4 ms·

The major question I don’t have a good answer to is, “Why is this different than brick and mortar store brands like Safeway signature?” Surely a part of is is

by entee 6y ago

The major question I don’t have a good answer to is, “Why is this different than brick and mortar store brands like Safeway signature?” Surely a part of is is placement, but Safeway could put own brand ketchup at the same level (and I think sometimes does) as Heinz and still wouldn’t sell the same volume. Amazon is clearly getting a big advantage here, I’m just curious about what the underlying dynamics are that allow them to be so much more successful in their context than it seems store brands are in other contexts.

rahul003 6y ago
Does it mean that the brand of Amazon is better than the likes of Safeway or Target who sell their own products to compete with more name brand ones? Or it could also be that the brands on Amazon such as the top voted comment here might be smaller brands without enough name recognition to gain the attention of a buyer.
pge 6y ago
I have wondered the same thing every time this question comes up. It seems the difference is that the companies that put products in grocery stores are very large companies that spend a huge amount on marketing themselves (e.g. P&G, General Mills). So, the "house brand" is less recognizable to consumers and sells at a discount to the known brand that is often a larger company than the grocery chain. The grocery stores need the name brands because shoppers come looking for them (and Safeway gets the benefit of all the marketing they do). In Amazon's case, they are serving as a distribution channel for many, many small brands, none of which are known as well as Amazon (whereas Kellogg's cereal is better known than Safeway). That changes the power dynamic in favor of Amazon.
- chillacy 6y ago
  I had a friend who worked at a milk factory. They took their 2% organic milk and piped it into cartons with different labels: brand names as well as store brands, off to be sold at various price points. To his company it didn't matter at the end of the day if people bought the brand name or the store brand, it was all the same stuff.
- entee 6y ago
  I think you’re totally right. In addition/corollary, it seems a lot of the things Amazon Basics sells are basically commodities. If you have a million iPad stands, eh, just buy the amazon basics one, it’s probably not crap and the reviews look good. I need my stand, my USB adapter, my cable, my whatever to just, “do the job”, there’s not a whole lot of performance differential within the category beyond works/doesn’t work. If there’s a strong quality differentiator in the product I think they’d do less well and I bet their data scientists have answered that question one way or the other.
  - samatman 6y ago
    This also points to a hidden advantage Amazon has which is totally unethical. Namely, Amazon is perfectly willing to sell counterfeit name-brand goods, and presumably this doesn't extend to their own Amazon Basics products. I don't think this singlehandedly explains why Amazon is so unwilling to do anything about their huge counterfeit problem, but it's suspicious that the dilemma resolves in their favor.
    - salawat 6y ago
      It's because they don't have liability for it because they act as a platform. Whereas with Amazon Basics, they risk their brand.
dangjc 6y ago
Maybe store brands should also be banned. We allowed this vertical integration in retail when maybe we shouldn’t. Yeah it shaves some costs, but is probably having a huge effect on supplier diversity and margins. If we’re revisiting the consumer welfare above all doctrine, this seems fair to revisit as well.
- rleigh 6y ago
  The vast majority of the "store brands" are made by the same companies who make the usual branded stuff. In many cases, it's the exact same product in a different wrapper or container, made on the same production line by the same company and the same staff. Sometimes to differentiate the product, it might have subtly different ingredients, or be of slightly lower quality to differentiate it from a "premium" product but still within the quality spec of the original product (for products which are binned or have batches of varying quality, or where there's variability e.g. biscuits which cook differently at different places on the conveyor). I used to work in a big brewery where we made supermarket branded beers. It was the same product in a different can. Actually, the exact same can, with a custom paint job. It was one of the more generic beers, rather than one with a taste associated with one of the well-known premium brands, but there was zero compromise on quality there. What was packaged for the supermarkets was 100% identical to beers with our own company name on it. It's only the cheapest of the cheap "value" stuff which has been significantly cost reduced and has compromised quality. That's stuff like pastry with a higher water content in place of fats, or substituted ingredients such as palm oil in place of butter etc. In these cases you're paying less, but obviously getting less product for your money. That's its own specialised segment. These are often made by different companies with their own separate supply chains, and possibly living by a different set of ethics... There clearly seems to be a market for this type of thing, but given the reduced nutritional quality and taste, it's not necessarily providing a genuine cost saving.
snowwrestler 6y ago
The difference is that Safeway does not have any other sellers on their shelves. Safeway buys inventory at wholesale and sells it at retail. Everything that is sold in Safeway was intentionally selected by Safeway to be there. If you see a product on a Safeway shelf, the company that makes that product already got paid--by Safeway. If Safeway puts a generic ibuprofen bottle next to a bottle of Advil, that's fine with Advil because Advil already got paid! Safeway is assuming the risk that those bottles of Advil might not sell because everyone buys the generic. Amazon is different--they sell things themselves, but they also offer to run a logistics platform for other folks selling things. Folks who use this platform believe (are led to believe) that they are going to direct to consumers, NOT selling wholesale to Amazon. Amazon purports to be a neutral infrastructure provider, like UPS or Verizon. Now, you can say that these folks are naive for believing Amazon about their neutrality, but it is what Amazon said! Many of these companies would never have used Amazon for logistics in the first place if Amazon had said "we are going to use all your data to copy your products and go direct-to-consumer ourselves with our copies, including placing them above yours in search results." Who would take that deal?
- abacadaba 6y ago
  Advil may very well be paying for the privilege of being on that shelf. See "slotting fees."
- granzymes 6y ago
  I don't see as big of a distinction between Safeway and Amazon. The demand for pain medication is relatively constant, so if sales of Safeway's generic ibuprofen increase it will come at the expense of Advil because Safeway will start buying fewer units. The harm is one step removed but is still there. I think a better argument would be the scale of the data collected by Amazon vs physical stores. But on the other hand, Safeway has an online store where they can collect the same information and if they are anything like Walmart then they also already have startlingly detailed insight into the supply chains and logistics of their suppliers that surely rivals what Amazon sees if you use their warehousing service. I don't think it makes sense to draw a clear distinction between Amazon generics and Safeway/Walmart generics. It seems like a fuzzy line at best.

by entee 6y ago

rahul003 6y ago

Does it mean that the brand of Amazon is better than the likes of Safeway or Target who sell their own products to compete with more name brand ones? Or it could also be that the brands on Amazon such as the top voted comment here might be smaller brands without enough name recognition to gain the attention of a buyer.

pge 6y ago

I have wondered the same thing every time this question comes up. It seems the difference is that the companies that put products in grocery stores are very large companies that spend a huge amount on marketing themselves (e.g. P&G, General Mills). So, the "house brand" is less recognizable to consumers and sells at a discount to the known brand that is often a larger company than the grocery chain. The grocery stores need the name brands because shoppers come looking for them (and Safeway gets the benefit of all the marketing they do). In Amazon's case, they are serving as a distribution channel for many, many small brands, none of which are known as well as Amazon (whereas Kellogg's cereal is better known than Safeway). That changes the power dynamic in favor of Amazon.

chillacy 6y ago
I had a friend who worked at a milk factory. They took their 2% organic milk and piped it into cartons with different labels: brand names as well as store brands, off to be sold at various price points. To his company it didn't matter at the end of the day if people bought the brand name or the store brand, it was all the same stuff.
entee 6y ago
I think you’re totally right. In addition/corollary, it seems a lot of the things Amazon Basics sells are basically commodities. If you have a million iPad stands, eh, just buy the amazon basics one, it’s probably not crap and the reviews look good. I need my stand, my USB adapter, my cable, my whatever to just, “do the job”, there’s not a whole lot of performance differential within the category beyond works/doesn’t work. If there’s a strong quality differentiator in the product I think they’d do less well and I bet their data scientists have answered that question one way or the other.
- samatman 6y ago
  This also points to a hidden advantage Amazon has which is totally unethical. Namely, Amazon is perfectly willing to sell counterfeit name-brand goods, and presumably this doesn't extend to their own Amazon Basics products. I don't think this singlehandedly explains why Amazon is so unwilling to do anything about their huge counterfeit problem, but it's suspicious that the dilemma resolves in their favor.
  - salawat 6y ago
    It's because they don't have liability for it because they act as a platform. Whereas with Amazon Basics, they risk their brand.

dangjc 6y ago

Maybe store brands should also be banned. We allowed this vertical integration in retail when maybe we shouldn’t. Yeah it shaves some costs, but is probably having a huge effect on supplier diversity and margins. If we’re revisiting the consumer welfare above all doctrine, this seems fair to revisit as well.

rleigh 6y ago
The vast majority of the "store brands" are made by the same companies who make the usual branded stuff. In many cases, it's the exact same product in a different wrapper or container, made on the same production line by the same company and the same staff. Sometimes to differentiate the product, it might have subtly different ingredients, or be of slightly lower quality to differentiate it from a "premium" product but still within the quality spec of the original product (for products which are binned or have batches of varying quality, or where there's variability e.g. biscuits which cook differently at different places on the conveyor). I used to work in a big brewery where we made supermarket branded beers. It was the same product in a different can. Actually, the exact same can, with a custom paint job. It was one of the more generic beers, rather than one with a taste associated with one of the well-known premium brands, but there was zero compromise on quality there. What was packaged for the supermarkets was 100% identical to beers with our own company name on it. It's only the cheapest of the cheap "value" stuff which has been significantly cost reduced and has compromised quality. That's stuff like pastry with a higher water content in place of fats, or substituted ingredients such as palm oil in place of butter etc. In these cases you're paying less, but obviously getting less product for your money. That's its own specialised segment. These are often made by different companies with their own separate supply chains, and possibly living by a different set of ethics... There clearly seems to be a market for this type of thing, but given the reduced nutritional quality and taste, it's not necessarily providing a genuine cost saving.

snowwrestler 6y ago

The difference is that Safeway does not have any other sellers on their shelves. Safeway buys inventory at wholesale and sells it at retail. Everything that is sold in Safeway was intentionally selected by Safeway to be there. If you see a product on a Safeway shelf, the company that makes that product already got paid--by Safeway. If Safeway puts a generic ibuprofen bottle next to a bottle of Advil, that's fine with Advil because Advil already got paid! Safeway is assuming the risk that those bottles of Advil might not sell because everyone buys the generic. Amazon is different--they sell things themselves, but they also offer to run a logistics platform for other folks selling things. Folks who use this platform believe (are led to believe) that they are going to direct to consumers, NOT selling wholesale to Amazon. Amazon purports to be a neutral infrastructure provider, like UPS or Verizon. Now, you can say that these folks are naive for believing Amazon about their neutrality, but it is what Amazon said! Many of these companies would never have used Amazon for logistics in the first place if Amazon had said "we are going to use all your data to copy your products and go direct-to-consumer ourselves with our copies, including placing them above yours in search results." Who would take that deal?

abacadaba 6y ago
Advil may very well be paying for the privilege of being on that shelf. See "slotting fees."
granzymes 6y ago
I don't see as big of a distinction between Safeway and Amazon. The demand for pain medication is relatively constant, so if sales of Safeway's generic ibuprofen increase it will come at the expense of Advil because Safeway will start buying fewer units. The harm is one step removed but is still there. I think a better argument would be the scale of the data collected by Amazon vs physical stores. But on the other hand, Safeway has an online store where they can collect the same information and if they are anything like Walmart then they also already have startlingly detailed insight into the supply chains and logistics of their suppliers that surely rivals what Amazon sees if you use their warehousing service. I don't think it makes sense to draw a clear distinction between Amazon generics and Safeway/Walmart generics. It seems like a fuzzy line at best.