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Amazon's private label sales could hit $4.3 billion when including Whole Foods, analyst says

  • Amazon's sales from private label products could hit $4.3 billion when including Whole Foods, SunTrust Robinson Humphrey's Youssef Squali wrote in a note Monday.
  • Amazon already has 27 private label brands, including the Echo, AmazonBasics, and a bunch of fashion labels, according to Squali.
  • Squali expects Amazon's private label sales to exceed $20 billion by 2022, accounting for roughly 5 percent of its total sales.
Source: Amazon Fashion

Amazon is expected to generate roughly $4.3 billion in sales this year from its growing army of private label products, according to SunTrust Robinson Humphrey's Youssef Squali.

That's in part boosted by the Whole Foods acquisition, which Squali estimated to add roughly $700 million in sales with its own list of private label products, including 365Everyday Value, Whole Foods Market, and Whole Paws, which are now sold on Amazon.com.

Amazon has been ramping up its private label offerings in recent years. It now sells its own products across a number of different categories, including electronics, baby products, and fashion. Squali noted that 20 of the 27 brands owned by Amazon — excluding Whole Foods-owned products — have been created over the past two years alone.

By 2022, Amazon should get roughly $20 billion in revenue from its private label products, accounting for about 5 percent of total sales, he added.

"One of the highly underappreciated trends within Amazon is the rise of private labels, which should give the company a strong competitive advantage overtime," Squali wrote.

The growth in private label sales helps Amazon in a number of different ways. It gives Amazon more visibility into what products are most in demand, and better control over the supply chain. It also helps Amazon's profitability, because private label products have higher margins. Squali believes it could help bring down prices of competing products as well since they're mostly offered at a lower price — which would drive customer loyalty to Amazon.com too.

The bulk of Amazon's private label sales will come from electronic devices. Over 70% of private label sales are expected to come from devices like the Echo, Fire TV, and Kindle, he wrote. But apparel and fashion is the fastest growing category as Amazon launched 9 new fashion brands in 2017 alone, and 17 since 2016.

"We estimate that Apparel sales on Amazon will account for ~2% of overall private label sales but will grow at very robust triple digit pace over the next few years," Squali wrote.