Amazon (AMZN) Ventures Into Private Label Perishables

In an effort to diversify its online presence, the e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) has reportedly started selling its first private-label groceries, which include Happy Belly (its coffee brand) and Mama Bear (its baby food brand). Per the Wall Street Journal, these products will be made available exclusively to Amazon Prime members.

However, we note that, Amazon isn’t going all out to advertise its private-label groceries. Also, its name is nowhere to be found as the manufacturer of these products in the description section of these perishables.

Why this Move?

While the company reportedly has been considering rolling out its own grocery products for quite some time, the following may be the chief reasons why it finally took the leap:

Competition: The current move is a step toward competing with brands such as Starbucks (NASDAQ:SBUX) and Earth’s Best baby foods that sell their perishable items through its online platform.

Higher Profit Margins: It is always more profitable to sell one’s own products than by taking a cut out of reselling products produced by others.

More Control: Having its own brands would help it to assume more control over the shipping and distribution process, which will lead to faster and more reliable shipping to Prime members within a short span of just two days.

More Success: Amazon hopes to record more success with its perishables business than the diapers line, which it called off just seven weeks after its launch in 2015.

Ramp Up AmazonFresh: Amazon’s online grocery business, AmazonFresh is likely to get a boost with this addition as it is being expanded to new markets.

Amazon’s Other Private Label Brands

The current offerings are not the only private-label brands in Amazon’s repertoire. It launched Elements in 2015, which comprised more than two dozen food and household items and is also exclusively available to Prime members.

Additionally, its first private-label apparel line was launched in Feb 2016, which is open to all customers.

Our Take

Going forward, the company is looking to expand its private-label brands by adding nuts, spices, tea, vitamins and household items such as laundry detergents to its perishable goods business.

We note that since the company is introducing these items after a thorough research on the demand for these products through third party sales, they are likely to do well in the coming years.

At present, Amazon has a Zacks Rank #2 (Buy).

Other Stocks to Consider

Investors interested in stocks in the broader technology space may also consider PetMed Express, Inc. (NASDAQ:PETS) , sporting a Zacks Rank #1 (Strong Buy) and Expedia Inc. (NASDAQ:EXPE) and IAC/InterActiveCorp (NASDAQ:IAC) , both carrying a Zacks Rank #2.