As an avid Amazon shopper, you‘ve likely noticed the incredible selection of products available on the site – over 350 million items at last count. From everyday essentials to niche hobby supplies, Amazon stocks nearly anything you could imagine.
But with this astonishing variety comes a key question: where do all these products actually come from? Does Amazon manufacture its own products, or source them from other companies? The answer may surprise you.
Amazon is a Retailer First, Not a Manufacturer
While Amazon does put its brand name on many products, the company is first and foremost a retailer, not a manufacturer. Amazon‘s core business model involves buying products from other companies and reselling them to consumers.
A few key statistics show just how much Amazon relies on external suppliers rather than its own manufacturing:
- Third-party sellers account for 58% of Amazon‘s total sales volume (Source: Statista)
- Amazon directly sells about 12 million products, while the total number of products available on the site exceeds 350 million (including Marketplace sellers) (Source: ScrapeHero)
- Net sales from third-party sellers have grown from $0.1 billion in 1999 to $160 billion in 2020, a compound annual growth rate of 52% (Source: Amazon)
So while the Amazon brand is front and center for shoppers, a huge portion of the company‘s retail business comes from simply providing a sales platform for other brands and resellers. This is a very different model than manufacturing products in-house.
Amazon Devices: Designed In-House, Made By Partners
One area where Amazon does put significant effort into product development is its line of hardware devices. Products like Kindle e-readers, Echo smart speakers, Fire tablets, Fire TV streaming devices and Ring doorbells are all designed by Amazon‘s in-house engineering teams.
Amazon has made several acquisitions over the years to bolster its device capabilities, such as buying smart doorbell maker Ring for $1 billion in 2018 and mesh WiFi router company Eero for $97 million in 2019. But even with these Amazon-owned device brands, the actual manufacturing is outsourced.
Amazon‘s primary manufacturing partner for devices is Foxconn, the giant Taiwanese electronics contract manufacturer. Foxconn is best known for making iPhones and other Apple products, but it also produces devices for Amazon, Microsoft, Sony and many other top tech brands from its factories in China and other countries.
While the product designs and specifications come from Amazon, Foxconn is responsible for sourcing components, managing the supply chain and assembling the devices to meet Amazon‘s quality standards and demand forecasts. This allows Amazon to focus on what it does best – innovating on customer experience and building an efficient distribution network.
"At Amazon, we pride ourselves on being inventors and innovators for our customers. By partnering with world-class manufacturers like Foxconn, we‘re able to bring our device innovations to market quickly and at scale, while maintaining our high bar for quality," said an Amazon spokesperson.
The Inner Workings of Amazon Private Label Brands
Beyond its name-brand devices, Amazon also offers a wide selection of everyday goods under various private label brands. Some of the most prominent include:
- AmazonBasics – Home goods, office supplies, electronics accessories
- Amazon Essentials – Affordable clothing staples
- Amazon Elements – Health and personal care products
- AmazonFresh – Perishable groceries and meal kits
- Amazon Collection – Fine jewelry
- Pinzon – Bedding and bath products
- Presto! – Laundry and cleaning supplies
- Amazon Commercial – Office and industrial supplies
- Spotted Zebra – Kid‘s clothing
By some estimates, Amazon now has over 100 private label brands spanning nearly every product category. But crucially, Amazon does not do the manufacturing for these products directly.
Instead, Amazon will often seek out suppliers that are already manufacturing a product in large quantities for other brands, and simply buy the product in bulk to put the Amazon brand name on it. Many of these manufacturers are believed to be in China, though Amazon does not typically disclose its relationships.
Here‘s an example of how the process might work for an Amazon Elements vitamin supplement:
- Amazon identifies vitamins as a high-demand, search-heavy product category
- Amazon buyers find a vitamin manufacturer in China that produces supplements for several other brands, with extra capacity
- Amazon orders a large quantity of a standard vitamin formula and pills from this manufacturer
- The manufacturer produces the vitamins and bottles to Amazon‘s specifications, affixing the Amazon Elements label
- Finished vitamins are shipped to Amazon fulfillment centers in the US and sold on Amazon.com
This approach allows Amazon to quickly scale up its private label offerings without investing in its own factories or equipment. The company can source products that are already proven to sell based on its troves of customer search and sales data.
"Amazon‘s private label business is essentially a brand and distribution play, not a manufacturing one. By sourcing quality generic products at volume and putting the trusted Amazon brand name on them, the company can offer compelling value to customers and increase its profit margins compared to reselling other brands," said James Thomson, Partner at Buy Box Experts, an agency that advises Amazon sellers.
The trade-off is that because Amazon does not directly control manufacturing, it has less oversight over factors like component sourcing, factory conditions and quality control. Amazon has faced criticism in the past for counterfeit, faulty or even dangerous products sold by third parties on its site.
Amazon says it is constantly working to improve its product safety and anti-counterfeiting efforts. The company uses machine learning to scan for suspicious products and sellers, and it employs dedicated teams to investigate and remove problematic listings. In 2020, Amazon says it blocked more than 10 billion suspected bad listings before they were posted and seized more than 2 million counterfeit products.
The Impact of COVID-19 on Amazon‘s Supply Chain
The COVID-19 pandemic put immense strain on Amazon‘s fulfillment network as online shopping demand surged. The company scrambled to adapt its operations to keep workers safe while meeting customer needs.
One impact was that Amazon temporarily prioritized stocking and shipping essential items like groceries and medical supplies over less critical products. This meant that some items from both third-party sellers and Amazon‘s own inventory were delayed or unavailable for a time.
"In a crisis like COVID, it becomes very clear which products are essential to customers and which are more discretionary. We made the decision to temporarily prioritize high-priority items so that we could continue to serve customers during this challenging period while keeping our employees safe," said Dave Clark, CEO of Amazon‘s Worldwide Consumer business, in a 60 Minutes interview.
This episode underscored the importance of Amazon having a resilient, flexible supply chain that can adapt to changing circumstances. While Amazon doesn‘t manufacture most products itself, its relationships with suppliers and ability to forecast demand are crucial to keeping goods flowing to customers.
Since the pandemic began, Amazon says it has invested over $10 billion to help keep employees safe and deliver products to customers, including providing protective gear, enhanced cleaning, staggered shifts and temporary pay increases. The company also accelerated its expansion plans, opening dozens of new fulfillment centers and hiring hundreds of thousands of additional workers to meet demand.
Amazon‘s Sustainability Goals and Manufacturing
As Amazon has grown, so has its impact on the environment. The company has faced pressure from employees, activists and investors to reduce its carbon footprint and adopt more sustainable practices.
In 2019, Amazon co-founded The Climate Pledge, a commitment to reach net-zero carbon emissions by 2040, 10 years ahead of the Paris Agreement. As part of this pledge, Amazon is working to power its operations with 100% renewable energy by 2025, up from 42% in 2019.
While much of Amazon‘s sustainability efforts have focused on areas like renewable energy, electric vehicles and sustainable packaging, the company‘s manufacturing and supply chain also play a role in its environmental impact.
For Amazon devices, the company says it is working to incorporate recycled materials, improve energy efficiency and reduce packaging waste. The latest Echo and Fire TV devices include 100% post-consumer recycled fabric, 100% recycled die-cast aluminum and 30-50% post-consumer recycled plastic.
Amazon is also investing in recycling infrastructure to help ensure that its devices can be properly recycled at the end of their useful life. The company has pledged $10 million to the Closed Loop Fund to help improve curbside recycling programs across the US.
However, some environmental advocates argue that truly sustainable manufacturing means making products that are durable, repairable and upgradeable, not just recyclable. They point out that Amazon‘s business model of constantly releasing new versions of products encourages a cycle of consumption and waste.
"While using recycled materials is a step in the right direction, it doesn‘t address the root problem of electronics becoming obsolete too quickly. We need companies like Amazon to design products that can be easily repaired and upgraded by users, so they can last longer and generate less waste in the first place," said Nathan Proctor, director of the Right to Repair campaign at the US Public Interest Research Group.
As Amazon continues to grow its device business and face scrutiny over its environmental footprint, it will likely need to balance its drive for innovation with a more holistic approach to sustainable design and manufacturing partnerships.
The Future of Amazon‘s Manufacturing Strategy
As Amazon expands into more product categories and builds its reputation as a consumer brand, some experts believe the company may take on more manufacturing directly over time, rather than just partnering with outside firms.
One area where Amazon is already making a bigger push into vertical integration is groceries. The company‘s 2017 acquisition of Whole Foods gave it a significant physical retail presence and expertise in perishable food logistics.
Since then, Amazon has expanded its lineup of private label grocery brands like Happy Belly and Wickedly Prime, and built out a network of Amazon Fresh delivery warehouses that can quickly ship and deliver perishable goods to customers.
Some of these Amazon Fresh facilities include space for light food preparation and assembly, such as putting together meal kits or packaging meat and seafood. This allows Amazon to have tighter control over quality, freshness and portion sizes compared to relying solely on outside suppliers.
Looking ahead, Amazon‘s growing footprint in brick-and-mortar retail with its Amazon Go, Amazon Books and Amazon 4-Star stores could provide more opportunities to showcase its own products and experiment with in-house manufacturing. For example, Amazon 4-Star stores only carry products rated 4 stars or higher on Amazon.com, and they heavily feature Amazon‘s own devices.
"I wouldn‘t be surprised to see Amazon continue to expand its presence in physical retail as a way to promote its own brands and gather more data on customer preferences. They could potentially use these stores as test beds for new products before scaling them up through online sales and distribution," said R "Ray" Wang, founder and principal analyst at Constellation Research.
Another area to watch is Amazon‘s increasing use of automation and robotics in its fulfillment centers. The company has made several acquisitions of robotics startups, and it now deploys over 200,000 mobile robots to help pick, pack and ship products. Some speculate that as Amazon‘s automation capabilities grow, the company could start to manufacture some products directly in its own warehouses using 3D printing or other advanced technologies.
"Amazon is always looking for ways to cut costs and speed up delivery times. If they can find a way to manufacture select products on demand closer to customers using robotics, that could be a game changer. They would have unprecedented flexibility to respond to spikes in demand without relying on lengthy overseas supply chains," said Ben Conwell, Senior Managing Director and leader of Cushman & Wakefield‘s newCommerce advisory practice.
For now, Amazon says its focus remains on innovating for customers and working with a wide range of suppliers to bring new products to market. But as the company‘s ambitions grow, it‘s clear that Amazon‘s decisions around manufacturing and supply chain will have major implications for the future of retail and consumer goods.
"Amazon‘s ultimate goal is to be the one-stop shop for everything a customer could need or want, delivered as quickly and conveniently as possible. As they continue to disrupt industry after industry, it will be fascinating to see how they evolve their approach to sourcing and producing products to meet that goal," said Juozas Kaziukėnas, founder of Marketplace Pulse.
