Amazon begins cutting private-label selection: Report

Yahoo Finance Live anchors discuss reports that Amazon will begin cutting its private label selection.

Video Transcript

- All right, let's stay on retail here. Amazon is cutting back on the number of sales from its own brands according to a new report from the Wall Street Journal. The e-commerce giant has even weighed the idea of cutting the private label aspect of its business all together due to regulatory concerns and weaker sales on the items.

And Julia, look, when I go to Amazon, for me, I'm still buying name brand stuff. When I go to the sites, that's what they promote. So in part, I go there because I know what I want. But secondarily, that's where the site takes you so I can't say I'm surprised by this.

- Well, maybe you and I have different algorithms because I get the recommended Amazon basic stuff on a very consistent basis. And what's interesting about this Wall Street Journal story that talks about the company moving away from third party is that reportedly, Jeff Bezos is somebody who had championed the private label-- excuse me, them moving away from private label. Apparently, he had championed the private label and had really pushed for them to increase the percentage of merchandise being sold on the site that was private label.

And so they've sort of flooded the zone. There are something like 250,000 products almost that are private label at Amazon, either Amazon Basics, I guess, or other owned brands of Amazon. So I don't know if they are going to pull back on that, what they do with all that inventory. We were just talking about discounting. Does that mean that we are going to start to see deeper discounts on that merchandise?

- That's the last thing broader retail Walmart, Target wants to see, is Amazon out there aggressively liquidating its own inventory. But I do find it interesting that this story comes before Amazon reports earnings on July 28th. It gives you a sense of a company looking for ways to find ways-- more ways to cut expenses. Maybe they realized after their second quarter ended, they need to find more ways to cut expenses and they need to start doing a better job signaling to Wall Street that they're going to get their expenses under wraps, really after, I would say, an aggressive year and a half of expanding their CapEx and building out various fulfillment centers. Cutting back on private label goods, that'd be a very good way, especially if they're not selling to cut back on costs.

- You know, it's interesting the way that Amazon works as a value proposition for people who buy the stock. Because you have these two tracks of AWS, the cloud business, and the retail business. And they don't always sort of fire both at once. During the pandemic, perhaps, you could argue they were both strong businesses. But you tend to hear investors say, well, you're buying one thing and getting the other and discount, or vise versa, at different times.

We just had the Prime Day numbers, by the way, if you want to argue which way we are at this point in time. And according to Adobe, the second day of Amazon Prime in particular saw total US online spend surpass $5.9 billion. So that was 9.2% growth, compared to the second day last year. So it looks like there was some success in driving that spend. You always wonder with this, if it's spend that would have happened anyway at other times? I don't know the answer to that.

- You made a very good point there, though. Do we start to hear-- look Andy Jassy is still getting a sea legs running as CEO of Amazon. Does that discussion start again that Amazon should split up to drive value for shareholders? This has been living for some time. Do you split off that cloud business? This has been talked about that cloud business is massively undervalued because of the pressure on that retail business, because they're investing so aggressively.

- Right, but they are pulling back a lot on the investing in the retail business. We've seen closure of warehouses, shrinking of warehouse space. So I don't know, it'll be interesting to see, you're right, if that narrative comes up once again with this earnings report next week. I mean, it's going to be-- it's going to be busy. Not next week, two weeks?

- Every day is busy.

- What day is today?

- Every day--

- I have no idea.

- I have no idea.

- In any case, we're buckling up for a lot of those tech earnings. Amazon's going to be among them and it's difficult to see one that has not been under pressure and hasn't been retrenching. That's really the overall theme.

- Yeah, our producer says it is Friday, July 15, 2022. So there we go. Powell, coming in hot and heavy with that real-time analysis. All right--