A new month brings another foray into diapers by Amazon. Earlier this week, the internet retailer launched its Amazon Elements brand of baby diapers and wipes in North America, adding to the company’s growing list of private label products. In terms of diaper sales, private label continues to grow in North America, but still only accounted for 19% of value in 2014, compared to closer to 24% in Western Europe, suggesting there is still further opportunity for Amazon and other retailers to move into.

To see Elements as just another private label is to miss the point however, the company’s latest initiative is something of an assault on the existing diaper status quo inside its own sales platform and may well prove to be something of a wakeup call to the wider North American market. Amazon will not be competing more directly with Amazon Marketplace retailers and re-sellers as well as traditional store based retailers who still dominate the category.

Value for money, private label
In keeping with private label, Amazon Elements offers good value, especially for Amazon Prime subscribers who pay an annual fee for free delivery and receiver other exclusive offers and for Amazon Mom members who gain an even larger discount.

Elements are clearly designed to push these enhanced memberships, but the pursuit of parents is nothing new in the retail game. Indeed Amazon doesn’t even appear to have a particular price advantage over its competitors as Target’s online diapers frequently come out as the cheapest in the business. The key for Amazon will be the development of its base of Prime subscribers who are commonly suggested to spend double that of any other Amazon user with parents of younger children even more so.

Loss leader?
What would appear important for Amazon is the private label allows the company to squeeze margin on its diapers in a way which isn’t possible with big brand products unless they have the volume capacity of a Wal-Mart or a Target, which they clearly don’t, at least not yet. Competitively priced products is certainly a great way to attract consumers into the Amazon fold and develop these consumers by offering a whole range of baby related products as well as all the staples that have made Amazon the largest on-line retailer in North America.

Analysts have also quite rightly pointed out that the company’s strategy with Prime is one of a number of initiatives designed to keep consumers stumping up the $99 annual membership fee associated with these premium accounts. The opportunity to purchase Elements products at a significant discount falls alongside other member only advantages such as free entertainment streaming, Kindle library as well as free two-day shipping.

Ethical diaper
Amazon also been savvy in that Elements is being promoted as an ‘ethical’ diaper which while being far from ‘sustainable’ is certainly a strong and likely popular claim to make with North American parents. Amazon have backed this claim with the somewhat novel step of providing full product sourcing information, ingredient lists as well as other information pertaining to their diapers. This kind of transparency, whether fully understood by parents or not, is likely to do down well with parents, especially in North America and could well set a marker for other retail brands to follow if accepted as a new norm for diapers as has increasingly become the case in home care products.

While the development of Elements is far from a revolution in the diaper category in North America it serves as further evidence that diapers will see sales migrate on line rapidly as consumers alter their purchasing patterns. In 2014,  just 5% of all North American diapers sales were conducted through the on-line channel and although this figure has pretty much quadrupled in 5 years, it is still some ways from the 40% which is common to South Korea. While trailing this is again strong evidence that in terms of private label as well as channel development Amazon are well positioned for future growth. It will be interesting to see what Amazon does with the slightly more sensitive subject of incontinence care in the communing years another category ripe for on-line migration.

———————————————————————————————————————————————————————–

Ian Bell is the head of Home Care Research for Euromonitor International.