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Amazon has long been a frenemy to the businesses that sell goods on its site. Soon, grocery food brands are going to get their own taste of why an Amazon relationship can be so complicated.
The company plans to introduce its own line of grocery items, including milk, cereal and baby food, under the Amazon Elements label that it launched last year, according to the Wall Street Journal. What this means is that Amazon’s own baby food or cereal could compete for shoppers’ attention on Amazon.com alongside offerings from big-name Amazon partners such as Gerber and Kellogg’s.
While Amazon already owns other private-label brands such as Amazon Basics, it’s taking a different approach with Elements. The Basics strategy appears to quietly go after product categories where shoppers don’t have a strong brand preference and where big brands don’t dominate. But with Elements, Amazon looks to be interested in competing head-on with big consumer brands, starting with a landing page on the site that stands out from the rest of the Amazon shopping experience.
“It’s a big deal when Amazon does a color that’s not yellow or black,” said an industry executive who helps grocery brands sell on Amazon.
Although this strategy is not new to the retail world — big retailers such as Costco, Kroger and Target sell their own private label brands to boost profit margins and improve selection — Amazon’s efforts are raising some eyebrows because of the power it wields in online retail.
“Amazon is still learning and so they will stumble some,” said an e-commerce executive in the grocery industry who asked to remain anonymous because he does business with Amazon. “But if they promote it like the Kindle, then it becomes an issue.”
Other grocery brands are watching carefully to see how aggressively Amazon markets its own brand on and off its site and whether it will give preferential ad placement or search-result placement to the Elements brand, retail executives who spoke with Re/code said.
Some suggested that Amazon could also use the prospect of competition from the Elements brand as a tactic to get better terms in negotiations with grocery brands that sell on Amazon. There are currently no signs of this, but Amazon’s reputation as a ruthless negotiator often has partners at least considering the worst-case scenario.
For now, Amazon’s private-label initiative is not cause for major alarm, according to a handful of executives who either work inside grocery brands or consult with grocery brands on how to do business with Amazon. The thinking is that grocery brands are already used to competing for shelf space with store brands in physical stores. It’ll also take Amazon a long time to create a strong grocery brand that shoppers will trust.
The Journal report comes six months after Amazon unveiled Amazon Elements, its own store brand that launched with lines of baby wipes and diapers, the latter of which was pulled from Amazon for “design improvements.” At the time, Amazon made it clear these products were just the first of many that it would launch under the Elements banner.
Recent trademark filings, unearthed by the Journal, highlight the real ambition for the new brand. In addition to milk, cereal and baby food, Amazon also wants the exclusive right to use the Elements brand name in categories ranging from coffee to energy drinks to razors.
The Amazon Basics line has been expanding, too. That brand began with products such as batteries and electronics accessories, but has since moved into other categories such as office products and pet supplies. A recent search turned up Amazon Basics branded poop bags for dogs as well as office chairs, shredders and even patio heating lamps.
This article originally appeared on Recode.net.
