Amazon Is In The Oil Business, Proving No Industry Is Amazon Proof "WORKS FOR ME" HK Amazon continues to prove that no industry is safe. Amazon has released its private-label motor oil and industry analysts have begun to downgrade oil stocks. (AP Photo/Mark Lennihan) Amazon is now in the oil business. With the release of its Amazon Basics Synthetic Motor Oil, Amazon has effectively entered into an industry ripe for disruption. A report from Market Watch announced that shares of Valvoline Inc., sank 4.2% in premarket trading on Friday, September 14, after J.P. Morgan turned bearish on the engine maintenance products company, citing concerns over competition from Amazon.com Inc. I anticipate that other press releases will become commonplace in the coming months as news about Amazon's latest product and category entry gains publicity. Retail and business analysts always regard Amazon's entry into a category as having a detrimental effect on established brands. Amazon Basics Synthetic Motor Oil is the retailers' private label oil and a competitor to Valvoline, Quaker State and other leading brands. (Photo: Amazon) Amazon.Com Although first available in July 2018, reviews of Amazon Basics Full Synthetic Motor Oil have just started to appear with most customers giving the product a positive review. Retail analysts tell me that they find it fascinating how Amazon will release one of its private label products with no fanfare or announcement. The fact that Amazon has a released a private label product in a category most analysts and consumers believed Amazon wouldn't compete, will become a big story. Full disclosure: I used the Amazon Basics brand for my latest oil change and so far I have seen no difference in performance, horse power or mileage when compared with the more expensive motor oils I regularly use. Like many car owners, I prefer to keep a vehicle for a long period of time. My current SUV has over 100,000 miles on the engine. Private Label Is Strategic To Amazon Private label is becoming extremely strategic to Amazon. As of July 2018, Amazon has a total of 76 private label brands but I estimate Amazon will have over 2,000 private-label brands within 3 to 5 years. Reviews of the brands are exceptionally positive. Note: I have spoken publicly and written in many articles that I believe Amazon will become one of the largest Consumer Packaged Goods (CPG) companies in the world due to its private-label strategy. Amazon is the hub of online demand generation. Add in the fact Amazon owns nearly 500 Whole Foods stores with more to be built in the coming years, and what's clear is that Amazon has tremendous potential for influencing consumers to buy its private-label products. A question I am often asked is why does Amazon want to sell its own private label products? The answer is this: In the age of digital commerce where consumers can easily search for products and compare brands, retailers find that to drive traffic and make a sale, they have to compete on price. Lowering prices on branded products can often erode margins and eliminate profits. Products costing $3 or less are on display in the lab of the online retailer Brandless in San Francisco. Brandless has gained success by offering only private-label products to customers. Brandless reduces costs by working with manufacturers directly to make the goods. (AP Photo/Eric Risberg) Private brands are one of the primary ways for a retailer to differentiate itself from its competitors. Retailers control virtually every aspect of the private label brands they create and introduce. From a strategy perspective, I strongly recommend my retail clients to accelerate focus on private label products for one key reason - private label brands are always cheaper than well-known branded products resulting in hire margins and profits for the retailer. Note: It's important for me to point out that retailers that introduce its own line of private-label products will more likely than not also sell branded products in the same category. Many customers are brand loyal so a private-label only strategy wouldn't be wise. What makes Amazon such a dangerous competitor to established brands in the motor oil category is the fact that Amazon can sell its private-label oil online at a much cheaper price. Amazon will continue to offer branded motor oil but over the coming months and years, I anticipate that Amazon will take significant market share in the motor oil and lubricants categories. Another option Amazon can pursue is to introduce its private brand of motor oil in Sears Auto Centers. Amazon and Sears have a relationship whereby car tires can be ordered online from Amazon and installed at a Sears Auto Center. Expanding the relationship to include Amazon's private label oil for use in oil changes would be fairly easy to do. Amazon can also partner with any number of quick service oil change providers (Jiffy Lube, Kwik Car Lube, Valvoline Instant Oil Change, etc.) which is where most consumers go for an oil change. Pennzoil is a leading brand in such centers but I see nothing to prevent Amazon from being able to take market share from Pennzoil or any of the other brands sold in quick service oil change facilities. What is certain is this: Amazon is just getting started in the oil business and the company has significant growth opportunities across multiple categories. I can easily imagine Jeff Bezos giving this speech from the movie There Will Be Blood that I posted from YouTube.