From SCDigest's On-Target E-Magazine
- Nov. 13, 2013 -
Supply Chain News: e-Fulfillment Drama Continues, as Amazon Tussles with Johnson & Johnson, Partners with USPS for Sunday Deliveries
Johnson & Johnson Pulled Product from Amazon over Third-Party Gray Market Sales, While USPS to Provide Amazon new Sunday Delivery Service
SCDigest Editorial Staff
More drama in the e-Fulfillment wars, with Amazon.com once again making news not once but twice this week.
First, there was news of a simmering battle between consumer products giant Johnson & Johnson and Amazon over the availability of "gray market" products on the Amazon site. J&J has been complaining to Amazon for the past year or more that some of the thousands of "third party" sellers that use Amazon as their web channel are selling expired, damaged (e.g., packaging) or otherwise uncontrolled product through Amazon's platform.
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Believing Amazon was not doing enough to reduce or eliminate those gray market sales, J&J stopped selling its well-known consumer products, such as Tylenol, Band-Aids and Johnson's baby wipes and shampoo, to the internet giant, according to the Wall Street Journal this week. Although it later resumed shipping some product to Amazon more recently, it is still withholding some of its SKUs from distribution through the company.
The issues are several. J&J as well as other consumer companies are worried e-channels might lead to a loss of control of their various brand reputations, as consumers receiving products with damaged packaging or expiration date issues blame the brand company, not the third party reseller or Amazon itself.
Second, as with any gray market activity, sales revenue flows primarily to the third-party seller in ways that hit the brand company's top and bottom lines through lost sales. While some of these third-party sellers obtained brand products through normal distribution channels, others might be sourced in other ways, often at deep discounts, allowing them to undercut other retailers on price.
This all makes for some interesting dynamics. Beauty products maker Este Lauder, for example, doesn't sell to Amazon directly - but many of its products are available on Amazon through the third-party channels on Amazon's site.
The issue With J&J products was uncovered by some of the company's "mystery shoppers" in 2012, who bought J&J products with short expiration dates, packaging damage, or which had been discontinued by the company. J&J raised the issue with Amazon, but felt Amazon did not take strong actions to curb the issues, leading J&J to pull its products in the Spring.
Many but not all of those products, as noted above, are now back on Amazon's virtual shelves, but the dispute is far from resolved.
The Wall Street Journal reported that a couple of years ago, Procter & Gamble complained that some Amazon third-parties were selling counterfeit Gillette razor blades. Now, third-parties are not allowed to sell those blades, only Amazon itself can do so.
Amazon's position has largely been that it is up to the manufacturers themselves to manage how their products are distributed, the article says.
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The service started last weekend in the Los Angeles and New York metropolitan areas and Amazon plans to expand it to much of the rest of the US market in 2014, including Dallas, Houston, New Orleans and Phoenix.
