In the coming weeks, Amazon Prime members might be able to buy Amazon-branded coffee, nuts, baby food, cooking oil, and other perishable foods.
According to The Wall Street Journal, the company's new brands will have names like Happy Belly, Wickedly Prime, and Mama Bear. Besides perishable foods and vitamins, Amazon is expected to sell its own household items such as diapers and laundry detergents, but for now only to Amazon Prime members, who pay $99 per year for unlimited, free two-day shipping, a streaming video service, and other benefits.
Since launching in 1994, The Seattle-based e-commerce giant has shaken traditional brick-and-mortar industries: first booksellers, then electronics, and more recently household goods. This latest expansion of the Amazon brand could have similar effect on the grocery industry, as many consumers have demonstrated interest in shopping for groceries online. Restricting the offerings to Prime members could further encourage shoppers to use the site as a one-stop-shop.
Amazon already has 54 million Prime members, according to Consumer Intelligence Research Partners, a market research firm. Prime members spend on average about $1,100 per year on the site, compared to about $600 per year for non-members, the research company said in a press release that analyzed spending on Amazon in the fourth quarter of 2015 through a consumer survey.
Amazon’s private-label products fall into niches with generally higher profit margins, as the Journal reports. Privately labeled products also bring in more profit because they allow companies to save costs on marketing and brand development.
Information about how Amazon's private-label prices will compare to brand names is not yet available.
Many grocers and other retailers, including Wal-Mart, Sephora, Dean & DeLuca, offer their own branded products. But Amazon's foray into this arena could make a huge dent if the company gives its own products more prominent placement on its site and offers lower prices than competitors, Recode's Jason Del Rey suggests.
Amazon already accounts for half of all sales growth in US e-commerce and a quarter in all of retail, including brick-and-mortar stores, as Recode points out.
And online sales will only continue to climb. One-quarter of global respondents told market research firm Nielsen that they buy groceries online for delivery to their homes. More than half said they are willing to do this in the future, according to the Nielsen's Global E-commerce and the New Retail Survey released in April.
Amazon has a grocery delivery business, AmazonFresh, which is available in several US cities.
The company also has already dabbled in private labeling with mixed results. Its Elements label has been available through Prime since late 2014. Despite problems with a couple of products that Amazon had to pull because of design flaws or other problems, its Elements baby wipes represent about 9 percent of all baby-wipes sold on the site, according to estimates from analytics firm One Click Retail, as the Journal reported.
Last year was the first time in years that Amazon turned an annual profit. That was driven largely by its booming Amazon Web Services cloud business, CNN reported.