IN THE 6TH INSTALLMENT OF THE AMAZON SERIES, WE DEEP DIVE INTO HOW AMAZON IS TURNING FROM A E-COMMERCE SELLER TO AN ALL OT MANUFACTURER.
The Amazon bandwagon keeps on rolling! The American giant is poised to form an ecosystem of "Prime Members" which will generate a robust cash flow in the billions for the company. By the power of its brand & associated ubiquitousness with online shopping, sellers are finding it tough to go independent or defect to a rival.
And now Amazon is planning to replace these sellers by directly competing with them. Although this move seems highly unethical, it makes business sense. Why would YOU give a third party a part of YOUR profits to sell products accessible to YOU on YOUR platform?
To grab a larger share of the pie, Amazon is pursuing the "private label" strategy. Private Label essentially means someone else manufactures the product for you but the end product has your brand name. In Amazon's case, the end product can have any of the thinly veiled brands owned by Amazon. The Private Labels of Amazon can be seen in the picture below.
The strategy is simple:
Have a private label brand in every category.
Offer the lowest price on quality products (possible through extreme bulk buying)
Outsell the small merchants who have one or two products & force them to exit the e-commerce business.
Corner the market of a particular product & set the price in the future.
The fact that Amazon is the sole watchdog of its own platform & its brands appear at the top whenever a product is searched gives the company an exclusive inherent advantage. For instance, on searching baby products on Amazon, you will be sure to find "mama bear" & "mama earth" at the top! (try it for yourself).
You might be wondering why Amazon is perturbed by small third-party sellers!? The reason is, these third-party sellers account for more than 50% of Amazon's total sales!
I sincerely hope the article above enlightened you about Amazon's malpractices. So the next time you buy something from Amazon (its inevitable isn't it?), be sure to buy from a smaller merchant/seller.
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Until Then.
Stay Safe.