Amazon is Making a Truly Radical Change, and It Could Change Everything That You Think About Amazon
Our vision is to use this platform to build Earth’s most customer-centric company, a place where customers can come to find and discover anything and everything they might want to buy online.
Over the next two decades, that was the mantra. In fact, the bestselling book about the company was literally called, The Everything Store. (You can find it on Amazon of course, even though Bezos’s wife wrote that she hated it.)
Now, however, it suddenly seems that there’s an asterisk next to that idea of “anything and everything”–at least according to a truly fascinating story in The Wall Street Journal.
The problem is that while Amazon can sell almost everything, it can’t necessarily sell everything profitably.
In fact, there’s an internal acronym for certain products that Amazon has listed on its site, and pledged to fulfill, but on which the company is actually in the red.
They’re known as items that can’t realize a profit. Or “CRaP” for short. Really. As Laura Stevens, Sharon Terlep and Annie Gasparro write in the Journal:
Think bottled beverages or snack foods. The products tend to be priced at $15 or less, are sold directly by Amazon, and are heavy or bulky and therefore costly to ship–characteristics that make for thin or nonexistent margins.
So, what do you do if you’re the world’s largest retailer, a/k/a The Everything Store*, and you decide there are products you’d rather not sell products that you don’t make money on?
You stop selling them. But in a way that people hopefully don’t notice, according to the Journal.
For example, Amazon sells Smartwater on its site. But the retail giant changed the default order size from $6.99 for a six-pack (which works out to $1.17 a bottle) to a 24-pack for $37.20 (which works out to $1.55 per bottle).
In other cases, Amazon just discontinues poorly margined items, or pressures manufacturers to change packaging or make other adjustments that it thinks will improve online sales.
And, it pressures some manufacturers to ship directly to customers who buy on Amazon,, so that Amazon can save on warehouse and shipping costs. The good news, in a way, is that the pressures fall hardest on other big companies that have the resources to make changes to their products–and hopefully sell more.
As examples, Seventh Generation, which is owned by Unilever PLC, changed the sizes of some products it sells on Amazon and stopped offering lower margin products like paper towels online.
And Mars Wrigley Confectionery emphasizes larger, more profitable bags of Life Savers candy on Amazon.
This all kind of makes sense, and it’s hard to hold Amazon’s feet to the fire to sell products that simply aren’t profitable.
But it’s also kind of funny, for people who have been around long enough to remember the early days of the Internet. Amazon’s moves here are a response to the same pressures that destroyed some early dot-com darlings like Webvan, Pets.com, and my personal favorite (although much smaller), Kozmo.
All of these offered free shipping on ridiculously inefficient orders–a 30-pound bag of dog food, sent via UPS, for example. It was all about burning through investment capital to get big fast back in those days.
Frankly, Amazon did the same thing for a long time, enduring years of unprofitability to become the world’s biggest and most successful retailer. In the end, it worked.
Amazon got big. And now, it makes the rules.
This article is from Inc.com