Amazon Tells Brands Like Cheerios Or Oreos to Start Building and Packaging for E-Commerce

Bloomberg reports on a meeting between Amazon and brand manufacturers of CPGs:

Amazon.com Inc. 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 like Wal-Mart, Target and Costco.

Executives from General Mills, Mondelez and other packaged goods makers will attend the three-day gathering in May, Bloomberg has learned.

Bloomberg’s headline “”​Amazon Wants Cheerios, Oreos and Other Brands to Bypass Wal-Mart” is -probably unintenionally- misleading. Amazon doesn’t ask brands to abandon Walmart. That would be hilarious at this point in time. But rather, Amazon wants manufacturers to stark rethinking their products and their packaging.

The company wants manufacturers to, essentially, start bisecting their production lines in two: One part for brick-and-mortar retail, and the second one for Amazon slash online retail.

Bloomberg:

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 a Wal-Mart Stores Inc. aisle. 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.”

​For starters, packaging could and should look differently:

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, cookies, crackers and cereal could be packed in durable, unadorned boxes. Plants could spit out products for individuals rather than trucks-full of inventory.

​Think of it similar to Amazon’s “frustration-free” packaging of goods. Goods sold online don’t need packaging that stands out on its on and can withstand getting ripped open at the store. Packaging needs to be durable, easily stackable (think containerization but for CPGs) and the products may need to come in different sizes than what they used to.

​The time, at least in the US, may have come for manufacturers to jump in:

“Most of these people haven’t been interested in e-commerce 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 Inc. Just like Costco, 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.

​If 20th century brands don’t jump in, online retailers’ private labels and new digital only brands will take over (faster). It is not just a question of packaging but also of product dimensions to optimize for, how and where to advertise, and how to structure support and services around products and so on.

Amazon’s market power (and the threat of its private labels) may be enough pressure to get results:

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.”

​In light of all this make sure to read these three articles (and in that order):

​* Amazon Builds the Best System for Re-Ordering Consumables With Virtual Dash Buttons
​* Data from Dash Buttons Will Lead to Evolution of Brands & Amazon’s Private Labels
​* Here Is What a Big Part of Amazon’s Endgame Looks Like

​More on this topic:

​* Amazon Is Pressuring Walmart into a Price War That Will Change the CPG World Forever
​* ​Amazon Presents Itself as Brands’ Best Friend at #Shoptalk17
​* The Faustian Pact Between Manufacturers and Amazon

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