Amazon (NASDAQ:AMZN) is expanding its private-label line to include food items such as milk, cereal and baby food, according to people familiar with the matter. The addition of everyday grocery items would give the e-commerce giant a more traditional retail trajectory in which brand-name products are sold next to store-owned products.
Private labels are now vital to many retailers, especially supermarkets, because they generate stronger margins and build loyalty, the Wall Street Journal reported. The growing loyalty trend in retailer-generated brands is the result of a growing consumer base that no longer views private-label products as having less quality. For example, big-name grocers with a large selection of successful private-label items include Trader Joe's and Kroger (NYSE:KR).
Earlier this month, Amazon applied for trademark protection for items under its Elements brand, which included an assortment of ethically sourced goods available for Prime customers. Now, the retailer is approaching select private-label food manufacturers.
Amazon already offers several private-label items such as USB cables and backpacks. However, the products are often unsuccessful and need to be pulled. But dealing with groceries will be a new vein for Amazon, and the retailer will definitely need to exercise cautious quality control.
Although not yet announced, it seems likely that Amazon will sell these new items through its Fresh grocery delivery service.
The news about a private label comes just hours after Amazon launched its same-day delivery program in 14 cites across the United States.
-See this Wall Street Journal article
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