Kim Wexler (from 'Better Call Saul') did what I least expected. She stopped practising law and turned herself in.

In July 2022, Amazon made an attempt to resolve three-year antitrust entanglements in Europe. It offered to stop using independent seller data to compete with sellers. This would help it clear off regulatory allegations without making any sweeping changes in its core businesses. Giving customers the best version of the product they want is customer-centric. Amazon has the best insights to do just that – except, those insights are built on top of the data from the sellers that provide consumers choice. The most customer-centric thing that Amazon can do, threatens the very basis of the idea of a marketplace.

Other retailers though, don't have such problems. Even as Kim turned herself in, Jimmy continued to live on the edge.

What's ailing your aisle space?

The ever-insightful @iiiitsandrea recently pointed out that Kroger is stacking up its own private label, Simple Truth, right next to Olipop. Amazon may or may not continue with its private label program. But for retailers, private labels decisively move the needle of profits.

We talk about the 'digital native' phase of DTC as a thing of the past and DTC as a channel strategy as the current thing. The other side of the coin, for brands that embrace retail distribution is the competition for aisle space from the retailers' own private labels. Amazon’s private labels span tens of thousands of products, but most sales come only from the top dozen products. Private labels account for only 1% of its total revenues. This is insignificant when compared to the sizable private label revenue share at Target Corp. (33%), Kroger Co. (25%), Costco Wholesale Corp. (20%), The Office Depot Inc. (20%) and Walmart Inc. (15)%.

Amazon still gets a bad rap much the way Microsoft used to be the bad guy of the early antitrust movement in tech. Today, it is Meta and soon it will be ByteDance.

I am digressing.

Should you outrun the outlaws?

For DTC brands, competing with retailers means many things:

1. Price isn't a lever. They need a good reason to charge a premium and still be the choice (Ex: Liquid Death)
2. Brand Extensions have to be seen from the perspective of retail competition. The more niche a product is or the newer category is, the less likely it will get a private label initiative
3. Product formulations will be the real differentiator. Good typography and bold copy from an agency are often quoted in a derisive manner when we talk about DTC differentiation but those are table stakes. An authentic, differentiated, and even slightly unhinged communication finds love. But consumers need more than just a hard-hitting message or imagery. CPGs are slow with product innovation cycles. Product innovation is not even a retailer's game.

For every lever that a DTC brand has to pull to compete, there is a good reason why the private label is going to take an unassailable lead.

Consumers love value. Similar products at a cheaper price will find a large audience. Any product can be copied and launched within 3 months, should a retailer care.

It's usually the (unattractive) size of the opportunity and sloppiness of the retailers that DTC brands have to count on when they launch at a retailer's aisles (or) commit to marching towards category leadership. It's easier said than done when public DTC brands underperform and private equity capital is more diligent about DTC investments.

If platforms can embed finance as a service and offer it to merchants, why can't retailers offer insights as a capital resource to top challenger brands to launch unique products that are exclusively available to their shoppers? Maybe they do and I don't know about it.

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