[crazygringo]

How is that different from large supermarkets determining own-brand cereal and peanut butter are good markets to move into?

It's just capitalism at work. Yesterday's high-quality high-price item becomes today's low-priced low-quality commodity. Quality-focused small brands in every industry and every market need to be constantly improving, developing new product improvements, new niches, new products. (E.g. an even-higher quality version for the luxury niche.)

It's extremely unlikely that Amazon will be be able to raise prices long-term on an own-brand item with "no competition" simply because... well, capitalism. As soon as they do, manufacturers in China or whoever sells the equivalent product at Wal-Mart will list on Amazon for a lower price and make money... so Amazon lowers the price again... and as always, the invisible hand of capitalism keeps prices low for the consumer.

[bigjimmyk3]

I think it's different because of intent. Supermarkets and large retailers (e.g. WMT) seek deals to relabel and sell products as "house brand" but it's generally done in such a way that they are selling to customers who would not have purchased the name brand in any case. That's the pitch anyway, and judging from the longevity of these arrangements it's likely that the "name brand" is seeing enough benefit to continue in that way. The two entities seem to find a way to balance their interests.

With Amazon, I don't think they are seeking that balance at all. I do not think it's a good long-term move for their retail side. The problem with stabbing all of your friends in the back is that you also have a back.

[repiret]

> they are selling to customers who would not have purchased the name brand

When I was a kid, the supermarket had an isle named "generic", and all the generic stuff was relegated to that isle and came in plain yellow packaging. Back then, I would have accepted that they're not selling to the same customers as the name brands.

Today, store brand stuff at the supermarket is sitting on the shelf right next to the name brand stuff, with intentionally similar packaging. They are absolutely competing with the name brand stuff. And thats true at Home Depot and Walmart and Costco and everywhere else I shop that has a mix of store-brand and third-party brand stuff.

Of all the places I shop, Amazon is the only one whose store-brand is plainly labeled as such, and I give them kudos for that. Some places like the grocery store and Costco have a single store-brand, so you don't have to work too hard to figure out whats name brand and what isn't. While yet other places have several store brands that aren't really marketed as such in an attempt to confuse you into thinking you're getting a name brand (plumbing and electrical fixtures at Home Depot and Lowes is where I've seen this most rampantly)

[bigjimmyk3]

You are correct that more stores are mixing their house brand in with "national" brands (or whatever term you want), and that stores have discovered the good ROI that comes from upping their house brand game (which is the point of the linked article).

I want to add that there is a hidden benefit for name brands to having the house brands there, at a lower price point. There's plenty of fascinating reading on "price positioning" and how having a lower house brand right next to the national brand results in increased sale of the national brand.

My main point was that I don't think Amazon sees its relationship with vendors the same way that older retailers do. WMT has a deserved reputation for being very aggressive with their suppliers, but I believe that their culture still sees the relationship goal as win-win (they would argue that they are helping their suppliers achieve better efficiency, or often licensing the national brand's stock to make their house brand so more sales for all). I know nothing about Amazon's buyer culture, but their own brand activity does not seem to give much consideration to supplier health.

It's also interesting to note that their own brands are immune to the commingling problem, which gives them a perverse incentive to let that problem ride. That makes me very uncomfortable.

[crazygringo]

> ...they are selling to customers who would not have purchased the name brand in any case... it's likely that the "name brand" is seeing enough benefit to continue in that way. The two entities seem to find a way to balance their interests.

I'm sorry but I just can't buy that. Generics in the supermarket and drugstore (at least the ones I go to) are directly next to the name-brand and clearly compete directly. There's no "arrangement" or "balancing of interests" between the two, any more than Coca-Cola and Pepsi have an arrangement or balance of interests to appear on the shelf next to each other -- which they of course don't, but rather are in cutthroat competition with each other, the same way they have been for decades.

It's flat-out competition pure and simple, there's zero difference of intent from what Amazon is doing. And both survive, because some people prefer to pay a little extra for name-brand or quality, and some people prefer to save a little money and trust generics. The only balance is between pricing and demand.

[tivert]

> I'm sorry but I just can't buy that. Generics in the supermarket and drugstore (at least the ones I go to) are directly next to the name-brand and clearly compete directly.

Many store-brand generics are manufactured by the exact same company that manufactures the name brand. The arrangement works because the manufacturer know that some consumers are cost conscious, some are brand conscious and willing to pay more. If they lower the price of the name-brand to get the cost conscious consumers, they lose out on the name brand markup. The solution is often two slightly different brand from the same company at different price points. For this to work, it's important that the store brand packaging have zero connection to the name brand.

Costco is especially known for doing this. IIRC, Kirkland batteries are probably Duracells in different packaging.

[bigjimmyk3]

tivert's reply is correct, and WMT does it on a surprising array of goods. The most visible example is "Great Value" frozen pizzas, which are produced by the same company that makes and sells Red Baron. Cost conscious consumers buy GV, brand conscious consumers by RB, both companies make money.

[geofft]

The invisible hand of capitalism works slowly. The fingers of the invisible hand are unhappy consumers communicating their demand; the thumb is holders of capital hearing it and building better products. This process requires time to communicate that information and time for new suppliers to enter the market, and in the meantime consumers are unhappy and existing suppliers aren't making as many sales as they could.

The invisible hand corrects mistakes, but that's no defense of making mistakes.

[emodendroket]

Well, maybe, if we judge that Amazon does not exercise monopolistic control over online retail. But a lot of people are going to never look anywhere besides Amazon (gotta take advantage of that Amazon Prime subscription, of course) and just buy the product and not know that a lower-price option is available.