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Amazon’s aggressive private label strategy
Amazon is increasingly promoting its own brands. As the Lebensmittelzeitung now reports, the world’s largest online retailer is operating in the US market with a new aggressive tactic: An Amazon own brand is now displayed to customers above the purchase button as an alternative to the selected product. This clearly demonstrates that Amazon is increasingly competing with its marketplace sellers. How fair is such behavior?
Already in 2018, the “New York Times” reported that Amazon is increasingly breaking with its original business concept, namely democratizing trade by offering a platform to even the smallest retailer. Amazon is now often in competition with these very retailers. This is what Business Insider writes, referring to this article in its report. Amazon started very slowly with its own brands, but is now gradually working on directing customers away from competitors towards its own brands.
Successful marketplace sellers are being “amazonized”
The fact that Amazon is pursuing a consistent private label strategy in more and more product ranges has been observable for years, explains Dr. Hans-Christian Riekhof, Professor of International Marketing at the Private University of Göttingen. “Price and assortment strategically, this is of course highly attractive for Amazon, especially to oppose a cheaper private label product to the bestsellers of the brand manufacturers in the Amazon assortment. Especially since this usually has significantly more attractive margins.”
Amazon learns a lot from the sales figures of the sellers on the Amazon Marketplace. When bestseller products are then replaced by Amazon products, this is called “to be amazonized”, explains Riekhof. The fact that Amazon displays an Amazon alternative directly above the “Buy” button in the offers of its marketplace sellers in the USA means for the customers that they can decide what they find more attractive. “Whether the Amazon Marketplace remains attractive for the strong sellers in the long term is another matter”, says the marketing expert. “And whether they perceive this strategy as fair, likewise.”
Photo: Simon Steinberger by pixaby.com
Further links:
Lebensmittelzeitung (Paywall):
https://www.lebensmittelzeitung.net/handel/Produktplatzierung-Amazon-rueckt-Eigenmarken-in-den-Fokus-142348?crefresh=1
Stern (2017):
https://www.stern.de/wirtschaft/news/amazon–die-geheimen-eigenmarken-des-onlineriesen-7577786.html
The K-Favourites Line: Strategic Pricing for Private Labels at Kaufland
The food retailer Kaufland has now expanded its private label offering. The new value-added brand “K-Favourites” offers around 160 items. It is aimed at all people who want to “treat themselves to something special in everyday life.”
The quality brand complements the price spectrum between entry-level and premium.
The brand is intended to offer clear added value, such as extraordinary ingredients, a special place of production or
a long maturation period. The range extends from pasta and meat to chips and chocolate to dairy products and delicatessen. It is supplemented by products from the pet food and hygiene sectors. “Private labels are more than just a remake of A-brands today. With the top products from K-Favourites, we are going our own, confident way”, explains Stefan Hüttemeister, Managing Director Brand Management International at Kaufland.
Pricing for private labels: Kaufland occupies not only the entry-level price ranges
Dr. Hans-Christian Riekhof, Professor of International Marketing at the Private University of Göttingen, sees private labels as an increasingly important, strategic component of the retail assortment. “They contribute – if done correctly and especially in the long term – disproportionately to the company’s results. In addition, they help to create a price architecture in the assortment in which the entry-level price ranges are also adequately represented.” For the pricing expert, they are both “assortment and price strategically an extremely important response of the trade to
the price pressure in the market”.
What is remarkable about the Kaufland strategy, which other retailers also strive for, is that with the private labels not only the entry-level price ranges are occupied, says Riekhof. “Such an assortment and price strategy will have to be worked on in the long term in order for it to fully pay off. The brand manufacturers in the middle price ranges will be the first to notice when they are delisted.”
Photo: © Kaufland
Further links:
Kaufland Homepage:
https://unternehmen.kaufland.de/presse/pressemitteilungen/pressemitteilungen-detail.y=2019.m=09.n=neue-eigenmarke-k-favourites.html
Lebensmittelpraxis:
https://lebensmittelpraxis.de/handel-aktuell/25311-k-favourites-kauflands-neue-eigenmarke-2019-09-03-11-12-34.html
Supermarktblog.com:
https://www.supermarktblog.com/2018/09/25/k-favourites-ist-da-jede-woche-eine-neue-kaufland-eigenmarke/
Focus (Preview, 26.03.2019):
https://www.focus.de/finanzen/news/vollsortimenter-und-discounter-kaufland-mit-neuer-mittelpreismarke-favourites_id_8670631.html