Why are AmazonBasics Products so Cheap

by: - Last updated on: November 30th, 2018

Searching for batteries on Amazon will fetch you hundreds of products. But the first ten will be nearly from the same company. Look up iPhone cables and you’ll find a common name among the top listings there as well. Or suit hangers. Or camera tripods. Or shower curtains. Or DSLR bags. Or kennels and beds for pets.

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That company is AmazonBasics. And if you’ve ever shopped on Amazon, you’re most likely familiar with that name too. AmazonBasics, the e-commerce juggernaut’s most successful private brand and the platform’s third best-selling brand overall, has an unimaginably large and diverse portfolio. The kind of portfolio you wouldn’t normally find under just one label. But look closer and you will come across a common trait among AmazonBasics’ 1,500+ products.

They’re all unglamourous, generic items you don’t usually buy with a specific brand in mind. Be it microfiber cloths, batteries, umbrella, hangers, file folders, you get the idea. The basics, if you will. These are the sort of products you don’t think about much. You buy the one which offers the most value and that’s exactly what AmazonBasics aims to offer. Reliable quality at an exceptional value. AmazonBasics’ batteries, for instance, sell for prices roughly 30% lower than that of Duracell and Energizer and still have at least a 4-star rating.

But how are AmazonBasics’ products so cheap? Is it simply to capture a high-volume market by employing Amazon’s practically limitless resources?

In a way, yes. Amazon’s aggressive efforts to dominate the retail and commerce industry does involve putting an Amazon sticker on every possible product and AmazonBasics, which clocks in roughly 275 million in sales, falls perfectly in line with that goal. However, there are a bunch of factors in play here rather than the matter of merely implementing a low-margin strategy.

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The first element to understand here is that the platform AmazonBasics sells on is Amazon’s own turf. Amazon knows how buyers surf its website through the heaps of data it harvests, it has control over all the marketing, analytics tools, and more. So if there’s a generic item rising in ranks of late, Amazon quickly adds one to the AmazonBasics lineup like Type-C dongles for MacBooks. Products from Amazon’s private labels are also accompanied by tags such as “Made for Amazon”, “Amazon’s Choice”, or both and are highlighted in a larger space.

That, however, doesn’t mean there’s bias involved. Other big brands can access the analytics data too through a service called Amazon Retail Analytics but it’s expensive. Even after paying $100,000 and 1% of their wholesale cost of goods sold to Amazon, there’s a chance they still won’t be tap into all the data Amazon has.

Second is, of course, distribution. AmazonBasics orders benefit from their parent’s wide distribution channels and are an easy sell for its Prime subscribers. In addition, it’s worth keeping in mind AmazonBasics are not necessarily cheap either despite the common misconception. The quality is, more often than not, only above average and more importantly, the competition is typically priced similarly and on par or in a few cases, better.

For instance, AmazonBasics’ non-braided iPhone cable costs, on an average, Rs 699 and has a 3.5-star rating. The one by a company called Wayona, however, comes with a braided and sells for Rs 399 and has a five-star rating in spite of the fact that the one by Amazon is certified by Apple.

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The presence of “Amazon” in its title plays a pivotal role too and if something goes south, odds are you won’t be let down by Amazon’s customer service. So for instance, if someone is browsing for a new iPhone cable and they have the option to choose between brands like Gejin, Youer, and AmazonBasics, which one do you think will end up in their cart?

Now think about this. What’s the biggest reason for Amazon to not charge a premium for its AmazonBasics products? It is certainly not because it owns the leading e-commerce platform. It’s the fact that Amazon is not selling you the item. It’s selling you the Amazon ecosystem.

I know, I know, the ecosystem has nothing to do with mundane, dumb paraphernalia like iPhone cables but hear me out.

To understand how Amazon is trying to wire you in its ecosystem with everyday items, you will have to look at one of the most recent AmazonBasics’ product, the AmazonBasics Microwave. It’s a run-of-the-mill black, boxy microwave you won’t be able to tell apart from others if it weren’t for that blue Alexa logo on the front. But in order to utilize the feature that sets AmazonBasics’ Microwave apart, you will have to invest in an Echo device.

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If you already own an Amazon Echo, the AmazonBasics Microwave is a no-brainer. It’s super affordable at $60, supports all the modern, smart features, and there’s no particular reason why wouldn’t choose it over the rest. If you buy the Echo Dot together with the microwave, you can even get the whole package for $80 as opposed to $110 it would cost normally.

Furthermore, if you ask an Echo to purchase something like batteries, it will bring up only one option — AmazonBasics. And for customers who have previously owned and been satisfied with the brand, it’s a rather straightforward decision. It’s Amazon’s way of locking you into a walled ecosystem.

If somewhere down the line, you feel like switching to Google Assistant and own, say an AmazonBasics microwave or lights, you won’t just need to replace that circular speaker sitting on your kitchen top. You will think about those appliances as well since they’re not compatible with any other platform.

While, on the other hand, if you decide to buy the same type of smart microwave from a third-party company, you will be able most likely to talk to it with any of the three voice assistants. But most buyers don’t think that way. They’re in the market for a microwave and if they already own an Echo device, they wouldn’t mind saving a few bucks.

This behavior will eventually lead to an Alexa-locked home they wouldn’t be able to get out of later. These benefits sync perfectly with other Amazon brands as well like Amazon Fresh or Amazon Prime Video. AmazonBasics is just one of the ways Amazon is making sure you don’t have to cross Amazon’s fences if you want to buy anything.

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By selling tons of generic, reliable products over these years, Amazon has managed to build a brand you wouldn’t think twice about before purchasing. And it’s now capitalizing those efforts to extend its lead in the smart home industry. The microwave is just the beginning and we can expect the company to release a multitude of other, standard smart home items which are deeply integrated with Alexa in the next year.

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