Amazon Plans to Add Its Own Line of Food

29 May 2015 | Author: | No comments yet »

Amazon tipped in plan for self-branded grocery items.

Amazon is expanding the grocery business by broadening its private-label brand, Elements, into food items, according to a report by The Wall Street Journal. The e-commerce leader is planning to add food to its fledgling line up of house labels, a move that seeks to capitalize on customers’ growing acceptance of store brands and its grocery delivery service.

The newspaper also reported that Amazon filed for trademark protection in early May for more than two dozen categories under its existing Elements brand including coffee, soup, pasta as well as household products like razor blades and cleaning products. Amazon has approached some private-label food manufacturers to partner including TreeHouse Foods, a major player, according to the Journal’s report. According to sources that have cropped up, such will be possible in the future, with the retail giant looking to roll out an own-branded line of food and grocery items. At the time, company watchers speculated that the brand will be used to launch other products, mirroring the private-label strategy used by other large retailers. Think of it like a store brand, only that store brand is an Amazon brand — a generic product, in a sense, only one likely to be found on Prime subscriber’s shelves.

Costco (Kirkland), Walmart (Great Value) and Target (Up & Up) use their private label brands – an arrangement in which products are exclusively manufactured by a third-party for a retailer – to drum up sales in popular categories at their stores. They also help build customer loyalty — just ask some Costco fans about the Kirkland brand – and pad retailers’ profit margins since they don’t require as much marketing costs.

Such in-house brands are also finding more acceptance with customers, many of whom are increasingly looking for bargains and are more open to buying store brands. Amazon’s Elements portfolio began last year with diapers, which it has since dropped, and baby wipes that are sold exclusively to members of its Prime subscription service. But about a month after the launch, Amazon ditched Elements diapers after customers complained about the quality. “Based on early customer feedback, we are making some design improvements to the diaper,” the company told customers in an email.

For Amazon to see success with such products, it will have to battle against trusted store brands from big-name competitors, and that’ll require quality products. Another snafu like the diapers issue would result in a low consumer opinion of Amazon’s self-branded wares, and such opinions aren’t easy to reverse. Its grocery shopping service, Prime Pantry, was introduced a year ago, in which Prime members can add items to their online cart and have them delivered to their homes for $5.99 a box.

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