Amazon's private brands have gone from $0 to $2.5 billion in sales in less than a decade (AMZN)

pulse

August 21, 2017 2:53 PM

Analysts described private label sales as Amazon's 'secret weapon.'

Amazon Fashion ambassador Suki Waterhouse at Amazon's east London studio

It looks like Amazon has yet another multi-billion dollar business sitting in its backyard.

The company has quietly launched around 20 private label brands — custom brands that you can't buy anywhere else — covering fashion, women's fashion, baby clothing, and snacks.

And according to an analyst note from SunTrust Robinson Humphrey, those brands racked up around $2.5 billion (£1.9 billion) in sales for Amazon in 2016 alone.

Amazon launched its first in-house brands in 2009, with AmazonBasics and the Pinzon bedding brand. That means it's taken less than 10 years to go from $0 to $2.5 billion in private label sales.

The note's authors, Youssef Squali and Naved Khan, predicted this could grow at an even faster pace over the next five years. They predicted sales would hit between $15 billion and $20 billion (£12 billion to £16 billion) by 2022, describing private label sales as "Amazon's secret weapon."

That's a tiny fraction of Amazon's overall revenue: the company reported $43 billion (£33 billion) in sales for 2016.

But, the analysts wrote, it's still a big deal for the following reasons:

Amazon can make more money through private label brands because they offer better margins.
Amazon holds an awful lot of data on its customers and their preferences: it can move faster than traditional retailers to meet demand.
Private label brands force branded competitors to become cheaper — making Amazon an even more attractive place to shop compared to the competition.

You probably know at least some of Amazon's private label brands, such as its Echo, Fire TV, Fire Tablet, and Kindle device ranges.

More recent launches include fashion brands Society New York, North Eleven, Lark & Ro, and Franklin & Freeman. Amazon is due to launch its own activewear line, according to job postings spotted by Recode, and a women's underwear range.

A report last week from 1010data, which tracks consumer spending online, is a little more conservative about Amazon's private label revenues. It estimates around $500 million (£389 million) in sales for the first six months of 2017.

It also gave an indication of where people are willing to swap a known brand for a phantom brand, or Amazon's own brand.

The report found most sales coming from AmazonBasics, which offers everyday items like USB cables, bedsheets, towels, and batteries. The second most popular line is Amazon's range of devices, and the third most popular is the fast-growing Amazon Elements, which offers baby wipes and vitamin supplements.

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