by Brad Stone
Bezos approved these plans but wasn’t as immersed in their development as he was in new technology projects, like Alexa. He reviewed the weekly updates that Landry emailed the S-team and occasionally responded with questions. He did make one significant contribution though: in a November 2014 meeting, he scrapped the Amazon ASAP name and rechristened the service Prime Now, to tie it more closely to Amazon’s expanding subscription club. Landry and her team had to scramble to change their branding at the last minute.
By then, they were all working eighteen-hour days and seven-day weeks, sprinting to meet their one-hundred-day goal. In Seattle, engineers pumped out the new Prime Now app and a corresponding smartphone tool, dubbed Rabbit, to guide drivers through the delivery routes. The company planned to introduce the business with full-time drivers and then transition to the kind of freelance contractor model popularized by Uber and Instacart.
In midtown Manhattan, where Amazon decided to introduce the Houdini portion of Prime Now, employees set about stocking popular merchandise like Beats headphones, coffee grinders, toilet paper, and bottles of seltzer water in a fifty-thousand-square-foot warehouse inside an office tower across the street from the Empire State Building. For the first few weeks of December, they scattered around Midtown, placing test orders in the initial service area. Landry, who practically moved to an Airbnb in Brooklyn with her partner and their two-year-old son, ordered a pair of Havaiana flip-flops while she was getting a pedicure; they arrived before it was done.
After abandoning a marketing plan to promote the launch by wrapping the entire Empire State Building in gift paper, Amazon introduced Prime Now on December 18, 2014. Due to some last-minute delays, Landry and her team missed their deadline by eleven days—a trivial number that qualified them for gentle ribbing, instead of a more serious rebuke. Wilke was satisfied. The service offered free two-hour delivery for Prime members in select areas of Manhattan and delivery within an hour for an extra $7.99, then gradually expanded outward from there. After the launch, Bezos was photographed holding a brown paper Prime Now bag outside his Central Park West apartment, next to a seemingly oblivious delivery person.
But Houdini was the relatively easy part. Copperfield, the initiative to sell affiliated grocery store products online for the stores, was arguably the more important initiative; people didn’t mind waiting a few days for Beats headphones or a pair of slippers, but they usually wanted their groceries right away. Seeking a partnership, Prime Now executives and their counterparts in Amazon’s business development group visited the headquarters of Kroger in Cincinnati, Safeway in Pleasanton, California, and Gelson’s Markets in Los Angeles. The grocers were all afraid of Amazon, indifferent to Prime Now, and concerned about Amazon Fresh, even though it only operated in a few cities.
Bezos was particularly enthusiastic about signing up another chain: Trader Joe’s. Colleagues said he was infatuated with the store and its wide variety of distinctive, high-quality private-label products. Amazon’s country manager in Germany, Ralf Kleber, was dispatched to the western city of Essen to meet with the chain’s owners, the reclusive Albrecht family of the European supermarket conglomerate Aldi Nord. He reported back that it was a short meeting and that the Albrechts did not want to work with Amazon.
Finally, Copperfield execs flew to Austin, where they pitched Prime Now to Whole Foods Market. John Mackey did not attend the meeting, but his deputies delivered a swift rejection. Whole Foods already had an exclusive partnership with Instacart. Plus, they asked to know more about Amazon Fresh and said they were not happy to hear about Fresh delivery trucks being parked in a Whole Foods parking lot; they viewed it as a cheap promotional stunt. Amazon execs left without a deal; they never seemed to understand why so many companies viewed Amazon as a pernicious threat, even as it scrambled the economics of every industry it entered. But the meeting was not entirely futile. In preparation for it, Amazon’s business development staff reviewed Whole Foods’ portfolio of real estate and observed that it neatly aligned with the geographic distribution of Prime members.
Copperfield was supposed to launch in New York City in March 2015 to complement Houdini. But the absence of large partners and the added complexity of picking items from store shelves delayed the rollout by several months. It finally went live with only a smattering of local stores and a single national brand: Sprouts Farmers Market, a Whole Foods competitor. Nevertheless, Prime Now spread throughout New York City and expanded to cities including London, Los Angeles, San Francisco, Atlanta, Dallas, and Miami.
Prime Now employees later admitted that they had rushed the service. It initially lacked some crucial features, like the ability for customers to return products. When customers had problems, Amazon simply refunded their money with no questions asked and ate the charge. The cost of rapid delivery was also significant, as was leasing and operating warehouses in metro areas with high real estate costs. As a result, Prime Now would be a significant money loser for years.
But the program closed Amazon’s open flank and addressed the competitive threat posed by Instacart and Google Express. The entire Prime Now effort was heralded inside Amazon as a success under challenging conditions, and Stephenie Landry was asked to address the company at the biannual all-hands meeting at Seattle’s KeyArena. The failed discussions with hostile retailers had also been a revelation. With limited opportunities for partnerships, Amazon itself would have to push much deeper into the supply chain of everyday household products and groceries if it was ever going to be successful in a brutally competitive business.
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In the midst of Prime Now’s blitz into new cities, Doug Herrington pitched another phase of his ongoing grocery campaign to Jeff Bezos. In the fall of 2015, employees on the project listened in via phones from their offices three blocks away in the Roxanne building while Herrington and his deputies met Bezos in his Day 1 North conference room. They were there to discuss Bloom Street, a heavily focus-grouped house brand they planned to affix to a wide range of grocery and home-care staples like coffee, snacks, wine, and razors. The goal was to create the equivalent of Costco’s sweeping Kirkland Signature brand, which at the time was responsible for a staggering $30 billion in annual sales.
As with many such Bezos reviews at Amazon, Herrington’s team had prepared for this moment for months. They conceived of the products, found factories to make them, negotiated prices, and designed labels. Herrington even brought the inaugural product, Bloom Street coffee, for Bezos to sample. According to two employees who attended the meeting, Bezos tasted it privately, then walked into the conference room and announced that he liked it quite a bit. Then he said that he didn’t like the brand concept at all.
Amazon later said in a statement, “Jeff simply thought we didn’t think we hit the mark with Bloom Street, and thought we could find something more interesting and creative.” But several employees who worked on the project heard a more nuanced explanation. Bloom Street was explicitly tied to the company, with the Amazon Smile logo and other corporate trademarks on the product packaging. These employees were told that Bezos didn’t want to risk Amazon’s name and reputation on a single, relatively uncreative brand for food products. He asked for a total redo, and for the team to test various house brands with and without Amazon in the name. Since this would be a highly visible area of innovation, he now wanted to closely review the team’s subsequent work. “Jeff just slammed on the brakes,” recalled JT Meng, an employee on the project.
The meeting delayed the introduction of private-label products by Amazon’s consumables group by six months. But they had good reason to keep pushing: in-store brands made up around 20 percent of all retail in the U.S. and above 40 percent in European countries like the UK, Germany, Spain, and Switzerland. By working directly with manufacturers, retailers lowered prices, increased their profit margins, and cultivated loyalty among shoppers with exclusive products. “We were kind of late to the game,” Herrington said. “The vendors that I talked to were always asking
me, ‘When are you guys going to do this? Practically everyone else has.’ ”
Amazon already had private-label goods, mostly in its hardline and softline divisions. Its track record was mixed so far. There had been a few notable successes—like batteries, HDMI cables, and other electronics accessories that Amazon sold under the umbrella of Amazon Basics—but there had been some debacles as well. Amazon’s Pinzon bed sheets were once recalled because the company missed a labeling requirement, according to an employee who worked on the brand. One of its outdoor furniture lines was discontinued after quality problems; many pieces were returned and had to be thrown out. Most famously, Amazon introduced diapers and baby wipes with fanfare in December 2014, under the mantle of Amazon Elements. The diapers were promptly buried in an avalanche of one-star reviews by parents complaining about poor fit and leaks. Amazon ignominiously withdrew the diapers from the market a few weeks later, and some employees felt that the public relations disaster contributed to Bezos’s reticence to the idea of a single, high-profile consumables brand.
After the Bloom Street meeting with Bezos, Herrington and his team retooled their private-label strategy, creating several brands, including a few that weren’t obviously linked to Amazon. With an assortment of slightly bizarre names, they started to appear on the website over the summer of 2016. There was Happy Belly coffee, snack items, and spices; Presto! household cleaning products; and Mama Bear provisions for new parents, including a relaunched diaper, manufactured this time by consumer goods giant Kimberly-Clark.
Wickedly Prime, a gourmet label that Bezos developed with Herrington and one of his deputies, Sunny Jain, debuted in late 2016 with eclectic snacks like coconut toffee roasted cashews, plantain chips, and fiery mango trail mix. A few months later, Amazon Elements was relaunched and preserved the brand’s novel approach to ingredient transparency. The packaging of vitamins, supplements, and protein powder displayed an “authenticity code” that users could scan with a smartphone app to call up information about the product’s ingredients and where it was made. Few customers took advantage of it.
Nevertheless, Bezos and other Amazon executives wanted the whole effort to move even faster. They set “S-team goals” such as requiring the team to grow product selection by a certain amount. Around five hundred such goals were established inside Amazon and approved by the leadership committee at the end of every calendar year, establishing the most important metrics for each business unit at the company. Teams that owned those goals were required to supply frequent updates on their progress and explanations if they fell behind schedule. It was a crucial way that the S-team managed a sprawling amalgamation of loosely affiliated business units.
With aggressive new benchmarks, the private-label team was now in the hot seat. They were being asked to fill gaps in Amazon’s catalog with a steady stream of new products while keeping the quality level high and doing nothing to damage the company’s reputation. Employees from that time describe a high-pressure environment, with various brand teams pitted against one another and everyone held accountable for their individual P&L statement. Meanwhile, Bezos was reviewing everything up to the artwork for new products and issuing a constant edict to go faster.
Numerous private-label employees later admitted to taking a shortcut out of this predicament: they exploited Amazon’s massive treasure trove of data. Years later, this fact would become a significant focus of attention for regulators in the U.S. and Europe. They would demand to know: Did the company take advantage of the unique tools and proprietary information at its disposal as a retailer to give its house brands an unfair advantage? Did Amazon, in effect, cheat in its effort to compete directly with its own vendors and sellers?
One of Amazon’s databases, Heartbeat, had all customer reviews across the website; accessing it allowed employees to look for revealing patterns that might indicate how they could improve well-established products. For example, customer reviews in the all-important category of dog poop bags indicated regular confusion about which end of the bag opened. So the Amazon Basics version included a blue arrow and the words “open this end.” Another valuable tool was Amazon’s Vine program, in which influential product reviewers received free samples in return for their written appraisals—and were thus more likely to produce more exuberant critiques.
Speaking on the condition of anonymity, several private-label managers admitted to exploiting a resource that was even more precious than product reviews—prominence in Amazon’s search results. When they introduced a new brand, like Mama Bear diapers, a practice called “search seeding” allowed the brand managers to pin the initial relevancy score for the new product to the score of an established product, such as Pampers, at least for the first few days. The Amazon product would then appear at the top of search results, rather than starting on the unseen last page with other new brands.
When I asked Doug Herrington whether Amazon changed search results for its private-label products, he flatly denied the practice occurred. “We don’t manipulate search results at all,” he said. He added that Amazon brands were sometimes given prominent advertising slots in search results when they were a “great deal for the customer,” and if customers didn’t respond, the Amazon products quickly vanished. He also compared Amazon’s tactics to those of competing physical retailers, who put generic products like painkillers right next to Tylenol and Advil, taking up limited shelf space. Amazon, on the other hand, had “infinite aisles,” Herrington said, and customers could make selections from an extensive variety.
But Amazon’s brand managers said these practices did occur, and that the impacts were substantial. JT Meng, the former private-label employee, recalled having to back off search seeding for Amazon Essential baby wipes because unit sales were exceeding 20 percent of the category’s overall volume, which risked damaging the company’s relationships with Procter & Gamble and Kimberly-Clark. An Amazon economist who worked with the private-label team added, “Brand managers were given really big goals and were like bulldogs. They would do anything they possibly could to get their stuff out there. That is just the Amazon way.”
Amazon’s critics and some of its sellers accused the company of exploiting another significant advantage. By looking at the sales data in the company’s third-party marketplace, Amazon’s private-label managers could rapidly identify new consumer trends and determine what products were selling well and should be copied. Amazon executives claimed they had safeguards in place to prevent this kind of data snooping from happening. “We don’t use data about an individual seller to decide what items to produce for a private label,” Jeff Wilke told me. The company also asserted this in congressional testimony in 2019: “We don’t use individual seller data directly to compete,” Amazon lawyer Nate Sutton testified.
But three managers from the push into private brands said this was simply not the case.
One who worked on a new lifestyle brand called Solimo said she originally assumed third-party data was off limits when she joined the company in 2016. A year into her job, her boss showed her how to access the sales data and told her to ask Amazon’s data analysts if she needed help. The employee, who asked that her name not be used, subsequently examined third-party sales to determine the fastest-selling vitamin supplements, how many units were sold, and the average selling price and profitability of each.
To prove it, she shared a spreadsheet of probiotics sold by third-party sellers that she had kept from her time at Amazon. It showed individual marketplace sellers and their products, including the trailing twelve months of sales and average prices for each. “We would look at what our competitors were doing and sometimes copy it exactly, or just semi-customize it and throw a label on it,” she said. “All along I was told there was a firewall, and then I learned it was a sort of a ‘wink wink.’ ”
An article in the Wall Street Journal in 2020 reported similar accusations from former private-label employees, who dubbed the practice “going over the fence.” The story recounted the o
rdeal of a four-person Brooklyn merchant, Fortem, which sold a foldable trunk organizer. Amazon spotted its success and prepared a competing product under the Amazon Basics banner. “We strictly prohibit our employees from using nonpublic, seller-specific data to determine which private label products to launch,” Amazon told the Journal. The revelations added fuel to antitrust investigations in the U.S. and Europe.
The question, ultimately for regulators, was whether all this gave Amazon unfair advantages. Back in 2017, when Doug Herrington’s private-label expansion was in full swing, the data and internal tools almost certainly helped amplify the team’s efforts and meet their ambitious S-team goals. But much of the data they gleaned was also easily available to competitors, either by scraping the Amazon website or via research companies that collect data on consumer trends, like Nielsen. At least in consumables, many of the private-label products from that time—from Happy Belly peanut granola bars to Wickedly Prime roasted almonds—didn’t appear to hurt rival brands, at least any more than the similar efforts of other large retailers. In a statement, Amazon added that “All retailers have information about brands and products that are popular in their stores, or that customers frequently ask about, and use that information to decide which private label products to offer.”
The new products also did little to accelerate the popularity and profitability of Amazon’s dueling home grocery initiatives, Prime Now and Amazon Fresh. The house brands had little of the appeal and salutary financial impact of the private labels at major grocery chains—like Whole Foods Market. Its 365 Everyday Value brand, attached to everything from milk to meat to maple syrup, conveyed a sense of being economical and wholesome while accounting for a significant percent of the chain’s sales. Amazon, which remained largely the land of engineers, MBAs, and a CEO who considered himself a swashbuckling inventor, still didn’t know how to harness that kind of magic.