It looks as if Amazon is getting into the food business. A new report from The Wall Street Journal says the online retail giant is gearing up to launch its first brand of foodstuffs by “as soon as the end of the month.”
These “private-label brands” will reportedly include Happy Belly (including nuts, tea, and oil), Wickedly Prime (snacks and treats), and Mama Bear (baby products). But they are designed and created by Amazon, with all the profits going straight to the company.
Amazon has sold private-label products before, including toilet paper and batteries, but this is its first foray into food. And it makes total sense.
For a start, the market is huge. The global food retail market last year was $2.14 trillion, according to data compiled by Statista. When we narrow this down to just private-label foodstuffs sold in the U.S., it is still a whopping $80-billion-a-year opportunity (via data from the Private Label Manufacturers Association).
In Europe, one in every three dollars spent in the consumer-packaged-goods market is on private-label content, Nielsen says.
And Amazon’s playbook when it comes to online retail is increasingly to see what works, then mimic it—but cheaper. Back in April, Bloomberg published a report on Amazon’s practice of monitoring best-selling products on its platform—citing a laptop stand as an example—and then creating its own version of them at considerably lower price points, drawing customers away from the originals.
The tech giant has been selling foodstuffs from other brands for a decade. That’s a vast wealth of data to draw upon to figure out exactly what works and how the company can execute in a way that undercuts everyone else, leveraging the company’s well-known indifference to profits.
It’s a risky business, however, with higher stakes than Amazon normally deals with. If your brand of USB cable doesn’t work, customers get annoyed and buy a different one. If your brand of food gives someone salmonella, you risk long-term reputational damage. But the potential rewards have also never been higher.
As shoppers increasingly turn to the web to do their weekly shopping, major supermarkets are beefing up their online grocery-ordering services. Loyalties are up for grabs as consumers make the transition—and Amazon, aiming to be a key beneficiary of this trend, reckons it’s worth the gamble.