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Amazon would have a new tactic to boost its already important online sales: ask companies to create new brands that sell exclusively on its e-commerce platform. Since 2016, Amazon has consistently developed private labels, offering generic internal versions of products such as diapers, laundry detergent and electronic accessories. These private brands are not only a profit generator for the e-commerce giant, they also give it an added advantage when trading product prices with large companies selling products on Amazon, such as Unilever and Procter & Gamble . But Amazon may no longer be focused on product development, according to a new Wall Street Journal report. Instead, he wants other well-established brand manufacturers to do most of the work.
Amazon is asking companies to create new proprietary brands to reduce its own manufacturing and product development costs, according to the magazine's report, and some companies are complying with its obligations. The e-commerce giant has launched an acceleration program whereby companies could develop new products exclusively Amazon only last year; to date, they include a range of sweeteners from the Equal Sugar Substitute brand, a mattress brand from the young company Tuft & Needle and two brands of CNG supplements. This change is part of Amazon's broader strategy to reduce costs and increase Prime's profits, and indicates the influence of the company, which controls half of eMarketer Retail's online sales of brands. .
But if it's a winning strategy for Amazon, which has to increase its offer while reducing its manufacturing costs, is this a good deal for participating companies?
It's complicated.
On the one hand, brands that create exclusive products for Amazon have access to consumers who might otherwise turn to a competitor. Ken Martindale, CEO of GNC, reportedly told investors that Amazon supplements were a way to offset lost sales in the store, according to the newspaper. Participating brands can also be placed higher on search pages, which researchers say could have a significant impact on sales, as Amazon sometimes places its internal brands higher in search results. "[Algorithms are] In fact, we pushed customers to buy the best-performing products, "Ted Lappas, an badistant professor at the School of Business at Stevens Institute of Technology, told me in December. "People never see six, 16 and 20"
But developing new products for Amazon is not cheap, and it is clear that the company expects the brands to bear the costs themselves. Equal's "Sugarly Sweet" brand was developed in just 90 days – a process that normally takes one to two years, the Journal reported. And an unidentified discount retailer offered Amazon an abandoned coffee brand at "virtually no cost". The brands are also responsible for the shipments, and the Journal reports that the shipping costs of Equal and CNG have increased.
This is not the only way for Amazon to try to reduce its shipping budget. Preferred clients may be familiar with its "added items" policy, which requires them to spend at least $ 25 for "inexpensive and prohibitively expensive items to ship on their own". (It should be noted that Amazon is also trying to reduce its dependence on third-party shipping companies by increasingly supporting transportation, which would give it additional control over the entire distribution chain. .) Last December, the Journal announced that Amazon was gradually giving up low profit margins, which it called internally "CRAP": things that "can not make a profit".
He also encouraged brands to design packaging suitable for shipping, which many have done. Tide, for example, has developed an "Eco-Box" packaging for its detergent that looks like canned wine. Smartwater, which is owned by Coca-Cola, has changed its default order on Amazon Dash – a service that allows customers to automatically reorder certain products – from a $ 6.99 pack to a $ 37.20 package, which went from $ 1.17 to $ 1.55.
For brands, spending extra money for packaging and product development may be worth the extra sales generated by Amazon. More than anything else, these latest news show all the influence of Amazon on brands.
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