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Friday
Dec092011

What Will Amazon Do If Walmart Goes All White-Label?

[ Image courtesy of Walmart via creative commons license. ]

In the next couple of years, Walmart will start selling private-label products to replace every branded product they offer, a source familiar with Walmart practices told LAUNCH.

Walmart has 30+ private labels that cover essentially every category at Walmart from food to clothing to office supplies. Walmart competitor Amazon, which is apparently opening its own retail stores, also has white-label products but not nearly as many, with only three brands: AmazonBasics, Pinzon for kitchen products and Strathwood for homes.

If Amazon decides to create more private-label brands, it would have significant leverage over pricing of top brand products and pose even more of a threat to Walmart.

As Mashable reported in June, Amazon surpasses Walmart in areas like customer service ranking, acquisitions, online presence and even prices. Still, Walmart is ahead of Amazon in terms of revenue, bringing in $408B+ annually while Amazon's revenue falls at $34B annually. 

LAUNCH has contacted Walmart and will update this story if we receive a response.

In February 2010, Walmart sent Glad and Hefty packing as the retailer decided to consolidate and only offer its own private label, Great Value, and SC Johnson's Ziploc for plastic sandwich-sized bags.
 
A month before Wal-Mart gave the big boot to Glad and Hefty, the company started leveraging its global scale to lower the cost of goods and accelerate speed to market for consumers. In doing so, they created Global Merchandising Centers, a change in structure and alliance with global sourcing organization Li & Fung.

"The core of the company’s overall global sourcing strategy will be to continue increasing direct sourcing for the company’s private brands," a 2010 Walmart press release states.

As president and CEO Bill Simon said at a Goldman Sachs conference in September 2010, Walmart is a house of brands.

"They show our product better -- excuse me -- they show our value better," Simon said. "When the price of Oreos in my store is less than the price of Oreos in a competitor's store, there is no doubt who the price leader is and where the basket win is. And we would prefer to show that as value. Private brands are still important to us. They play an important role in our business, different by category. They will fill holes or gaps in our offering."

As of 2009, private brand merchandise for labels like Faded Glory and George clothing represented $100B+ in Wal-Mart purchasing annually. As the Financial Times reports, with sales annual sales of $400B+, "Walmart is famously tough in negotiating with its suppliers, exploiting the scale of its buying to gain discounts." However, it acquires less than one fifth of those goods directly from the manufacturers and has generally made its purchase on a country-by-country basis.

“Our new strategy and structure should drive significant savings across the supply chain," Walmart vice chairman Eduardo Castro-Wright said in 2010.
 
Walmart introduced its Great Value brand in 1993 and relaunched it in 2009 to span 100+ categories and offer products like pizza, ice cream, organic cage-free eggs.

"This is an opportunity for us to provide solutions to our customers at a time when they need to save money," Wal-Mart Senior VP Andrea Thomas told FORTUNE.

Great Value is the largest of Walmart's private brands but others include Ol'Roy dog food, named after one of Sam Walton's hunting dogs, and Equate health and beauty products.

Walmart began offering private label brands in 1991 with the launch of Sam's Choice, a brand of drinks produced by Cott Beverages exclusively for Walmart.

INFOGRAPHIC