To take on rivals, Amazon dishes out low priced home cleaning private label Presto!

It looks like even after a tragic blow by the new FDI policy, Amazon does not intend to promote the growth of products that create a larger margin for the company itself.

In October last year, the US-based e-commerce giant started distributing its private label FMCG home cleanliness products under the brand name of Presto! The private label has already been circulated in the US market under Amazon, and now it has come to India as well.

The route chosen by the company for the same is asking local manufacturers to create the product that will be sold and marketed via Cloudtail. After the execution of the new FDI policy in the starting of February, Amazon had reduced its stake in Cloudtail from 49 per cent to 24 per cent.

This activity by the company comes under the market scrutiny as the premise that the government took in executing the new policy was to redress the trader’s complaint against Amazon favouring private labels and captive sellers on its platform.

With a product line as competitive and economic as Presto!, the problem still remains. As per an ET report, the prices of private label products of Presto on Amazon are far below the prices of competing products.

For instance, A Lizol disinfectant surface cleaner (975 ml) is for Rs 149, while the same product in Presto is Rs 109. The gap widens in another instance where you see that Pril dishwasher gel (425 ml) priced at Rs 99, has a variant in Presto! which is available for Rs 77 in a much larger size of 750 ml.

On another side, it is being speculated that the company is forcing the producers of other products to lower down their own product price to match the competition. They, however, can still not match the level of Amazon due to commission rates that the marketplace does not have to bother about.

This way, Amazon creates a larger margin on selling its private labels and also makes money via increasing the sales of competitors on the platform. Further, the entry into this vertical of FMCG is also pegged to be a plan to increase the frequency of purchase on the platform. These are products that a consumer buys regularly and can help the company create a loyal customer base.

Owning other private labels like House & Shields, Arthur Harvey, Myx, Vedaka, Solimo etc. Amazon earns 6-7 per cent of its revenue from the sale of the products under these brands. Presto! Is expected to increase this number.