Amazon to CPGs: Skip the Stores, Sell Direct

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Amazon to CPGs: Skip the Stores, Sell Direct

03/30/2017

Amazon.com has planned a meeting to convince CPGs to bypass brick-and-mortar chains and ship their products directly to consumers, Bloomberg.com has reported.

The Seattle-based ecommerce retailer has invited executives from General Mills, Mondelēz and other manufacturers to attend the three-day gathering in May, the news outlet stated. During the meeting, attendees will tour an Amazon fulfillment center and listen to a presentation from Jeff Wilke, Amazon's worldwide consumer CEO.

The intent is to get CPGs to think less about creating products that stand out on shelves and more about designing products that easily and quickly ship directly to consumers, Bloomberg said. For instance, laundry detergent could sell in stronger packaging that doesn't leak, compared to weaker packaging designed more to market the product in-store. Additionally, manufacturers could churn out products for individuals rather than filling trucks.

While it may sound like such changes still have some time to take place, Amazon already has convinced some manufacturers to redesign their packaging, according to the business news site. For instance, hard-to-open toy packaging, generally designed so to deter theft from stores, underwent a revamp when Amazon pushed manufacturers to make packaging that opens easier.

The news comes at a time when major sparring is taking place between Amazon and Wal-Mart Stores Inc. on the ecommerce front. The Bentonville, Ark.-based behemoth has doubled down here through the acquisition of Jet.com and several specialty ecommerce sites, the launch of a tech startup incubator, free two-day shipping and more, positioning itself as a growing threat to Amazon that could become an even bigger one in the coming years.

Amazon's move should come as no surprise to anyone watching the grocery industry, and it's highly likely that Walmart, Costco and other retailers saw this coming, says Tushar Patel, CMO of Kibo Commerce, a Dallas-based omnichannel solutions provider. At the end of the day, it's likely everything will come down to price, shipping times and fulfillment.

“In a recent survey, we found 70 percent of consumers said price is the most important factor when making purchases online, with product brand being the second most important factor – influencing 12 percent of consumers – and retailer brand the third most important factor at 6 percent," he states. "This obviously tells us that consumers will choose pricing over a retailer brand if they can obtain their desired product at the time required.”

No matter what decisions are made as a result of the May meeting, brick-and-mortar stores will remain a major player for selling direct to consumers, Patel assures. 

“We believe brands will stand to benefit from leveraging fulfillment best practices of big box retailers by utilizing locations, warehouses and logistics to implement options like buy online, pick-up in-store, return to store, or ship from store for their consumers,” he explains. “These brands have inherited channels they did not have before and can realistically compete with Amazon if they continue to focus on price, shipping and order fulfillment.”

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