Amazon isn’t just changing the way we shop; it’s also influencing what the things we buy look like. The e-commerce giant is encouraging brands to change the way certain products are packaged so they’ll be easier to ship — and more profitable for Amazon — theWall Street Journalreported on Sunday.
Certain products, like bottled drinks or snack foods, are expensive to ship and have relatively low profit margins; internally, according to the article, Amazon refers to them as CRaPs, an acronym that stands for “Can’t Realize a Profit.” In an attempt to increase its own margins, Amazon has reportedly convinced some brands to alter their shipping and packaging strategies. In certain cases, this means redesigning products so they’re box-like or more compact, making them easier to deliver. In others, it means shipping them directly from the manufacturer’s warehouse instead of from an Amazon fulfillment center.
These changes may not matter much to shoppers, but they’re a big money saver for Amazon — and, conversely, an added expense for brands that have little choice but to cooperate with Amazon’s whims.
Smartwater, which is owned by Coca-Cola, worked with Amazon to change the way it packages and ships its water bottles, according to the Journal report. Starting in August, the default Smartwater order onAmazon Dash— a service that lets customers automatically reorder certain products — changed from a six-pack that cost $6.99 to a $37.20 24-pack, raising the price per bottle from $1.17 to $1.55.
Seventh Generation, a plant-based cleaning product brand that is owned by Unilever, similarly started advertising bigger packs of dish soap on Amazon. The price difference may be just a few cents for shoppers, but it can lead to bigger profit margins for Amazon.
And last month, Tide announced its plan to roll out new packaging, switching from its usual bottle to an “Eco-Box” thatlooks a lot like boxed wine. The new box contains 60 percent less plastic and 30 percent less water than the bottled version, according toa releasefrom Procter & Gamble, and doesn’t require additional packaging or bubble wrap, making it more environmentally friendly than a plastic detergent bottle. But the “eco” in Eco-Box isn’t just about sustainability — it’s also a nod to e-commerce.
“For the first time, we have designed a package ‘eComm-Back,’ beginning with the unique challenges and opportunities the eCommerce environment presents,” Sundar Raman, vice president of P&G’s North America Fabric Care business, said in a statement last month. It’s unclear whether the Tide redesign was the result of discussions with Amazon, but according to the Journal’s report, both Coca-Cola and Seventh Generation altered their packaging after discussing it with Amazon.
Notably, the Eco-Box was designed by P&G Fabric Care’s eCommerce Innovation Group, a branch of the company that focuses on making products suitable for online shopping — and shipping. “We know that the ‘last mile’ remains the biggest challenge both economically and ecologically in eCommerce,” Isaac Hellemn, P&G Fabric Care’s brand manager for e-commerce innovation, said ina statementat the time. “eCommerce isn’t a trend anymore, it’s a reality, and we’re excited to keep innovating for it.”
Some brand executives told the Journal that Amazon’s profitability push has happened at their expense. Changing packaging and lowering prices may be good for Amazon’s bottom line, but it’s not good for the brands’ own profits. But refusing to adapt can hurt sales, especially as Amazoncontinues to beef up its own in-house brands.
Amazon’s private label brands aren’t just a way of boosting profits — they also give the company leverage when negotiating with companies like Unilever or Procter & Gamble, whose own brands could be edged off the site,CNN Business reported in October.
The fact that brands would rather spend money on redesigns — and, in Procter & Gamble’s case, develop an entire e-commerce innovation team — shows how much they rely on online sales. And since Amazon controls nearly half of the e-commerce market, according toa July report by eMarketer Retail, that reliance means brands are increasingly beholden to Amazon.