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Are Amazon’s latest private label offerings part of a China strategy?

Chinese consumers have a huge unsatisfied demand for Western goods like electronics, shoes, shampoo/beauty, diapers and nuts. Sound familiar?

Alibaba Chairman Jack Ma and British actor Daniel Craig attend the ceremony of 2015 Tmall 11.11 Global Shopping Festival in Beijing, China.
VCG / Getty Images

On May 15, Recode and the Wall Street Journal reported that Amazon is expanding its line of private label products into more consumer product goods (CPG), including nuts, baby food, vitamins, coffee and diapers. These brands have fun/whimsical names like Mama Bear, Wickedly Prime and Happy Belly, and they are going to be Prime Exclusives (at least to start).

The general consensus on Amazon’s CPG private label strategy assumes that Amazon has tried to get Jessica Alba’s white-hot The Honest Company products on the site, to no avail. The Honest Company strategically manages its channels to Target, Costco and Whole Foods, as well as some specialty stores.

However, when I saw that list of product categories, the first word that popped into my mind wasn’t Honest or Prime — it was China.

What are the top-selling items on Tmall, and why does it matter?

At ChannelAdvisor, we closely monitor marketplace trends globally, and we work with retailers and branded manufacturers on both an import and export basis to and from China. For Western brands selling into China, one of the most interesting areas to watch is Alibaba’s Tmall. We track more than 100 marketplaces, and some of them are very opaque — like Amazon, where you don’t know transactional details. Others, like eBay and Tmall, are transparent with transactional details like volume and average order value (AOV), from which you can ascertain the total transactional value, or what we call GMV (Gross Merchandise Value) in the industry.

On Tmall, to help capture best practices for selling into China, we closely monitor a basket of roughly 100 U.S. brands and retailers that sell on Tmall. Here is a list of the Top 20 Western brands selling into China on Tmall:

As you can see, these are mostly electronics, shoes and CPG brands. Peeling the onion, when we look at the top 25 or 30 products for sale by these retailers and brands, we see an interesting product-level trend:

Here, you can see that the top-selling items generally fall into these categories: Electronics, shoes, shampoo/beauty, diapers and nuts. Sound familiar?

Digging deeper, if you look broadly at these categories of products on Tmall, there is definitely a supply/demand imbalance. The Chinese consumer has huge unsatisfied demand for these particular Western goods.

Putting it all together

Depending on the research you follow, Amazon is the No. 3 or No. 4 player in China, and I can guarantee Amazon has robust data on what Chinese consumers are looking for from Western brands. Putting these pieces together, I think there’s a high probability that Amazon is not only building these brands for U.S. consumption, but they also give Amazon exclusive products that Amazon can sell on, or Tmall, to help increase its sales in China.

Also, as you can see, Amazon’s store on Tmall is in the Top 5, so it has created a manufacturer brand. So it could be that while these products are sold under Mama Bear, Wickedly Prime and Happy Belly in the U.S., they could be sold under a more noticeably Amazon brand in China — for example, Amazon Diapers, Amazon Nuts or Amazon Basics.

Amazon is probably building the private label CPG brands with the U.S. consumer as a priority. But based on the data we see from the top-selling U.S. brands in China via Alibaba’s Tmall, Amazon could be looking to proverbially "kill two birds with one stone" with these offerings — it looks like most of them will clearly appeal to the Chinese consumer, as well.

As executive chairman, Scot Wingo sets the strategic direction for ChannelAdvisor, and works closely with the management team to align product direction with market trends. An industry thought leader, he contributes regularly to several ChannelAdvisor blogs, and speaks often at industry events. Reach him @scotwingo.

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