You have to hand it to Amazon for another bold, unconventional strategy that it has quietly been executing on, as Serena Ng writes on The WSJ:
P&G began sharing warehouse space with Amazon around three years ago and has expanded the practice. Amazon is now inside at least seven P&G distribution centers world-wide, including spots in Japan and Germany, said a person familiar with the matter.
The economics of the arrangement benefit both sides. For Amazon, co-location reduces the cost of storing bulky items like diapers and toilet paper and frees up space for the Web retailer to stock higher-margin goods in its own distribution centers. The location in northeastern Pennsylvania is 5 miles from one of P&G’s largest plants, which makes diapers, paper towels and toilet paper, and within a day’s drive of major cities in the U.S. Northeast and Canada. The warehouse also stocks other P&G products from pet food to razors to shampoo.
P&G, meanwhile, saves on the transportation costs that it would have incurred trucking products to Amazon’s regional distribution centers. Plus, it gets Amazon’s help in boosting online sales, a priority for many in the industry.
And if some of the resulting savings get passed along to consumers, that’s yet another reason for them to stick to Amazon (and not drive to, say, Wal-Mart). In other words, this cozy arrangement has all the markings of a win-win-win.
But what about the competition? Wal-Mart, Target, Costco and large regional and national grocery chains – doesn’t this put them at a disadvantage? Or does Amazon’s scale and ambition mean that P&G can afford to give it slightly more preferential treatment?
The interesting thing here is that, as Ms Ng writes, this arrangement is not limited to P&G:
Amazon is already inside or in talks to enter the warehouses of companies including Seventh Generation Inc., Kimberly Clark Corp. and Georgia Pacific Corp., people familiar with the matter said.
Seventh Generation said it is in talks with Amazon to ship its diapers, baby wipes and cleaning products directly from its warehouses. Chief Executive John Replogle said more than 20% of the Burlington, Vt., company’s sales come via the Internet—a percent that has doubled from five years ago, he said.
“This is the fastest-growing part of our business,” Mr. Replogle said.
Kimberly Clark and Georgia Pacific declined to comment.
Very, very curious to see what, if any, countermoves (promoting their store brands? Giving P&G a slightly cold shoulder? A warmer embrace for non-co-warehoused suppliers?) Amazon’s competitors will make.