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Amazon’s Expansion Threatens Other Companies

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Amazon is looking to expand into private label goods, but what affects will this have their competitors?

Amazons big plans

This month Amazon is looking to expand its business into private label goods. This move will see Amazon looking to sell –

  • Personal care products
  • Household products
  • Baby care products
  • Pet care products
  • Food and beverage

If these plans take off then, Amazon could overtake Target, Walgreens Boots Alliance, and CVS Health in the markets.

The market leader, however, will still remain Wal-Mart.

 

The rise of the online market

The Private Label Manufacturers Association has reported that sales of private label goods in the US in 2015 reached $118 billion. $80 billion of this amount was sold by supermarkets and drug stores.

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Amazons move into this market could mean danger for other companies. Amazon has the advantage of Amazon Prime, which offers same day delivery. Online sales are rising with increasing numbers of people preferring to purchase online instead of in store.

Why is this?

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Online vs. offline shopping

There are many reasons why consumers are turning their backs on conventional stores in favour for online stores; some of the reasons are

  • Convenience of the shopping experience
  • Better prices offered
  • A lot more variety or choice
  • Less additional expenses
  • Avoid the crowds
  • Less risk of impulse buying
  • Greater privacy when shopping

However, both online and offline shopping have positives and negatives. The downside of online shopping includes being unable to see physically what you are buying, waiting for your purchases to arrive, and shipping costs can prove expensive.

 

What will be on offer?

Amazon has been planning to introduce private labels goods to their stores for several years. The first brands will become available of Amazons website by either late May or early June. There have been reports that some of the brands on offer will be Wickedly Prime, Happy Belly, and Mama Bear.

The popularity of private label goods has increased over the years with stores such as Wal-Mart to Dean & DeLuca all offering a range of store brand products.

The new private label goods on offer have concentrated on carefully selected items which offer higher profit margins and have greater potential in creating new products before competitors.

Private label goods will only be available to Amazon Prime customers.

There are currently an estimated 50 million Amazon Prime customers.

 

Current Amazon brands

Private label brands are not a completely new concept to Amazon. Currently available is Amazon Basics, which offer a selection of batteries, computer hardware, cell phone cases, etc. They also offer their own brand of clothes, linen, towels, and baby wipes.

New products available will include snack food, tea, cooking oils, nuts, etc. A full list of products is currently not available however there are also rumours of Amazon applying for trademark protection for chocolate, razors, pasta, etc.

 

Amazon vs. Competitors today

Amazons stock rose today 0.6% to 702.8, on May 12; however, Amazons stock reached 722.45.

In comparison, Walgreens stock rose by 1.3% and CVS fell by 1.5%. Target’s stock rose by 2.4% and Wal-Mart managed to rise by 1%, Wal-Marts stock managed a 10% rise on Thursday.

 

The future of Amazon

It has been predicted by experts that with the release of their expansion into the consumable market that Amazon will find itself in second position behind Wal-Mart. However, expansion into the food and beverage market will place Amazon in at a top 10 position by 2019.

Separate from the expansion into private label goods, there are also reports of Amazon becoming the number one clothing retailer in 2017.

The current number one position is held by Macy’s. However, recent earning reports have revealed that Amazon is in a good position to take the top spot from Macys.

Amazon has also hinted at plans to have Echo (a voice-controlled speaker) to be the smart house hub of choice. There are plans to have Echo learn what its users daily routines are, eliminating the need to give constant voice commands. Instead, when you let the Echo device know you are home the device will then act accordingly adjusting lights and temperature to your preferred levels.

There are plans for Echo to eventually take over every aspect of your home, from your TV to your car, while also performing internet searches for you.

Currently Echo, which responds to the name ‘Alexa’, is most often used to play music, despite being able to do so much more.

Echo, however, is proving popular with consumers, there are currently over 3,600 reviews and an average rating of 4.5 on the Amazon website.

Although it is impossible to say for definite what the future holds for Amazon, there is no denying that currently the future is indeed looking very positive.

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