assign 6c and 6d

Amazon to Expand Private-Label Offerings-From Food to Diapers by: Greg Bensinger May 16, 2016

TOPICS: Brand Image, Competition, Marketing, Pricing

SUMMARY: Retailers need to prepare to face increased competition from Amazon's private-label lines. The company plans to enter perishable foods and vitamins, diapers and laundry detergent. The company already has its own line of fashion with the Lark & Ro and North Eleven brands. AmazonBasics is a line of hundreds of items from cellphone cases to dog crates. New brands include Happy Belly, Mama Bear and Wickedly Prime. The company's new strategy would be a threat to a new group of competitors in foods and other products. There are risks for Amazon because it is depending on manufacturing companies that might have varying quality controls. The company stumbled in the past with a tool line and cookware. Amazon also pulled diapers after launching them in 2014 because of design flaws. The food line might help supply the company's Fresh grocery delivery business. The company has long considered the private-label business and its new strategy is implementing it.

CLASSROOM APPLICATION: Instead of asking "who are Amazon's competitors" the better question might be to ask "who isn't?" The company streams music and videos, Amazon Web Service provides a variety of cloud services, it is second to Wal-Mart in clothing sales and it serves as a storefront for many different brands and product categories. Amazon has some private-label categories, but it is expanding into perishables and other lines. The food items may help its grocery delivery business, Amazon Fresh. Private-label items boost margins and Amazon can use the data it collects to make decisions about what will sell. The items will only be available to Prime members. The company has 50 million or more Prime members who spend more on the site on average. The company may offer some of its new items under the Elements label which is considered premium. Many other retailers offer in-house brands and some are viewed as higher quality. The goal of Amazon is to win sales in niches with higher profit margins while testing prices, labels and products to see what works.

QUESTIONS:  1. List the various private-label brands Amazon may launch and tell us what kind of merchandise is represented by those brands? 2. How has the customer perception of private-label brands changed over time for many brands? (What private label brands does your family purchase?) 3. Discuss how Amazon will use and incorporate data to determine how to price its private-label brands and the kinds of products it should offer. 4. Discuss the lessons Amazon seems to have learned from its unsuccessful attempts to launch private labels in the past. 5. Amazon and its private-label merchandise could compete with the brands that sell on the site. Evaluate the significance of the problem.