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Amazon admits a mistake and cuts most private label brands

When Target decided to revamp its retail model in 2014 after Brian Cornell became CEO, it bet very heavily on owned-and-operated brands. That was a switch from selling name-brand merchandise and it involved the chain -- especially in the clothing space -- cutting its ties with some big brands to launch its own.

In some cases, the retailer partnered with big names like Chip and Joanna Gaines who brought their Magnolia brand to the retailer. Target (TGT) - Get Free Report also extended this concept into its grocery space when it launched the Good & Gather brand in 2020.

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“Our guests are incredibly busy and want great-tasting food they can feel good about feeding their families,” said Target Food & Beverage President Stephanie Lundquist at the time.

This wasn't a small undertaking as Good & Gather consolidated a number of the chain's previous house brands and launched with over 2,000 items in the line. But, whether it's food items, health and beauty, clothing, or really anything else, Target has a massive retail presence and customers can see the products.

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The chain also has the advantage that people come to Target looking for specific things. If someone needs yoga pants or workout clothes, they may not recognize the Target-created brand, but they can touch it, feel the quality (or lack of quality), and make an informed decision.

That's something Amazon (AMZN) - Get Free Report can't duplicate. The retail giant may know a lot about what you like to buy, but even if it uses that knowledge to serve up its own brands in search people are not likely to buy bathing suits or underwear -- two areas where Amazon had multiple owned-and-operated brands -- or even sheets or other bedding without getting to be hands-on.

By not having retail stores to show off its merchandise, Amazon ensured that most of its house brands would fail and now the company has made the decision to get rid of most of them.

Amazon also wants to cut down on returns.Image source: Getty Images.
Amazon also wants to cut down on returns.Image source: Getty Images. Image source: Getty Images.

Amazon closes most of its private-label brands

Amazon has had success with its Amazon Basics and Essentials lines. That's because most people trust that the retail giant can make a phone charger or other basic item and sell it to them cheaper than other retailers. Even the Essentials clothing line has done okay because it sticks to the basics. Attempts to create company-owned brands with style and personality mostly did not.

Now, Amazon is scaling back its private label ambitions.

"Amazon confirmed on Friday it plans to streamline the number of private brands it offers. The retailer also said it plans to rebrand some popular items under existing brands like Amazon Basics and Amazon Essentials," Retail Dive reported.

The online giant has also faced regulatory scrutiny over how it used its data to decide which products to create. Sticking to more basic products, where the demand is clear, makes those problems go away.

Amazon missed an easy answer

Amazon has a relationship with Kohl's (KSS) - Get Free Report to process its returns and sell some of its electronics like Kindle tablets and Echo smart speakers. It does not, however, sell its clothing, bedding, or other household lines through the chain.

Kohl's, which has struggled mightily at least partly due to merchandise mix would have benefitted from adding some Amazon lines to its stores. The online giant could have used Kohl's as its showroom and perhaps even purchased or taken a stake in the chain.

Now, the strategy that has worked so well for Target has largely failed for Amazon, which shows that while people like to buy online, there are limits. If Amazon had gotten some of its private labels in front of people, they may have bought from them and repurchased online, but the company has decided to close more than half of its brands (which also include multiple furniture lines) rather than try a brick-and-mortar experiment.

Amazon has also closed all of its non-food retail brick-and-mortar concepts including its bookstores and 4-Star stores.

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This story was originally published August 13, 2023, 8:00 AM.

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