Last year in a story titled “Got a Hot Seller on Amazon? Prepare for E-Tailer to Make One Too”, Bloomberg described an aluminum laptop stand which was a best-seller in its category. Before AmazonBasics - one of Amazon’s own brands - launched a similar looking product at half the price.
“Rain Design has been selling an aluminum laptop stand on Amazon.com Inc. for more than a decade. A best-seller in its category, the $43 product has a 5-star rating and 2,460 customer reviews.
An aluminum laptop stand from Rain Design Inc., top, and a similar Amazon laptop stand, sold under its Amazon Basics brand.
In July, a similar stand appeared at about half the price. The brand: AmazonBasics. Since then, sales of the Rain Design original have slipped. “We don’t feel good about it,” says Harvey Tai, the company’s general manager. “But there’s nothing we can do because they didn’t violate the patent.””
Today Rain Design’s laptop stand sells for $41.90, and seems to be outselling Amazon’s $19.99 copy. However Amazon has since launched a different design which outsells them both, still at $19.99. Rain Design one is still the only one with a 5-star rating.
This story has spread wide enough to create an impression that successful products on Amazon are inevitably going to get copied by Amazon since it has unlimited access to data on each product’s performance.
This is a complete myth.
Jim Barksdale, former CEO of Netscape said “If we have data, let’s look at data. If all we have are opinions, let’s go with mine.” We instead say “If we have data, let’s look at data. If all we have are opinions, let’s go find data.” Since so much of what is being discussed in retail is pure speculation, and misinformation. Also known as opinions.
In this case the question is how many brands, and how many products were launched by Amazon or its subsidiaries. This is quite easy to answer - since January AmazonBasics has grown by 475 products. From 873 in January, to 1,348 in October. Most of them are some type of electronics or related.
Yet those products are rated poorly - top AmazonBasics products have an average rating of 4.18 out of 5. In January they had an average rating of 4.35 out of 5.
However One Click Retail estimates that Amazon sold roughly $300 million worth of its private label products year to date, 85% of which was from AmazonBasics sales. Amazon continues to launch more brands, but they are not as successful because Amazon Is Good at Building Generic Products, Not Brands.
The story of Rain Design’s laptop stand is scary, but doesn’t happen often. AmazonBasics is not the brands-killer it is being hailed as. It is true that some products get affected by it, but so do thousands of other products facing competition from thousands more products. There are private labelers launching 475 new products every month. That’s why we wrote “Brands Shouldn’t Fear Amazon, The Threat Is Millions of Marketplace Sellers”. Some of those sellers are on path to, are at, or are already beyond the $300 million of Amazon’s own private label sales.
In theory Amazon could launch all best performing products as copies on their own brands. As it stands today they don’t do it. All retailers have their own private label brands, from Walmart, to Costco, to Whole Foods; they always did. And so does Amazon. But Amazon is much more interested in product lines Amazon Echo devices, and businesses like Amazon Web Services (AWS) cloud. Chasing a few hundred million dollars more in sales is not the scale Amazon operates in, as ludicrous as this might sound.
Some people in the industry argue that brands like AmazonBasics are artificially limited to never get too big. There are many reasons for this, one being the ever-increasing mentions of anti-trust regulation. A marketplace where Amazon sells products it purchases from vendors, sells products it makes itself, and allows other to sell, all while controlling the black-box search and buy box algorithms is a potential risk.
This is not say that if Amazon wanted they couldn’t. They do have all the tools available to them. But so do thousands of very capable smaller sellers. And tens of thousands more who will try anyway. Brands shouldn’t overly focus on actions taken by only Amazon.