Amazon has reportedly started “drastically” reducing the number of private label items it sells, people familiar with the matter told The Wall Street Journal. The retailer’s owned product lines have been under internal scrutiny due to a combination of disappointing sales and regulatory pressure, according to the sources.
Amazon currently sells approximately 243,000 private label products across 45 different brands as of 2020 (the latest year figures are available). The ecommerce giant has been accused of giving advantages to its own brands at the expense of other vendors’ items, which has led to controversy on how it develops and sells these house brands.
Amazon executives have reportedly instructed the private label team to reduce its selection of items and not reorder many of them, including the possibility of slashing the assortment by over half. The cutbacks were reportedly initiated by Dave Clark, former CEO Worldwide Consumer at Amazon, who left the company in June 2022 to serve as CEO of supply chain startup Flexport. He initiated a review of the business at the beginning of 2022 and pushed the team to focus on “bestselling commodity goods” rather than the massive range currently offered.
The push matches what some experts saw during Prime Day — shoppers are stocking up on essentials, such as CPG and back-to-school items, more than in previous years. However, Amazon’s private label items only account for approximately 1% of its total retail sales, according to company data, despite interest in owned brands rising during the first wave of COVID.
Executive Chairman and former CEO Jeff Bezos was reportedly a major backer of Amazon’s private label brands and at one point aimed to grow the offering to 10% of total retail sales by 2022. Some of the sources stated that he has “bristled” at the relatively low sales, according to The Wall Street Journal.
Bezos’ blessing led to the rapid addition of thousands of new private label items, but many reportedly ended up sitting in warehouses or needing to be marked down. Clark’s review looked at the profitability of each private label item with an eye toward phasing out products that didn’t sell enough to hit their profit threshold and focusing on fast-selling goods like charging cables, according to the sources.
Some of the sources also told the Wall Street Journal that Amazon was reportedly considering exiting the private label business altogether, though they had decided not to take any action until necessary, for example as a concession they could offer regulatory agencies. However, in a statement sent to The Wall Street Journal, a spokesperson said that “We never seriously considered closing our private label business and we continue to invest in this area, just as our many retail competitors have done for decades and continue to do today.”
Amazon has been under scrutiny for reportedly using data from third-party sellers to develop new private label products that can compete with those products. In 2020, Amazon said it was opening an internal investigation into how its private-label employees use seller data to see if they were violating a company policy not to use such data.
The ecommerce giant also has been accused of violating competition law in Europe by using private information from sellers to compete against them, according to Reuters. In response, Amazon has offered to end the online selling and marketing practices EU antitrust regulators regard as anti-competitive to avoid a possible fine.