Amazon’s success in establishing a truly consumer-centric online brand in most non-food categories, based upon a multi-product/multi-service dynamic relationship with its consumer-base, it follows that meeting consumer need for food becomes just another hurdle, and just a matter of time… Adding its own food brand to their mix then becomes a final endorsement of Amazon’s pulling power with its customer base.
Amazon have already successfully introduced own label in many of their non-food categories and it would be naïve to suppose that they would long be content to be simply another route to market for major food brands. Whilst brand owners can of course choose to remain independent of Amazon by refusing to produce own label versions of the brand, it may be worth considering some of the advantages of closer participation with Amazon in optimising joint-returns from the category.
Whilst some brand clients have been over-precious re their brands’ sovereignty, and only supplied own label under duress, if at all, those suppliers that have recognised the strategic opportunities of creative use of own label have been able to derive creative insights that have benefitted the brand. For example, one client in the dairy category supplied the mults with own label versions of their leading brand. The supplier had a policy of launching five new flavours via their own label offering by providing the retailer with all new flavours ahead of the brand. Then, after a month they would choose the top three for inclusion in the brand offering as winning extensions. This obviously only works if the brand team are not too precious re ‘being first’ and can appreciate the advantages of testing via the retailer own label…
Another idea can be to allow the retailer to innovate within the own label version and adapt/adopt successful ideas for the brand. In fact, in this case, the brand owner treats the retailer as a test market for the brand, while the retailer enjoys the advantage of being seen to innovate within the category…
This level of creative use of own label allows branded suppliers to anticipate the inevitability of Amazon wishing to optimise a level of consumer insight that well exceeds that of most brands in their quest for a food product mix that perfectly matches consumer need. A collaborative supplier can thus tap into Amazon’s access to the consumer, and capitalise upon insights based on years of purchasing a variety of goods, including their food brand online from Amazon.
Amazon are not constrained by any of the ties to brand heritage/tradition that limits the marketing flexibility of a traditional brand owner in adapting to market need. Moreover, the supplier, as an expert in the category, ‘knows’ what will not work. However, amateur-Amazon, knowing no better, tries something ‘that should not work’ in this category, but actually works in practice… Another safe ‘learning’ for the brand owner.
Another cause of supplier reluctance to supply own label can be Amazon’s perceived lack of experience of the category. However, in practice it could be said that Amazon were amateurs in every category they first entered. So, why should their comparative lack of experience in food be regarded as a major issue? They learn by doing, fail fast and repair/adjust positioning based on a level of consumer insight that should be envied by more experienced marketeers…
We have all experienced the own label problem with major retailers whereby in order to secure a listing of a new brand, we provide the buyer with sufficient details to justify five facings. The only drawback being that in many cases the retailer machinery can get to market with an own label ‘equivalent’ faster than it takes us to return our offices… We should not expect any retailer to resist this temptation to make a quick one-off gain, and thus a degree of care is necessary in the presentation of each brand extension. Again, most NAMs have learned to roll with this particular punch.
Amazon are capable of employing a ruthless application of pricing to optimise their take from any category. In practice, this will mean they will evolve a combination of brand and own label offering that continuously meets consumer need, but can adjust prices continuously to optimise gross margin, and perhaps even net margin from the category, better than any multiple grocer has been able to achieve thus far…
Eventually, or sooner, they will apply this insight and methodology to your food category, with or without your help. Perhaps it would be worthwhile anticipating the inevitable, and benefiting from willing participation in the process from Day One…
NAM Implications going forward with the benefit of hindsight:
- Given what Amazon have achieved in 29 years of trading, it is inevitable that they would want to test the strength of their pulling power with consumers by producing own-label food.
- In doing so, they can capitalise upon insights based on 29 years of purchasing a variety of goods, including their food brand online from Amazon.
- Also, given they carry no brand baggage, amateur Amazon, knowing no better, tries something ‘that should not work’ in this category, but actually works in practice…
- With the benefit of hindsight, we would add that Amazon are now too big to ignore…
- …and supplying their own-label has to be a major opportunity for branded suppliers.
- But it will require 100% commitment i.e. not simply regarded as a way of using spare capacity.
- Finally, if still in doubt, keep in mind that they have kick-started Retail Media, a necessary pointer for all that wish to remain in the retail game…
