Amazon Adds Whole Foods Private Label to Marketplace Despite Overall Cutbacks

Amazon may be cutting back on its private-label offerings overall, but it seems that, when it comes to grocery brands, the eCommerce giant may just be getting started.

The company will be adding brick-and-mortar grocery subsidiary Whole Foods Market’s private-label brand, 365 by Whole Foods Market, to the Amazon online marketplace for delivery this summer, according to the Austin American-Statesman. This addition enables Prime members to get free shipping on the brand’s products, and many of these items will offer 15% discounts for those who utilize the Subscribe & Save option.

The move suggests that, while Amazon may be cutting some of its brands in an effort to reduce both costs and antitrust concerns, private label in grocery may remain a strength.

In fact, earlier this month, Amazon CEO Andy Jassy touted private-label brands as an advantage as the company looks to develop its grocery presence and recover from past missteps.

“[The] team has made up a lot of improvements. We have spent a lot of time thinking and rethinking how we want the [grocery] formats to look, and we’ve just started rolling out some of those new formats. … You see added selection. You see added private brands,” Jassy said.

Additionally, by offering these discounts, Amazon has the opportunity to woo consumers concerned about inflation, since consumers consider these factors when deciding which grocery retailers to shop from. Research from the May edition of PYMNTS’ Consumer Inflation Sentiment Report, “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” for which we surveyed more than 2,000 consumers in April, showed that 47% of shoppers have switched to merchants that offer better prices on groceries.

Retailers are noting these trends. According to data from PYMNTS’ study “Big Retail’s Innovation Mandate: Convenience and Personalization,” created in collaboration with ACI Worldwide, which draws from a survey of 300 retailers across the United States and the United Kingdom, 74% of grocers think consumers would be very or extremely likely to switch merchants if not offered the ability to use digital coupons and rewards.

Additionally, manufacturers of name-brand food products are seeing ongoing competition from private-label alternatives. For instance, snacking giant Utz shared on a call with analysts Thursday (Aug. 10) discussing its second-quarter earnings that it is continuing to see trade-down to store brands.

“I think it’s very normal in this environment that we start to see private label come back into the conversation. They play an important role for retailers,” Utz CEO Howard Friedman noted.

Indeed, retailers, for their part, benefit from the higher margins of private-label products and, in cases where these products truly provide competitive quality, from their ability to drive loyalty. Kroger noted on its last earnings call that, while the current macroeconomic environment may be what is driving consumers to try out private-label products, these habits remain sticky even as spending pressures subside.

“Our Brands are always a winner with our customers. In this period of sustained high inflation, it helps our customers save money without sacrificing quality,” CEO Rodney McMullen said, “While inflation may have been the reason for some customers trying Our Brands products, the taste and quality makes the customer love these products and continue to repurchase them.”