From SCDigest's On-Target E-Magazine
- Dec. 17, 2013 -
Supply Chain News: In Latest in Stunning 2013 Moves, Reports Say Amazon Preparing to Go After Warehouse Clubs, "Center Aisle" Goods
Reports Says Amazon will Ship Standard, Large Case Filled with Bulk Size Items; Four Fulfillment Centers Already Identified to Process and Ship New Orders
SCDigest Editorial Staff
In the latest of what has been a stunning year of news out of Amazon.com in 2013, from Sunday deliveries in some markets to advanced testing of sending shipments via unmanned drone aircraft, USA Today broke the story last week that the on-line giant was working on a new service aimed at the so-called "center aisle" package goods.
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| "Amazon has the clubs in their cross hairs," Keith Anderson of RetailNet told USA Today. "This will be a potential issue for Costco." |
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What Do You Say?
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Amazon Pantry, as the new service is supposed to be called, will sell paper towels, pet food, cleaning suppliers and more - some 2000 SKUs in total. USA Today said the new service would in part take on warehouse clubs such as Walmart's Sam's Club and Costco, implying that many of the items would be offered in the larger bulk sizes that fill many of the warehouse club shelves.
That different product assortment would make sense, as Amazon is already in the consumer packaged goods business currently. In recent years, it acquire both Diapers.com and Soap.com, and its Amazon Fresh on-line grocery business operating in some markets carries many center aisle items.
So the larger size offerings may be one way to differentiate Pantry from Amazon's other channels. Another differentiator would involve its approach shipping. USA Today reported that the plan is to ship items in a large, standard shipping box. For a set fee, Amazon will fill that box with as many items as can fit and still fall under some as yet to be defined weight limit.
Obviously, that approach will drive the number of line items on an order up, potentially adding enough margin to offset the shipping cost. It would also spread the fixed component of shipping costs over more items, reducing the per item transport costs for Amazon and customers.
Members of the Amazon Prime service, in which customers pay a $79 annual fee and then receive free two-day shipping all year, would pay just a small charge to have that standard box shipped to their houses.
Will that shipping be through UPS, FedEx, the US Postal Service, Amazon's own trucks, some or all of the above? No word on that yet. It does not appear drones are part of the plan - but you never know.
Word is that Pantry will be launched sometime in 2014, and that Amazon has already identified four of its US fulfillment centers that will process and ship these new types of orders.
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"We expect Amazon to take advantage of its strong relationship with Prime users, its existing infrastructure, and its leading online channel to continue to grow aggressively in CPG," Carlos Kirjner and other analysts at Bernstein wrote in a recent note to investors.
