Each day, P&G loads products onto pallets and passes them over to Amazon inside a small, fenced-off area of a joint-warehouse stocked with Pampers, and Bounty paper towels. Amazon employees then package, label and ship the items directly to the people who ordered them.
The e-commerce giant is quietly setting up shop inside the warehouses of a number of important suppliers as it works to open up the next big frontier for Internet sales: everyday products like toilet paper, diapers and shampoo. Amazon is going out to its suppliers with a program it calls Vendor Flex. By piggybacking on their warehouses and distribution networks, Amazon is able to reduce its own costs of moving and storing goods, better compete on price with Walmart and Costco, and cut the time it takes to get items to doorsteps.
Household staples have traditionally been considered too bulky or cheap to justify the cost of shipping. Americans currently buy just 2% of such goods online, retail analysts estimate. Yet even that sliver of business was worth $16 billion in 2012, according to Nielsen, who believe online sales will grow by 25% a year to $32 billion in 2015.
Having cracked the problem of bulky product shipments to consumers, why should Amazon and P&G not extend the idea to other parts of the portfolio?
With pay-offs for both parties (Amazon saving costs of bulky-storage, and P&G eliminating the cost of onward distribution) the idea has already spread to 7 P&G distribution centres worldwide…
...and with no mention of the resulting dilution of traditional multiples buying power, watch this space….
The e-commerce giant is quietly setting up shop inside the warehouses of a number of important suppliers as it works to open up the next big frontier for Internet sales: everyday products like toilet paper, diapers and shampoo. Amazon is going out to its suppliers with a program it calls Vendor Flex. By piggybacking on their warehouses and distribution networks, Amazon is able to reduce its own costs of moving and storing goods, better compete on price with Walmart and Costco, and cut the time it takes to get items to doorsteps.
Household staples have traditionally been considered too bulky or cheap to justify the cost of shipping. Americans currently buy just 2% of such goods online, retail analysts estimate. Yet even that sliver of business was worth $16 billion in 2012, according to Nielsen, who believe online sales will grow by 25% a year to $32 billion in 2015.
Having cracked the problem of bulky product shipments to consumers, why should Amazon and P&G not extend the idea to other parts of the portfolio?
With pay-offs for both parties (Amazon saving costs of bulky-storage, and P&G eliminating the cost of onward distribution) the idea has already spread to 7 P&G distribution centres worldwide…
...and with no mention of the resulting dilution of traditional multiples buying power, watch this space….
