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CNet reports that Amazon said over the weekend that it has no plans to shutter its private label operations, and plans to "continue to invest in this area … just as our many retail competitors have done for decades and continue to do today."

The comments are a response to a Wall Street Journal report last Friday that Amazon "has started drastically reducing the number of items it sells under its own brands, and the company has discussed the possibility of exiting the private-label business entirely to alleviate regulatory pressure, according to people familiar with the matter."

"Over the past six months," the Journal wrote, "Amazon leadership instructed its private-label team to slash the list of items and not to reorder many of them, the people said. Executives discussed reducing its private-label assortment in the U.S. by well over half, one of them said."

The Journal reported that Amazon's private label business accounts for about one percent of its sales, though a few years ago, then-CEO Jeff Bezos challenged employees to drive private label sales to 10 percent by 2022.  It didn't work.

KC's View:

Amazon is said to have some 243,000 SKUs in its private label portfolio, using 45 different house brand names.  I commented on Friday that I've long believed that Amazon's portfolio of private label brands is way too extensive and unfocused.  I think it would make a lot of sense not just to cut back on the SKUs, but on the brand names that don't really add up to much other than confusion.

I got different reactions to what I said.

One MNB reader commented:

Kevin, your suggestion sounds like the Costco approach where Kirkland is now recognized as a brand that represents quality and value.  Am I correct?

I would have expected Amazon to understand the Costco strategy and mimic it.

And another reader wrote:

Amazon should not only retain its private brands, but they should both expand item selection and offer higher quality products that deliver even more value. Inflation has increased from about 2% to 8+% in the last 3 years. Private brand products that offer a lower price/acceptable quality choice help the consumer at a time they need it more than ever in the last 40 years.

Every retailer in American uses internal data as part of the process in evaluating private label offerings… don’t penalize Amazon with an unfair standard.

I agree with the observation about data usage … but not with the idea that Amazon should expand its private label presence.  At least, not the way Amazon has been doing it.

If Amazon really is only doing one percent of its total retail sales in private label, that indicates to me that it has not been very effective in communicating value and quality.

If Amazon is going to continue investing in private label, then it also ought to invest in a broad overhaul of all of its own-label offerings.  It should see what's worked (like Amazon Basics batteries) and what hasn't, and work to figure out how to establish and effectively communicate differential value.