Amazon.com (NASDAQ: AMZN) has embarked on a comprehensive overhaul of its in-house brand portfolio, resulting in the discontinuation of numerous private-label lines. The action, reflecting a notable transformation in its private-label strategy, follows increased scrutiny from regulatory bodies and the company's drive to streamline operations.
Over the past year, Amazon, headquartered in Seattle, has made the decisive choice to phase out a staggering 27 out of 30 of its clothing brands, including well-known names like Lark & Ro, Daily Ritual, and Goodthreads, according to insiders privy to the matter. While some of these brands are still accessible on the Amazon platform, they will gradually be removed as the company exhausts its remaining inventory. The recalibrated approach will consolidate Amazon's clothing division into three key brands: Amazon Essentials, Amazon Collection, and Amazon Aware.
The company is not stopping at clothing. It is also shedding its private-label furniture lines, with the discontinuation of Rivet and Stone & Beam once existing stock is depleted, according to sources familiar with the situation. While precise figures for other affected areas of the business remain undisclosed, Amazon's commitment to Amazon Basics—its brand for a range of household goods and technology accessories—remains steadfast.
Matt Taddy, Vice President of Amazon Private Brands, stated in an official statement to The Wall Street Journal, "We always make decisions based on what our customers want, and we've learned that customers seek out our biggest brands—like Amazon Basics and Amazon Essentials—for great value with high-quality products at great price points." Taddy emphasized Amazon's focus on eliminating products that fail to resonate with customers.
This shift in strategy comes after years of investment in building the private-label business. Amazon began scaling back its efforts last year following lackluster sales and concerns raised by lawmakers and other stakeholders who argued that it could potentially undermine the company's role as a seller of other well-established brands. The company also made adjustments to reduce the prominence of its private-label products in search results pages.
As of 2020, Amazon's private-label business encompassed an extensive portfolio of 243,000 products across 45 distinct in-house brands. However, the Federal Trade Commission (FTC) has been investigating Amazon on various fronts, including antitrust matters. In light of this, Amazon representatives are scheduled to engage with FTC commissioners, a customary step before the agency potentially drops its anticipated lawsuit against the company next month.
Although Amazon has previously asserted that private brands account for only 1% of its overall retail sales, the company reportedly contemplated exiting the business as a concession to the FTC, if the regulatory body proceeded with legal action. Amazon has recently downsized its roster of house brands to fewer than 20 and has withdrawn tens of thousands of products associated with those brands from the market.
Under the latest strategy, the phased-out brands will cease to exist upon selling out their existing inventory. Successful items from discontinued lines will be rebranded under Amazon Essentials or other remaining labels. These changes are part of a broader initiative by Amazon over the last two years to trim unprofitable ventures and products, as the company seeks to reduce costs in response to post-pandemic economic conditions.
This strategic pivot also addresses long-standing concerns about Amazon's competitive practices with its in-house brands. Notably, a 2020 investigation by The Wall Street Journal uncovered that Amazon employees utilized data from third-party sellers on its platform to develop and market Amazon-branded products that directly competed with those very sellers. This revelation led to Jeff Bezos, Amazon's founder and then-CEO, testifying before a Congressional antitrust committee.
Amazon is determined to reinforce its commitment to responsible practices. An Amazon spokesperson emphasized, "We draw a clear line against using non-public, single-seller data to determine which private label products to launch, and our policy goes further than any retailer we know of." This move aligns with the company's earlier decision to deprioritize its own brands in search results, addressing criticism and potential regulatory concerns.
In addition to the recalibration of its private-label strategy, Amazon's ongoing efforts to streamline operations extend to other areas of its business, marking a concerted response to challenges and changes in the global business landscape.
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