There’s power in private labels, and no one knows this better than Amazon.
That’s why the e-commerce giant has been steadily adding an array of owned brands across categories ranging from pet food and diapers to gadgets and cleaning products.
But the real threat is in Amazon’s apparel labels, which could be worth as much as $25 billion by 2022, SunTrust Robinson Humphrey analyst Youssef Squali told institutional clients in a note Monday. Amazon’s private-label apparel sales are expected to reach $7.5 billion this year, and its clothing and shoes are the fourth-most purchased in the category, ahead of numerous national brands, according to Coresight Research.
“Private label is one of the highly under appreciated trends within Amazon, in our view, which over time should give the company a strong ‘unfair’ competitive advantage,” Squali wrote, according to CNBC. “‘Unfair’ because it’ll be very difficult to dislodge the company once it attains it; fair because it’s earned, not bestowed.”
Some would argue that Amazon’s advantage in this area isn’t exactly earned. Brands have long been wary of working with the e-commerce giant, using the data and customer insights gleaned from brand partnerships for its own purpose and profit. However, companies like Nike and Calvin Klein notably caved in and began selling on Amazon within the past year simply because its reach and influence are too great to ignore—and it’s better to have some control over how their products appear on the platform than none at all.
Apparel brands and retailers have even more cause for concern with the recent news that Amazon is putting its 2017 Body Labs acquisition to use by inviting volunteers to New York City to be 3-D body scanned over the course of several weeks to determine how their figure fluctuates. It doesn’t require a leap of imagination to posit that Amazon will be using those learnings to advance in-house garment design, further strengthening its private labels.
Plus, results show that Amazon’s private-label investments in categories such as activewear have already borne fruit. In Q1 of this year, 57 of the activewear bestsellers for men’s were Amazon’s own labels, in addition to 87 percent of women’s.