Amazon is using big shopping events, including Cyber Monday and the upcoming holiday season, to boost its own private-label brands, heightening the fears that Amazon wants to mine its wholesale brands’ data for its own gain.
In its 2017 holiday gift guide, accessible now in the Amazon Fashion marketplace, private-label brands — like Lark & Ro (women’s fashion), The Lovely Tote (purses), The Fix (shoes and accessories) and Amazon Essentials (basics) — are heavily featured throughout all categories. According to L2, Amazon also used the holiday gifting period as an opportunity to launch three new activewear labels: Goodsport, Rebel Canyon and Peak Velocity.
“The hot button issue for fashion brands is private-label encroachment from Amazon brands,” said Cooper Smith, the Amazon research lead at L2. “Amazon is investing heavily in its private-label brands, and they’re working with a lot of the same suppliers who work with the fashion brands they sell.”
According to One Click Retail, Amazon has pulled in $21 million in sales so far this year from its private-label apparel brands. At the same time, Amazon has rolled out its own collections of home goods and furniture. In the past, however, the company has specifically said private-label apparel will be a key growth driver going forward.
While retailers launching private-label lines is nothing new — traditional department stores like Macy’s and digitally native companies like Stitch Fix and Mr. Porter design and manufacture their own lines — Amazon’s push into the private-label space feels like a more significant threat to potential partners, thanks to its control over massive customer data and its ability to eat profit losses for an extended period of time.
“Right now, Amazon is throwing a lot at the wall to see what sticks. They haven’t taken a targeted approach to apparel yet, instead opting to test different things to see where they can compete and where they want to compete,” said Smith. “If they put their mind to it, not only can they offer items at a huge discount to bigger player brands, but they can get things to market super quickly.”
With the bulk of Amazon’s private-label brands premiering in the past year, this means that brand vendors selling on Amazon are navigating new territory when it comes to big shopping events. L2’s data showed that on Prime Day this year, the performance of the Amazon Essentials brand spiked, while two brands selling direct on Amazon, Hanes and Dockers, took a hit. There are similar expectations for Cyber Monday.
Source: L2. The A marks Prime Day.
According to Elaine Kwon, a former luxury brand manager at Amazon and the co-founder of e-commerce management firm Kwontified, this strategy to promote private brands over partners on major shopping holidays can feel like a slap in a face for the brands that have signed on to sell directly to Amazon as a wholesale partner. The dynamics between the two modes of selling on Amazon are already tricky to navigate: Third-party retailers on Amazon don’t enjoy Prime shipping perks or positioning on the Amazon Fashion marketplace, while wholesale sellers must give up their customer data and pricing control. For brands selling wholesale, like Calvin Klein and Tory Burch, the legitimacy and priority granted by the wholesale marketplace pays off. But when Amazon uses those brands’ data against them, then promotes its own brands instead, it makes for an uneasy relationship.
“More and more retailers are investing in private label, but what’s different about Amazon is the amount of data they have access to,” said Kwon. “That makes brands nervous. And when Amazon’s own brands are being prioritized during big shopping periods, brands can easily feel ripped off.”
This strategy also makes Amazon look like a poor retail partner compared to the major marketplaces in in China, like Alibaba. For the upcoming Chinese shopping holiday Singles’ Day, Alibaba’s e-commerce site Tmall hosted a see-now-buy-now event to promote items from brand partners like Rimowa, Victoria’s Secret and Furla. Alibaba doesn’t sell private-label brands, so brands don’t have to worry about the company learning from their performances and then undercutting their sales. As a strictly third-party seller, it’s in Alibaba’s best interest to coach brands on how to perform well on its site, rather than hoard customer data.
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Third-party sellers on Amazon, on the other hand, are treated like second-class citizens, while wholesale sellers are sweating over Amazon learning from and then capitalizing on their business.
“Alibaba’s strength is big data. They process 50 billion transactions every day,” said Nir Kshetri, a professor at the Bryan School of Business and Economics, in a recent Glossy interview. “But perhaps even more importantly than the sheer amount of data they have is their willingness to share it. Where Amazon has appeared as a black box when it comes to sharing data, Alibaba has established itself as a strategic partner.”
Kwon said that, as is often the case with Amazon, resistance may be futile, and the retailer’s private-label brands shouldn’t scare fashion brands away from selling on the site.
“The thing about Amazon is if they wanted to understand a brand’s performance and customer, they would find ways to learn more about it, whether or not the brand is selling on the site,” said Kwon. “I would not let that fear stop me from making the most of Amazon. Private-label is something to consider, but figuring out how to engage customers on the platform is far more important.”