Amazon is going to sell its own lines of food, detergent and diapers, and it's going to be a really big deal

Jason Del Rey
Amazon plans to launch new private labels

Amazon is going to start selling its own brands of snacks, diapers, detergent — a move lots of traditional retailers have already made.

But Amazon isn't a traditional retailer, so this move could be very meaningful for Amazon, and its competitors.

The e-commerce powerhouse will soon begin selling its own packaged goods, exclusively to Amazon Prime members under brands like Happy Belly and Mama Bear, The Wall Street Journal reports.

Recode reported in February that Amazon was testing out the Mama Bear brand name.

Jeff Bezos
Getty Images

Amazon already sells things like electronic accessories, office supplies, and even clothing under a variety of its own brand names. Now it's going all in on groceries and household products.

While some people will point out that so-called "private-labeling" is nothing new — grocery stores and big-box retailers have been increasingly pushing their in-house brands — this is a much bigger deal.

That's because the growth in retail is all going to be online, and Amazon owns online. It already accounts for half of all sales growth in U.S. e-commerce.

So Amazon's move into consumer packaged goods gives it even more opportunity to flex its muscle with suppliers. That means giving its own products better placement on its site, and undercutting competitors on pricing.

Amazon CEO Jeff Bezos is sizing up locations for its second US headquarters. Among the criteria: convenient access to mass transit and an international airport, a highly educated labor pool, a strong university system and a diverse population.
5 key business lessons from Amazon's Jeff Bezos

The move also offers Amazon the chance to pad its bottom line — something Jeff Bezos hasn't traditionally been willing or able to do. Private-label brands typically carry higher profit margins, in part because the companies selling them don't put big marketing campaigns behind them.

Think of the damage Amazon already does its to competitors as a low-margin business. Now imagine what happens when if it starts generating real profits on stuff like cereal and soap.

The move is also a way to increase the power of Amazon Prime, the $99-a-year unlimited shipping program that fuels Amazon's retail growth.

Prime customers spend more on Amazon than non-members and are more loyal, too. By adding another perk, Amazon can make its best customers even even more loyal.

Trump says Amazon has 'a huge antitrust problem'

There's risk here, of course. Some Amazon-branded products have already flopped, including its Amazon Element diapers, which were pulled for design flaws shortly after launch.

Now Amazon is selling its own brand of products that people will eat and drink. So a bad experience with that stuff, let alone a safety issue, can do harm to Amazon's well-cultivated brand.

But Amazon sits on so much data that it has a good chance at getting at least some of these new bets right.

By Jason Del Rey,

CNBC's parent NBCUniversal is an investor in Recode's parent Vox, and the companies have a content-sharing arrangement.