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Amazon Responds to Controversial Private-Label Report

A new report suggests Amazon’s private-label ambitions might be taking a step backwards.

The Wall Street Journal’s report updated Friday said flagging sales drove the e-commerce giant to “drastically” slash the number of items it sells under its own brands. Amazon has also toyed with the idea of pulling out of the private-label business altogether as a way to put regulatory scrutiny to bed both in the U.S. and abroad, it added.

The report cited an unnamed source who said executives discussed reducing the U.S. private-label assortment by more than 50 percent. The source went on to say that over the past six months, Amazon leadership instructed its private-label team to cull certain items and skipping out on reorders, according to the report.

Amazon didn’t comment on the reported reduction, but denied it’s giving up on the private-brand game.

“We never seriously considered closing our private-label business and we continue to invest in this area, just as our many retail competitors have done for decades and continue to do today,” an Amazon spokesperson told Sourcing Journal.

Despite its private-label growth in recent years, Amazon has said that its owned brands still account for just about 1 percent of its retail sales. As of 2020, the company was selling 243,000 products across 45 different house brands. This year, the e-comm juggernaut even entered the burgeoning sustainable apparel and home textiles market with its Amazon Aware product line, which includes dresses, T-shirts, tank tops, bedding and towels, skincare products and other household essentials.

The WSJ report indicated that Amazon founder and former CEO Jeff Bezos instructed the private-label team to drive 10 percent of company sales by 2022. But after the team responded by quickly serving up thousands of items to generate more sales, many SKUs ended up idling in warehouses or relying on discounts to move product.

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Amazon’s private labels have been a source of controversy for reasons related to the company’s business practices. Over the years, critics have accused the marketplace of piggybacking off third-party seller data to build rival private brands, and showering preferential treatment on its own brands at the expense of products sold by outside vendors.

In growing its own offerings, Amazon effectively put itself in competition with more third-party sellers on its platform, further igniting the ire of sellers as well as government officials.

Despite Amazon’s insistence that it does not leverage individual seller data to for its own private-brand benefit, an April 2020 Wall Street Journal report uncovered instances in direct violation on the company’s stated policies. Interviewing 20 former employees, WSJ discovered that Amazon used non-aggregated or easily identifiable data from third-party sellers to inform its own product strategy and develop its in-house brands.

When called to testify to Congress in July 2020, Bezos admitted that he couldn’t “guarantee you that that policy has never been violated.”

The Federal Trade Commission (FTC) has been investigating Amazon’s competitive practices, and U.S. lawmakers have proposed various forms of legislation aimed at it and other Big Tech companies that would bar these widely used platforms from favoring their own products and services.

Former Amazon consumer worldwide CEO Dave Clark engineered the private-label shift, the Wall Street Journal said. After an initial review of Amazon’s private brands, Clark pushed the company to focus more on its bestselling internal brands instead of a broader product range.

Under Clark, Amazon teams conducted a profitability review of each private-label product, determining which ones didn’t sell enough to hit their profit threshold and targeting them to be phased out, the report said.

But Amazon’s executives have held off from going through with any exit strategy until necessary, the report said, which added it could potentially appease the FTC or another regulatory agency that threatened or filed litigation by walking away from the owned-brand business altogether..

Amazon UK to hire 4,000

While the overall tech sector is on shaky footing given concerns about the economy, with many businesses either cutting jobs or slowing down hiring, Amazon said it plans to create more than 4,000 new permanent jobs in the U.K. this year.

The hiring news comes come as the e-commerce giant is planning to open two more fulfillment centers in northern England.

This is the smallest new jobs number Amazon announced in at least three years, a period in which the company hired 40,000 new employees. The recruitment drive would bring its permanent workforce in the U.K. to 75,000, and make the tech titan one of the country’s 10 largest private-sector employers.

“We’re continuing to invest in talent right across the U.K., from apprentices in Swansea to data scientists in Edinburgh. People join us not just for the wide variety of roles, great pay and benefits, but for the career development opportunities we provide,” said John Boumphrey, Amazon UK country manager. “Applicants recognize we are an employer that offers great development potential, and we are proud to have so many employees growing and taking the opportunity to learn new skills that will create paths to new jobs at Amazon and beyond.”

The company’s new roles include opportunities at the fulfillment centers set to open in the English towns of Wakefield and Knowsley. Amazon is also creating new jobs at its 19 Fresh stores using “Just Walk Out” technology, including the first outside London in Sevenoaks.

The jobs announced also include roles in corporate and technology functions in Amazon and Amazon Web Services (AWS), including software development, product management, and engineering; as well as jobs in the operations teams in fulfillment centers, sort centers and delivery stations. In addition to Amazon’s permanent employees, the company previously announced 1,500 new apprenticeships in 2022.

UK watchdog latest to open Amazon probe

As Amazon onboards new employees in the U.K., the country’s top antitrust watchdog officially opened an investigation into whether the company’s practices might be anticompetitive. The Competition and Markets Authority (CMA) had reportedly been examining Amazon’s business for more than a year as the tech titan battled probes in the European Union. Like the E.U. investigations, the CMA probe will focus on how Amazon collects and uses third-party seller data and how it sets the eligibility criteria for selling under the Prime label.

“It’s right that we carefully investigate whether Amazon is using third-party data to give an unfair boost to its own retail business and whether it favors sellers who use its logistics and delivery services—both of which could weaken competition,” Sarah Cardell, general counsel at the CMA, said in a statement.

The E.U. probes convinced Amazon to make some concessions, with the company committing to stop using sellers’ data for its own competing retail business and its private-label products in European. It also said sellers on Prime will be chosen based on non-discriminatory criteria, and they can now choose their own logistics and delivery services partners instead being forced to use Amazon’s logistics services. Amazon will also rank seller offers equally before including them in the “buy box” that is prominently visible on the product search results page.

Amazon’s concessions came as the company faced a potential fine from the European Commission of 10 percent of its global annual sales.