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Amazon Streamlines Private Label Brands in a Bid to Cut Costs
Amazon's Cost-Cutting Measures: Trimming Private Label Brands
In an effort to control costs, Amazon has confirmed that it is reducing some of its private label brands. Apart from the vast array of products offered by third-party sellers, retailers, and well-known brands, Amazon also markets goods manufactured in-house, akin to store brands. Over time, Amazon's private label brands have grown exponentially, encompassing products such as Goodthreads apparel, Rivet furniture, Presto! paper towels, and Amazon Basics batteries.
Matt Taddy, Vice President of Amazon Private Brands, stated that the company is looking to discontinue some in-house products that have failed to meet customer expectations. "Our decisions are always customer-centric. We've found that customers gravitate towards our major brands, like Amazon Basics and Amazon Essentials, which offer high-quality products at attractive price points," Taddy explained. However, the company did not disclose the exact number of private brands slated for elimination.
Anticipated Reduction in House Brands
According to The Wall Street Journal, Amazon is expected to cut dozens of brands, leaving fewer than 20 house brands. The company is significantly scaling back its apparel and furniture brands, some of which will continue to be available until stocks are depleted. This move forms part of Amazon's broader cost-cutting initiatives and is also in preparation for a potential antitrust lawsuit from the Federal Trade Commission.
CEO Andy Jassy's Aggressive Cost-Cutting Strategy
As Amazon grapples with an economic downturn and slowing revenue growth, CEO Andy Jassy has been aggressively trimming costs across the company. Jassy has focused on some of Amazon's riskier ventures, such as groceries and devices, while halting corporate hiring and slowing warehouse expansion. Recently, the company laid off 27,000 employees in its largest ever job cut.
Antitrust Concerns and Amazon's Private Label Business
Amazon's private label business has drawn the attention of antitrust regulators following concerns raised by third-party sellers. These sellers allege that Amazon executives improperly used merchant data to create competing products. Brands have accused Amazon of replicating their products and pricing them competitively, making it challenging for them to compete.
These issues culminated in a 16-month investigation by the House Antitrust Subcommittee into competitive practices at Amazon and other Big Tech companies. When questioned about the practice, Amazon founder and then-CEO Jeff Bezos stated, "We have a policy against using seller-specific data to aid our private label business, but I can't guarantee that this policy has never been violated."
The FTC is reportedly preparing to file a long-awaited lawsuit against Amazon, accusing it of using its retail dominance to pressure third-party sellers into its marketplace. Despite these controversies, Amazon maintains that sales from private label brands account for only 1% of its total retail sales. As of 2019, the company reported having 158,000 private brand products across 45 brands, in addition to brands sold by its online grocery service, Amazon Fresh.
Hot Take: Implications of Amazon's Strategy for New Businesses
Amazon's decision to streamline its private label brands as part of its cost-cutting measures offers valuable insights for new businesses.
Customer-Centric Decision Making
Firstly, Amazon's move highlights the importance of customer-centric decision making. The company's decision to cut brands that didn't resonate with customers underscores the need for businesses to continuously evaluate their product offerings based on customer feedback and preferences.
Cost Management in Challenging Times
Secondly, Amazon's aggressive cost-cutting strategy, led by CEO Andy Jassy, demonstrates the need for businesses to be proactive in managing costs, especially during economic downturns. This could involve reassessing riskier ventures, controlling hiring, or even making tough decisions like layoffs.
Antitrust Concerns and Market Dominance
Finally, Amazon's impending antitrust lawsuit serves as a cautionary tale for new businesses. As companies grow and potentially dominate their markets, they must ensure fair competition and avoid practices that could lead to antitrust violations. This includes being careful about how they use data and ensuring they do not unfairly squeeze out competitors.
In conclusion, Amazon's recent decisions provide lessons on customer-centric decision making, cost management, and fair competition practices, all of which are crucial for new businesses aiming for sustainable growth.
Article First Published at: https://www.cnbc.com/2023/08/10/amazon-axes-some-private-label-brands-as-part-of-wider-cost-cuts.html
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