From the outside, Amazon looked paralysed. India’s nationwide lockdown—the world’s most stringent in the fight against the Covid-19 pandemic—brought the globe’s largest e-commerce platform to an almost complete halt. For nearly two months, it was allowed only to sell essentials such as groceries.

But even as it chafed at the bit to resume operations across all its categories, it was recalibrating for a new world order. One where customers are less likely to spend big due to the worsening economic slowdown. Where items like personal protection equipment (PPE) are highly sought after. Where, perhaps most importantly, Amazon’s Chinese backbone was crippled.

The first two factors play perfectly into Amazon’s hands. Over the last five years, it has worked tirelessly to create a three-pronged private label juggernaut. It has at least eight private label brands; hundreds of made-for-Amazon brands; and its Global Accelerator Accelerator The Ken Of, by, for Amazon: Private labels, public consequences Read more programme, where it taps select sellers to develop Amazon-exclusive brands, which it can later buy for a flat fee of US$10,000.

Private labels account for around 5% of Amazon’s revenue in India. This is significantly higher than the 1% contribution the company claims globally, according to Satish Meena, senior analyst at research firm Forrester. In a post-Covid world, where people are drawn less to brands and more to savings, it should be primed to grow. After all, the high-volume, high-margin private label strategy makes Amazon virtually unbeatable on price. 

Less means more

According to reports, the number of stock keeping units (SKU) on Amazon India has fallen to just 15 million, compared to 50 million before the lockdown. This has seen its private labels gain visibility

Take headphones, for example. Third-party sellers usually manage a 15-20% margin on these. Amazon’s margins on its private label headphones are almost double that, while still remaining competitive in terms of price, said several sellers on the platform. 

Its private label fortress, though, was built on a foundation of bulk sourcing from China. About 70% of its private label products in India are procured from China, said a former high-ranking executive at Amazon. Since the pandemic, however, transnational trade—especially from China, the epicentre of the virus—has been impeded. And without China, Amazon’s private label playbook doesn’t quite work the same. 

One of Amazon’s private label sellers experienced this first hand. The company approached him to manufacture PPEs, the category it is especially focused on under its Global Accelerator programme. “This is the first time I am seeing if I can localise manufacturing here; the only other thing we make in India is flip covers for mobiles,” said the seller. 

AUTHOR

Abinaya Vijayaraghavan

Abinaya is a Bengaluru-based writer, covering the sprawling and exciting world of Indian e-commerce. When she is not trying to understand alpha sellers and complex supply chains, she enjoys travelling and playing badminton. Abinaya was previously a reporter at Reuters.

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