In another monopolizing move, Amazon (NASDAQ: AMZN) has begun incentivizing brands and product manufacturers to create Amazon-exclusive products that the tech behemoth will sell exclusively on its website.
The directive has come on the heels of the fact that Amazon tried to create its own brands to undercut competition, but found it to be too costly and time-consuming.
Some of the brands in Amazon's product pipeline include the company behind Equal sweeteners and GNC (NYSE: GNC), a nutrition brand. Amazon already has products developed for its site by makers like Tuft & Needle, a mattress company, which has an entire line solely for the e-commerce giant, Nod. Amazon initiated its partnership with Tuft & Needle last year.
"We had a lot of flexibility in terms of what we could do," said Brian Huff, North American president of privately-held Equal sweetener manufacturer Merisant US Inc. "We had to take what would normally be 12 to 24 months of development to 90 days," he said, indicating that Amazon wanted to roll out these new product lines as fast as it could.
While selling through Amazon provides brands with more visibility and gives them a larger platform through which they can sell their products, it has resulted in higher costs. "There are some kind-of-hidden expenses...so we're trying to balance the profitability," said GNC Chief Executive Ken Martindale.
Amazon is a definite winner in this entire scenario, as it can now obtain "faster customer feedback when testing new products, marketing support and, of course, revenue from the sales. They also can appear at the top of search results - a big draw given that Amazon's platform lists an estimated 550 million items."
Amazon is no newcomer to the in-house brand game. Analysts predict that the website already has at least 100, such as brands like Happy Belly and Mama Bear. On the flip side, launching in-house brands is like launching an entirely new company. Not only does this entail costs in terms of time, but it also requires meticulous industry research and micromanagement.
According to Nielsen, "the market for private-label products has grown more than top-performing brands, driven by customer perceptions that private-label products are higher quality, less expensive and smart choices."