Amazonwants Cheerios, Oreos to circle past chains
Amazon has invited some of the world’s biggest brands to its Seattle headquarters in an audacious bid to persuade them that it’s time to start shipping products directly to online shoppers and bypass chains such as Walmart, Target and Costco.
Executives from General Mills, Mondelez and other packaged goods makerswill attend the three- day gathering in May, Bloomberg has learned. Attendees will tour an Amazon fulfillment center and hear a presentation fromWorldwideConsumer chief Jeff Wilke, who reports directly to Jeff Bezos.
Amazon is looking to upend relationships between brands and brick- and- mortar stores that for decades have determined how popular products are designed, packaged and shipped. If Amazon succeeds, big brands will think less about creating products that stand out in an aisle atWalmart. Instead, they’ll focus on designing products that can be shipped quickly to customers’ doorsteps. Brands have been experimenting with such changes, so the Seattle event may well resonate.
“Times are changing,” Amazon says in an invitation obtained by Bloomberg. “Amazon strongly believes that supply chains designed to serve the direct- to- consumer business have the power to bring improved customer experiences and global efficiency. To achieve this requires a major shift in thinking.”
Manufacturers would have to re- imagine everything from the way products are made to how they’re packaged. Laundry detergent could come in sturdier, leak- proof containers. Instead of flimsy packages designed to pop on store shelves, Oreos, Cheerios and other products could be packed in durable, unadorned boxes. Plants could spit out products for individuals rather than trucks- full of inventory.
It’s unclear who would handle the shipping, though Amazon offers a range of fulfillment services. The company declined to comment.
Amazon has been struggling to crack the food and packaged goods market — an $ 800 billion category still dominated byWalmart and other traditional chains. Amazon must convince brands that even though online purchases represent a small part of their sales, e- commerce is the future.
“Most of these people haven’t been interested in ecommerce because e- commerce has been such a small piece of their overall sales,” says Melissa Burdick, vice president of e- commerce at The Mars Agency marketing firm. “But we’ve reached a tipping point. We’re at a time when companies are ready to start figuring this stuff out.”
Amazon is looking to influence product makers the same way Costco and other club stores convinced brands more than 20 years ago to create bulk sizes sold at a discount. “There was a big perceived penalty for missing the boat, fear of missing out on growth,” says Jim Hertel, senior vice president at the marketing firm Inmar. Just likeCostco, he says, Amazon will encourage the changes by promising increased sales, a possibly welcome pitch for companies struggling to rekindle sales growth amid rapidly changing consumer tastes and shopping habits.
Amazon has already forced some manufacturers to revolutionize their packaging. For years toy and electronics makers have packaged their wares to help prevent theft and to maximize store display. But the packages’ tough plastic was hard to open, turning off millions of consumers. Amazon pushed manufacturers to develop packages that pop open more easily. Today thousands of “frustrationfree” products are sold on its site.
Some brands will be easier to persuade than others. One could be Nike, which has an Amazon store and has been experimenting with selling directly to consumers. Nike chief operating officer Eric Sprunk is scheduled to speak at Amazon’s Seattle gathering. The event’s co- host is SCM World, a research and conference group that serves the supply- chain industry. SCM’s advisory board includes executives from Unilever, Kimberly- Clark and Land O’ Lakes butter.
Amazon’s pitch comes as brick- and- mortar competitors try to blunt its momentum by enhancing their own online shopping options. Walmart and other big- box retailers are experimenting with things like buy- online, pick up in store. Startups like Instacart and Deliv make deliveries fromstores to homes, helping retailers keep up with Amazon. Looking to match the quick delivery benefits of Amazon Prime membership, Walmart offers a free twoday delivery on orders of $ 35 or more.
Walmart and Amazon squared off lastweek in Las Vegaswith keynote speeches at the ShopTalk conference that drew more than 5,000 attendees, including executives with major brands. Marc Lore, who heads Walmart’s e- commerce initiatives, touted the price leverage of the world’s biggest retailer that buys products by the truckload. Peter Faricy, who runs Amazon’s marketplace, said the online retailer would continue to narrow shipping times and talked up a future when one- hour delivery is the standard.
Despite the long relationships between brands and traditional stores, Amazon has leverage to convince manufacturers to rethink their operations, says Ken Cassar, an analyst at Slice Intelligence.
He notes that Amazon has 300 million shoppers and can make its own products if brands aren’t willing to sell on its marketplace. “Fear, more than anything else,” Cassar says, “may compel these companies to pay attention.”