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Amazon tipped to grow private label brands into billion dollar business

Last updated: 08:17 10 Oct 2017 EDT, First published: 03:17 10 Oct 2017 EDT

Amazon box
Private label represent 0.15% of sales

Selling its own products could become a US$1bn opportunity for Amazon.com Inc (NASDAQ:AMZN), that’s according to Morgan Stanley.

Brian Nowak, Morgan Stanley analyst, in a note highlighted Amazon now has 34 brands across 9 different categories, and he said there is a growing focus on ‘private label’.

The Whole Foods acquisition adds to the private label push, Nowak highlights.

“Consider too that the Whole Foods 365 private label brand is the only WFM product currently available in Prime Now...and the tea leaves show that Amazon cares about private label,” the analyst said.

He pointed out that third party data indicates that revenue private label brands is estimated at around US$250mln in 2017 to date, which would represent just 0.15% if Amazon’s gross merchandise sales.

“This speaks to the opportunity, as private label makes up anywhere from 5%-46% (18% average) of other major retailers’ revenue,” Nowak said.

“Private label products are more profitable than branded items too, as we estimate other retailers’ private label businesses have an average of ~600bp higher gross margins.”

Nowak reckons that growth of private label to 5% of retail sales by 2019 it would add US$1bn of gross profit.

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