SEATTLE -- Amazon’s exclusive line of over-the-counter (OTC) health products has stirred competition with pharmacy retail chains regarding store-brand profit margins, CNBC reported.
The e-commerce giant launched its Basic Care line in August 2017, offering 60 OTC products to treat allergies, colds, indigestion and more. Although Basic Care is exclusively on Amazon, it’s owned by private-label manufacturer Perrigo.
Matthew Oster, head of consumer health research for global research firm Euromonitor International, said Amazon’s emergence in OTC health products should concern pharmaceutical competitors. "Having Amazon jump in is not a good sign for existing brands, either branded or private-label, because the way Amazon works is its ability to take on unprofitable ventures for a time to see how things go," he told CNBC. "And the fact they have a near monopoly in e-commerce gives them a lot of scale that can allow them to undercut price.”
Medical products sold exclusively to Amazon from manufacturers surged 55% in 2017, according to market research firm One Click Retail. Such products included Advil, Mucinex and Nicorette, as well as Perrigo's proprietary brand, GoodSense. Amazon’s private-label products are not subject to price change—unlike its branded products—and the company may take minimal profit margins to make its proprietary brands cheaper than competitive pricing.
And private-label brands are growing. In fact, they represent 31% of America’s OTC medication industry, according to Euromonitor. Additionally, more than three-fifths (61%) of consumers are purchasing more private-label brands now than they were in 2016, according to retail service provider Daymon’s Private Brand Intelligence Report.
To combat Amazon, CVS, Walgreens and Rite Aid have all added walk-in clinics to drive traffic into their stores, and some brands have merged to drive more business. In December 2017, for instance, CVS acquired health-care company Aetna for $69 billion to create an integrated health system to help compete against the e-commerce leader.