Amazon’s acquisition of Whole Foods Market, Inc. will provide a significant revenue bump for the company’s private labels, according to an analyst from SunTrust Humphrey Robinson. The acquisition, which occurred in August this year, is expected to add $700 million in sales to Amazon’s private labels, stated analyst Youssef Squali in a note.
When Amazon’s acquisition of Whole Foods was announced, Squali stated that the deal “brings several unfair competitive advantages, that should drive market share gains and better profitability.” On an overall basis, he estimated that Amazon will earn $4.3 billion from private label offerings on its site. Earnings from this category are expected to touch $20 billion, or 5% of the company’s overall earnings, by 2022, according to Squali. (See also: Amazon Quietly Expands Private Labels.)
Squali said that the bulk of those sales, or approximately 70%, will occur in electronic devices manufactured by the company. These include Kindle e-readers and the Echo smart speaker series. Amazon’s foray into apparel, including a slew of private labels, will account for approximately 2% of overall sales by 2022 but “will grow at very robust triple-digit pace” in the next few years. (See also: Amazon Could Take $60B in Apparel Retail: Fitch.)
The Seattle-based company has ramped up its presence in the private label business with an estimated 27 private label brands on its e-commerce site. In addition to groceries, it retails apparel and household products. At the beginning of this year, Amazon announced the launch of its own athletic wear line. Meanwhile, the Whole Foods acquisition brings an array of private-labeled grocery products into Amazon’s fold. (See also: Amazon to Make Its Own Athletic Wear Line.)
Amazon’s move into private label territory should help boost its bottom line, even in the near term. This is because private labels enable the company to exert greater control over product pricing and the supply chain. One of Amazon’s competitors in the apparel retail category – Macy’s, Inc. (M
) – earned 20% of its overall revenue from private label brands under its umbrella.
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