Trend Watch: Amazon's Expansion in Private Label
by RDBA Executive Director Annette Maggi, MS, RDN, LD, FAND
As discussed last week in Phil Lempert's article Can Retail Dietitians be Supermarkets’ Secret Weapon to Compete with Online, online grocery is creating serious competition for brick-and-mortar retailers. No online retailer raises greater concern for traditional retail companies than Amazon, and their announcement in May that they are expanding their presence in private label has the industry sitting up and paying attention.
What is most significant about Amazon's announcement is the strong movement into perishable products within private label. Under brands including Happy Belly, Wickedly Prime, and Mama Bear, Amazon will offer snack products, spices, nuts, cookies, cereal, coffee, tea and vitamins.
The private label products will only be available to Amazon Prime members, a move which Amazon hopes will continue to boost membership in this program. Data presented in a webinar by Carbon View indicates there is significant crossover between primary grocery shoppers and Amazon users. In fact, while 97% of primary grocery shoppers shop through Amazon at least occasionally, 55% of primary grocery shoppers are also Prime members. Another 15% are expected to join within the next 12 months. When the data is broken down by age demographic, Carbon View indicates 45% of Boomer primary shoppers are Prime members but 63% of Millennial primary shoppers belong to Prime. In general, a higher percentage of Millennials purchase private label, and this statistic combined with this demographic's prime membership rates bode well for Amazon's new private label brands.
What outlets will be most impacted by perishable product purchases from Amazon Prime? Carbon View indicates that 44% of consumers will buy these food products less frequently from c-stores, 41% less frequently from drug stores, and 38% less from each of club, mass and traditional grocery. Ninety-seven percent of prime members indicate satisfaction with the service, and shoppers expect the quality of Amazon private label to be high, all presenting new competition for brick-and-mortar stores.
While Amazon is a formidable competitor, there are still advantages for traditional retailers. For example, they know their customers better and stores offer an experience that online shopping can't offer. But the in-store experience has to be worth more to the shopper than the hassle of getting there and shopping. Carbon View recommends retailers cater to the specific needs of specific shoppers, and build a fan base that Amazon can't through chef's presentation, pairing classes, and thematic pop-up displays. Other ways to add value include dietitian services, fresh prepared foods, and becoming a fabric of the community.
