How Big of a Threat is Amazon’s New Private Label?
At first glance, Amazon’s launch of Wag—its private-label pet food brand—might seem like another blow to independent retailers. However, there is reason to doubt that Wag will be much of a game changer.
The fact that the online retail giant is encroaching further into the pet sphere with its own food brand is unsurprising, given the company’s announcement at February’s Pet Industry Leadership Conference that it intends to drastically increase its share of the $69 billion pet care category. And Wag pairs well with Amazon’s other private-label pet offerings, which include accessories like beds and carriers marketed under the AmazonBasics brand.
Amazon has positioned Wag as a premium pet food with a low price tag. Touted as veterinarian-formulated with real meat as its primary ingredient, the dry food also hops on the grain-free gravy train by using lentils as a binder. A 30-lb. bag retails for $44.99, which comes in at a lower price than comparable brands like Taste of the Wild or Natural Balance. The product is also made in the USA. To further entice shoppers, Amazon has thrown in a $5 discount for first-time buyers and free two-day shipping.
Despite Wag’s assets, there are significant drawbacks that prevent this brand from bolstering Amazon’s potential as a threat to small, independent pet retailers. For example, one of Wag’s most distinctive qualities is its exclusivity—the pet food is only available to Amazon Prime members.
While there are currently around 100 million Amazon Prime members—an enviable customer base, no doubt—this group represents a committed core of online shoppers who probably don’t spend much time in brick-and-mortar stores, anyway. Rather than drawing customers away from small stores, Wag will attract online shoppers looking to consolidate their pet purchases to one convenient site, making it a bigger potential headache for large online pet retailers like Petco and PetSmart, owner of Chewy.com. These online players may be hoping that Amazon Prime’s forthcoming 20 percent price increase for its membership will discourage Amazon purchases.
Wag is also not a standout product. Even though the packaging is emblazoned with buzzwords like “no added grain” and “real meat,” the product fails to offer anything unique or inspiring to consumers. It may also be a bit behind the times. As discussed in our November issue, the pet industry is experiencing a revival of grain-in diets. And even though Amazon has plans to expand the private-label’s range in the future, pet owners may not purchase Wag now due to the lack of a wet food companion.
While Wag is made in the USA, it is not American-sourced. Though the packaging is transparent about including “imported ingredients,” this attribute may unsettle consumers. Pet parents are increasingly looking for products that are both manufactured and sourced in the U.S., a trend covered in our April “Made in the USA” feature. This aversion towards foreign ingredients combined with the low price tag, might make customers wary of purchasing something they perceive as a bargain brand with lower quality food.
But the most important reason that Wag fails to strengthen Amazon as a threat to independent retailers is that it doesn’t come close to outshining the singular advantage that brick-and-mortar stores have over online retailers: the ability to cultivate the trust of its customers.
Amazon’s algorithms can’t replace the valuable, face-to-face interactions that independent pet retailers provide customers. In fact, they detract from the company’s reputability. Research conducted by Bain & Company revealed that when a customer asked Alexa, Amazon’s digital assistant, for a product recommendation, Alexa suggested Amazon’s private-label version 17 percent of the time even though the company’s private labels only make up 2 percent of its total offerings. These findings indicate that Amazon attempts to shape consumers’ needs to the company’s own benefit.
In contrast to this digital infiltration, successful independent retailers consistently put their customers first. Whether it’s offering personalized product recommendations, helping customers carry their purchases to the car, organizing charity events, or even offering home-delivery service, pet retailers often go above and beyond to help pet parents and their communities. Amazon’s new private label will not shake the loyalty of brick-and-mortar customers who appreciate the irreplaceable bond they have with their local pet store.