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Amazon’s Juicing Private-Label Profits by Outsourcing Development

What do Tuft & Needle, Equal and GNC all have in common?

They’re among the brands now making private-label goods for Amazon to sell exclusively on its platform, representing a bit of an about-face for a company that poured millions into crafting own-brand merchandise designed to augment the value of its commerce ecosystem.

The Wall Street Journal first reported the news of this new arrangement between Amazon and brands, detailing the pros and pitfalls such a relationship presents. Though many brands are wary of—and have already been losing their customers to Amazon, building lower-cost products just for the Seattle-based e-commerce platform can help these labels attract new customers, the report said.

In addition to asking brands to take on the product development work, Amazon has also been saddling them with shipping responsibilities—furthering eating into these companies’ profits given Amazon’s speed delivery requirements.

The upside to all this is that brands producing Amazon private labels receive a helping hand when the product launches, and can more quickly get feedback on customer reaction in addition to the new stream of revenue, the Journal reported.

The pressures of meeting Amazon’s demands can be intense. Equal reportedly developed its Amazon exclusive, dubbed Sugarly Sweet by Equal for Amazon, in 90 days instead of the usual one to two years earmarked for new product forays.

The news comes on the heels of reports outlining Amazon’s national brand accelerator program, designed for outcomes exactly like Nod, the Tuft & Needle-produced boxed mattress and Equal’s millennial-friendly sugar-free sweetener.

There’s no word yet on whether Amazon has any apparel brand partnerships in the works, but it wouldn’t be out of character for the company, which has made no secret of its ambitions to forge a reputation as a fashion destination. As of now, its private-label clothing could generate as much as $25 billion by 2022.