Have you ever walked into a grocery store looking to buy your favorite cereal, only to notice that right next to the one you want stands a box of “Frosted Chunks,” featuring a concerning-looking mascot named Larry the Lion?
I hope not. But you get the idea — many storefronts have their own in-house brands, whether you want to call them “store-brand,” “generic” or “hilarious copycat.” As much as these brands are occasionally ridiculed by customers, they’re fairly universal across marketplaces.
Of course, that includes Amazon.
Amazon’s version of store-brand products is called AmazonBasics. These are first-party products that Amazon produces by closely modeling (read: copying) existing, successful third-party products. To add insult to injury, they often cut the price — sometimes by 50% or more.
Unlike the world of cereal, Amazon shoppers don’t always have the instinct that name-brand is better, or that they should avoid in-house brands. They see lower prices and the Amazon brand, and they go for it. Understandably, many sellers are perturbed by these turns of events — “How am I supposed to compete with a 50% price cut on my product?” “Am I next? Will I go out of business?”
It may seem hopeless, but we’re here to tell you why AmazonBasics isn’t actually that detrimental to Amazon sellers — there are steps you can take to compete. First, however, let’s start with some background on AmazonBasics so that we’re all on the same page.
AmazonBasics: How It All Started
AmazonBasics launched in 2009 with a product line fairly true to its name — they supplied the basics, a set of fairly generic home replacement products. Think batteries, blank DVDs, USB cables, things like that.
After the initial launch, AmazonBasics quietly sat, waited, and (most importantly) watched. Amazon collected data on the most successful products in a variety of categories, assessing the demand for those products and determining if they could find success with their own iteration. They also carefully scoured for gaps in supply by tracking keywords that didn’t offer satisfactory results.
Once it absorbed and processed enough data, AmazonBasics sprung back into action, launching product after product in a wide swatch of categories and aggressively marketing using all the knowledge of their own system. Many products quickly reached #1 Best Seller, and all of their products either remained close to the top of the ladder or were quickly axed.
As of March 2016, AmazonBasics sells over 900 different products across more than 20 categories. Their strategy, as Skubana tells it, has basically comprised of data-driven mimicry. They consistently target successful, high-demand products with largely positive reviews; then, they carefully copy the products, cutting the price by anywhere between 25% and 50%.
How It’s Affecting Sellers
As mentioned above, AmazonBasics’ strategy of copying a high-performing product and selling it at their own low price isn’t very well received by many sellers, especially when they get kicked out of a #1 position as a result.
Let's look at one of the most famous examples of AmazonBasics at work: the saga of the Rain Design mStand Laptop Stand.
The mStand: A Harrowing Tale
Since their launch in 2004, Rain Design has been topping the charts in the laptop stand category with their high-quality mStand, shown below.
As you can see, it’s the #1 Best Seller in its category of Laptop Computer Stands, with an absurdly high average rating of 4.8 out of 5 stars and over 2,600 reviews. Evidently, the mStand was doing very well — and Amazon noticed.
Here’s the remarkably similar AmazonBasics product that popped up in early Q3 2015:
As you can see, they essentially copied the design, but left enough differences that they didn’t directly violate Rain Design’s copyright. Most notably, the also cleaved the price in half with only a minor dip in quality (if the reviews are to be trusted).
Rain Design, as you might imagine, was not thrilled with this outcome. They couldn’t do anything to get Amazon’s product removed, since it didn’t violate any copyrights. However, this wasn’t the end of the line for them. They held on, and so can you.
Why It’s Not So Bad
Even though what happened to the mStand seems like the worst-case scenario for an Amazon sellers, it’s actually an excellent example of why being targeting by AmazonBasics isn’t the end of the world.
If we look at the Amazon category of Notebook Computer Stands today, the mStand is still first on the list. The AmazonBasics version is quietly sitting on the next line below the mStand.
Yes, “Notebook Computer Stands” is only one category of many. However, that doesn’t change the fact that Rain Design’s product still had a number of unique value propositions over the AmazonBasics stand. A few (non-exhaustive) examples:
They offered a higher-quality product; most notably, the mStand’s design matched the aesthetic of the Macbooks it was intended to be paired with. Numerically speaking, the quality difference is more evident: the mStand still holds a 4.8-star average compared to the AmazonBasics stand’s 4-star average.
The mStand offers a wider range of supported laptops than the AmazonBasics stand. The mStand will easily support up to 17-inch Macbook Pros, whereas many users have found that the AmazonBasics stand doesn’t work at all for 17-inch laptops and works unreliably for any laptop larger than 15 inches.
Thanks to these unique characteristics (not to mention an incredibly positive review base and a solid reputation gained over the years), Rain Design effectively resisted the competition from Amazon and maintained a strong, albeit slightly reduced niche in this category. AmazonBasics ended up being a competitor, not a conqueror.
You Can, Too!
You can apply Rain Design’s defense to your business too, if you ever find yourself under assault by AmazonBasics copycats. The key takeaway is this: There are multiple niches within one category, and Amazon can’t fill all of them.
The vast majority of the time, AmazonBasics’ strategy is to undercut the competition by a significant amount and win customers based on price. However this price drop is usually accompanied with a fairly generic product. After all, it’s in the name: AmazonBasics.
That’s AmazonBasics’ niche: no-frills products that work fairly well at an acceptable level of quality. No real wow-factor other than the price.
That leaves a surprising amount of room for you to work: there’s room for you to blow away your customers, to provide that wow-factor that AmazonBasics is missing. You may have to charge a higher price, but you can justify it.
Make your product quirky, make it cool, offer something that differentiates you from the rest of the pack. There are many people out there who want something more than just the cheapest, blandest product available — they want an experience with their purchase, and you can give that to them.
I realize that all that sounded like vague inspirational mumbo-jumbo, so let’s take a look at an example in the realm of Bluetooth speakers.
AmazonBasics offers a predictably cheap option, and you get what you pay for. It plays music. It doesn't have the best quality. It is, however, good value for the price.
But look at Bose — they aren’t at all concerned about Amazon’s product sitting at almost 10% of their price. They offer a more expensive product because they can provide higher quality in almost every department, especially sound.
At the end of the day, they’re both Bluetooth speakers, but cater to very different niches. AmazonBasics offers the “basic” solution for college students, deal-seekers, or first-timers into the Bluetooth speaker market. Bose offers the “high-end” solution for music lovers, audiophiles, and people who are serious about their speakers.
The bottom line is this: just think about AmazonBasics as one more competitor. Their selling point is price; what’s your selling point?
Stay different. If you feel like your product is unique enough compared to an AmazonBasics copycat, just keep doing what you’re doing. If AmazonBasics ends up copying you almost exactly but winning the price war, you’ll have to take a hard look at your product and think about what you can do to improve it and/or set it apart from the pack.
Plus, if Amazon decided your product was worth targeting, that means you were doing a lot of things right in the first place! Be proud of that, and stay exceptional.
Another thing to remember: Amazon makes a huge chunk of its revenue from third-party sellers. 45% of Amazon’s sales came from third-party sellers in 2015, despite the fact that AmazonBasics alone launched almost 300 new products that year. Third-party sellers aren’t going anywhere any time soon, even though it may feel like it sometimes.
Have any questions, comments, or additions? As always, leave them below!