Soap Opera: Amazon Moves In With P&G
E-Commerce Giant Sets Up Shop Inside Warehouses of Suppliers
This article summarizes the next major growth area perceived by Amazon and shows the critical importance of understanding and leveraging the nuances of supply chains. Innovation is far more than just product or service!
"TUNKHANNOCK, Pa.—Atop a hill at the end of a road called P&G Warehouse Way sits a warehouse stocked with Pampers diapers, Bounty paper towels and other items made byProcter & Gamble Co. It also houses an ambitious experiment byAmazon.com Inc.
Each day, P&G loads products onto pallets and passes them over to Amazon inside a small, fenced-off area. 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.
The under-the-tent arrangement is one Amazon's competitors don't currently enjoy, and it offers a rare glimpse at how the company is trying to stay ahead of rivals including discount chains, club stores and grocers.
Logistics have long been crucial to success in retail. Years ago, Wal-Mart Stores set up a system that lets suppliers monitor what needs to be replenished. Amazon instead 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 Wal-Mart and club stores like Costco Wholesale Corp., and cut the time it takes to get items to doorsteps....
.....…More efficient distribution and changing consumer habits are unlocking the market. If online sales of consumer packaged goods could rise to the 6% share the Internet claims of retail overall, Amazon could generate an extra $10 billion in revenue selling nonfood consumer goods, up from less than $2 billion currently, estimates Mark Mahaney, an Internet stocks analyst at RBC Capital Markets in San Francisco."
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