(CNBC) Amazon quietly removes promotional spots that gave special treatment to its own products as scrutiny of tech giants grows

Amazon quietly removes promotional spots that gave special treatment to its own products as scrutiny of tech giants grows

(Source: CNBC)

  • Amazon has significantly scaled down or relocated promotions of its private label products in recent weeks.
  • These promotions were exclusively reserved for Amazon’s own private label products and appeared in highly visible areas of the site, like the top of search results or next to the “buy box” of a competitor’s product page.
  • The change follows increased regulatory scrutiny of tech giants in recent months, including Sen. Elizabeth Warren’s call for breaking up big tech companies.
Amazon CEO Jeff Bezos, founder of space venture Blue Origin and owner of The Washington Post.

Alex Wong | Getty Images News | Getty Images
Amazon CEO Jeff Bezos, founder of space venture Blue Origin and owner of The Washington Post.

As tech giants face growing scrutiny over their market power, Amazon has quietly removed some of the most aggressive promotional spots for so-called private label products on its website.

Private label products are created by Amazon or partners and are sold only on Amazon’s website under an exclusive brand name. They benefit Amazon in many ways: They expand the selection of products on the site, offer better profit margins than selling third-party products, make supply-chain management easier and can help Amazon persuade big brands to cut prices to remain competitive on its site.

Amazon has been ramping up the number of private label brands during the last three years, stoking fear and concern among some sellers and brands that sell competing products on the marketplace.

Amazon’s promotions for these products, which started showing up at least a year ago, were exclusively reserved for Amazon’s own private label products and appeared in highly visible areas of the site, like the top of search results or next to the “buy box” of a competitor’s product page. Other companies spend billions buying Amazon ads that link to their product listings on the site, vaulting Amazon into the number three spot among U.S. digital advertising providers, behind Google and Facebook, according to eMarketer.

However, in recent weeks, Amazon has significantly scaled down or relocated on-site promotions for its private label products, according to multiple Amazon sellers and consultants.

The change follows increased regulatory scrutiny of tech giants, highlighted by Sen. Elizabeth Warren’s call for breaking up big tech companies like Amazon and Google last month. Amazon’s practice of exclusively promoting its own private label products on the most prominent parts of its site has drawn the ire of many sellers and brands for being unfair and abusive.

“If I were Amazon, I would be worried about being viewed as giving unfair advantage to my private label products, given the amount of power they hold in general — and how unpopular the amount of power is quickly becoming,” said Andrea Leigh, vice president of Ideoclick, an agency that helps sellers and brands sell on Amazon.

Unfair advantage

The promotions were highly visible on Amazon’s website.

For instance, a search for “baby food pouches” used to show a full banner of Amazon’s own products under the tab “Top Rated from Our Brands” at the top of search results.

Those placements have been removed now. For certain categories, like baby wipes or batteries, Amazon has pushed the Top Rated banner to the bottom of the page, where it’s less visible and intrusive than ads for third-party products. Amazon also used to promote its own products through “Similar Items to Consider” links across the site, but many of those links appear to have been removed as well, multiple sellers and consultants said.

Amazon removed top banner ads for its private label products

Andrea Leigh/Ideoclick
Amazon removed top banner ads for its private label products

In an email statement to CNBC, Amazon’s representative said the spots were part of a broader experiment and that the company constantly tests different types of product placements throughout the year.

“We are always testing different experiences in order to provide more convenience, more efficiency and more options for customers while shopping our stores,” the spokesperson said. Although the spots appeared like advertisements, the spokesperson said they were not ads.

Leigh, who worked at Amazon for nearly 10 years, said the problem isn’t just Amazon’s practice of running aggressive private label ads. Rather, she said, it’s how Amazon collects and uses purchase data to better promote its private label products against its competitors, who also buy ads and sell their products on Amazon.

“When [proprietary data is] leveraged to promote their private label products, I can see how it would be perceived as unfair and even maybe predatory,” Leigh said.

How Amazon and other tech giants use their market power to gain an unfair advantage over smaller competitors is poised to become a more contentious issue, and one of the key discussion points for the presidential election next year.

Warren, who is seeking the Democratic nomination for president, wrote in last month’s blog post that large tech companies like Amazon, Google and Facebook need to be broken up in order to promote fair competition. In Amazon’s case, she specifically pointed out its dual role of running a marketplace and selling its own products on it, saying it “creates a conflict of interest.”

Another Democratic hopeful, Beto O’Rourke, said big tech companies should be more seriously regulated rather than simply broken up. Other politicians, like President Donald Trump and Sen. Bernie Sanders, have also criticized Amazon’s abusive business practices, while European regulators have made similar calls for more strictly regulating Amazon’s growing power.

Amazon to cut more prices at Whole Foods starting Wednesday

Amazon to cut more prices at Whole Foods starting Wednesday  

Little success

Despite Amazon’s aggressive promotion, its private label brands have seen little success. Amazon’s spokesperson said its private label products account for “approximately 1 percent” of total retail sales.

In an extensive report about Amazon’s private label business, research firm Marketplace Pulse concluded that only a handful of products, like batteries, have been successful, while the rest have mostly failed.

“The number of unsuccessful products and brands shows that the company doesn’t have it figured out,” Marketplace Pulse CEO Joe Kaziukenas wrote in the report.

Still, Amazon continues to double down on growing its private label offerings. As of last month, Amazon had 119 private label brands, in addition to 314 exclusive third-party brands that only sell on Amazon, according to research firm Gartner’s L2. Almost all of those brands have been created in the last three years, the report said.

Oscar Barbarin, a former Amazon employee who runs the consulting agency ARMR, said Amazon may have bigger ambitions for those removed ad spots and could bring them back in the future for other brands to bid on. By testing it over the past year, Amazon now knows how valuable those spots can be in driving sales and could charge a bigger premium for other brands willing to pay up.

“Amazon’s motivations could have been to test the efficacy of this placement for future ads,” Barbarin said.

Sellers, however, are showing relief for now, as some of Amazon’s promotions, like pop-up ads in its competitor’s product page, were considered too obtrusive, according to Judah Bergman, an Amazon seller of three years. The change, he said, will help sellers and brands advertise their products without having to worry about unfairly losing exposure to Amazon’s own product ads.

“It reassures us that Amazon is aware of the antitrust concerns and will allow brands like my own to continue to develop and flourish on Amazon without worrying about getting knocked off the page one day for no reason,” he said.

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