Amazon has launched an exclusive line of over-the-counter health products that is sure to challenge pharmacy retail chain’s bottom lines.
CNBC reported that the Basic Care line was quietly launched in August and includes 60 health items that range from over-the-counter medications to hygiene products.
While the company doesn’t own the products, which are produced by private-label manufacturer Perrigo, the launch will allow Amazon to take on pharmacy retailers such as CVS and Walgreens.
“It’s a very different world, and 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,” said Matthew Oster, head of consumer health research at global market research firm Euromonitor International. “And the fact they have a near monopoly in eCommerce gives them a lot of scale that can allow them to undercut price. So that aspect should be concerning for whomever their competitors are in that space.”
While Amazon already sells branded OTC medications, as well as products from Perrigo’s generic GoodSense brands, all of those items are subject to changing prices. Amazon’s exclusive brand would not be, and it’s assumed that the company will do its usual move of taking tiny profit margins in order to keep price points lower than competitors.
Amazon would not disclose the Basic Care margins, but a spokeswoman said the company “works hard to offer low prices across its entire selection.” She added that the launch of the products was not a pathway to the eCommerce giant entering the pharmaceutical drug market.
The private-label OTC medication industry grew 31% to reach US$8.4 billion last year.
However, branded products have dominated every category except smoking cessation, according to data from Nielsen. Sales of pharmacy products sold directly to Amazon grew by about 55% in 2017. GoodSense, Perrigo’s private-label line, was the top-selling brand, while Nicorette, Align, Advil, Boiron, Mucinex, Hyland’s and Zyrtec were the other most popular names.
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