Why Amazon Is Closing Down Its Private Label Brands?

The American multinational technology company, Amazon, which engages in e-commerce, cloud computing, artificial intelligence, and digital streaming, has recently announced that it is reducing some of its items. The brand is cutting down the products that sell under its brand like Amazon Basics.

This leader in the e-commerce market mentions to the Wall Street Journal, "We never seriously considered closing our private label business and we continue to invest in this area, just as our many retail competitors have done for decades and continue to do today".

To find more, this article highlights the reason why Amazon took such a decision to reduce selling its own private-label business.

The Absence of Increased Margins
Unfair Treatment of Third-Party Merchants

The Absence of Increased Margins

The giant e-commerce brand, Amazon started having its own brands like Pinzon, Amazon Basics, Mama Bear, Wag, Amazon elements, and more in 2009. Amazon decided to have in-house brands to boost increase margins and reduce competition, however, some of its brands are not doing well in the market for which they are reducing the items. One of its private label brand Amazon Basics is going to have less number of items to be sold.

This change in the system that Amazon is going to adopt is due to 'weak sales'. However, they are not going to completely shut their private-label business, they will just reduce the number of items. As per some reports, Amazon has asked its team for the past six months to chop off some of its items and not to further go for reordering.

There are statements that Amazon finally came to this decision after Dave Clark, an ex-amazon executive made a review of how business is done by Amazon. Amazon claimed that Dave Clark made decisions that led to over-staffing at Amazon fulfillment centers and refrained from union progress.

Unfair Treatment of Third-Party Merchants

In 2020, the European Commission charged Amazon for using its power and data to push up its products for its benefit over other rival merchants. This was disclosed during a press conference on an anti-trust case with Amazon at the European Commission (2020) held in Brussels.

In addition to accusations, the European Commission has also opened up an investigation to look into the matter that if Amazon gives exceptional treatment to its products and to vendors who use its delivery benefits.

The controversy does not end here, as the Commission has also put up statements that Amazon has no right to use third-party's activity and data to its benefit since they are its competitors.

The dualism act by Amazon has also drawn scrutiny issues in the USA. They had been asked to defend themselves from these allegations in writing, with which they had disagreed.

In their defense, Amazon claimed that the company has always been helpful to other merchants. The brand made several statements in its defense that they only represent 1% of the world's retail market. Furthermore, they have also claimed the brand has supported small businesses for the past 20 years in comparison to any other retailer.

In efforts to ease the regulatory pressure, Amazon is now reducing the sale of its products. Amazon is doing all of this to resolve its two anti-trust cases issued by the European Commission.

The other case which was opened by the EU is to investigate whether the giant retailer favors those merchants that use its logistics and delivery system over other sellers.

Although as per reports, Amazon has contradicted these allegations, however, to settle down it has come to a concrete conclusion to make things transparent with the European Commission and keeping in view of their trust issues it is aiming to serve the European consumers and the 185,000 plus European small and medium-sized enterprises who are selling through their platform.

These investigations compelled Amazon a fine of up to 10% of its annual revenue worldwide.

Amazon has also made statements concerning its defence claims, that they are finding the new EU digital regulations, the Digital Markets Act completely one-sided. They have made remarks like, "unfairly targeting Amazon and a few other American companies."

To come out of these accusations, Amazon now has taken up the step to refrain from using its competitor's data and use it for its own purpose. The brand is now accepting to give equal status to other sellers while ranking their products with the feature, "buy box". This feature allows shoppers the liberty to add items directly to their shopping bags.

Conclusion

This massive e-commerce performer, Amazon, is facing some difficulties right now. The company's decision to reduce the selling of its products shows us that they plan to keep things ethical for other third-party merchants. Amazon is now looking for ways to give full access to other sellers on its marketplace.

FAQs

What is Amazon's private label?

Amazon sells its products using its in-house brands which are its private labels. Some of the examples are Amazon Basics, Solimo, Happy Belly, and Amazon Fresh.

Is Amazon closing down its private label brands?

No, Amazon has decided to sell fewer items by its private labels due to low sales and due to anti-trust issues.