4 Strategies to Stay Competitive During Amazon’s Private-Label Push
From vitamins and batteries to pet food and baby clothes, Amazon.com's growing investment in private labels is taking retailers by storm. Since launching its first in-house brand in the early 2000s, Amazon has expanded its collection of private labels to include more than 125 brand names.
Amazon is seizing every opportunity to place its private-label strategy on a fast-track for growth. The e-commerce giant has already introduced six dozen new private-label brands over the last 18 months across clothing, grocery, health, home goods, and more.
These aggressive moves are paying off. Recent estimates show that Amazon’s private-label sales will reach $7.5 billion this year, and climb to $25 billion by 2022. For some sellers and brands on Amazon, however, these moves are causing some concern and uncertainty over how to stay competitive on the Marketplace.
However, instead of viewing this private-label wave as a threat, sellers should view it as an opportunity to redesign and improve their sales strategies. The most successful sellers will be the ones who are willing to focus on changing customer behavior, long- and short-term business goals, and updated fees and regulations on Amazon's platform.
Here are four key strategies sellers and brands can use to stay both competitive and profitable as Amazon’s private-label strategy continues to evolve:
1. Teach old products new tricks.
One option for sellers that are beginning to compete with Amazon’s private labels is to create new variations of products with their own Amazon Standard Identification Numbers (ASIN). For example, sellers can create product bundles or re-introduce products with frustration-free packaging (both of which can be updated via Seller Central). Since these new product variations can help sellers avoid competing directly with Amazon, identifying these opportunities can give sellers another way to diversify their assortment, and consumers more options to choose sellers’ products.
2. Conduct regular audits of your performance metrics.
So much more than price and inventory matter when it comes to staying competitive on Amazon. Sellers directly competing with an Amazon private-label product will need to prioritize and improve their full spectrum of performance metrics to stay in the game while remaining profitable. Amazon’s algorithm analyzes factors like fulfillment method, item condition, shipping time, seller feedback count and score, order defect rate, late shipment rate, on-time delivery, cancellation rate, and refund rate.
3. Use smart tools to optimize your strategy.
To get the most out of Amazon, retailers and brands must manage several variables in real time. The end goal is to create a healthy balance between risk and safety. Once we add Amazon’s rapidly evolving private-label strategy to the mix, sellers can quickly find themselves overwhelmed with how to manage it all. Smart tools and software can help sellers keep an eye on how Amazon’s private labels are performing in comparison to their own, and give them actionable recommendations for how they should respond.
4. Ride the Amazon wave.
Sometimes the best strategy is to be patient. If Amazon does jump in on a new set of product listings, sellers in that product category may see their sales rank increase as a result. Amazon often pushes various private-label products for a limited period of time by increasing its advertising efforts or selling high volumes at a cheap price. This can be situational, but sellers may benefit from that improved sales rank once Amazon has left the competition.
Selling on Amazon is complicated, but the potential rewards are worth the investment necessary to effectively run a business through this platform. Though Amazon will surely continue exploring other product categories and expanding its private-label family, Marketplace sellers will continue to be the driving force behind its success. Sellers and brands alike should grab on to that momentum before it passes them by.
Victor Rosenman is the CEO of Feedvisor, an artificial intelligence-first optimization and intelligence platform for e-commerce brands and retailers.
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