Why is Amazon trying to convince CPG giants to go consumer direct?
Large consumer packaged goods (CPG) manufacturers have been tinkering around with consumer direct sales channels for years. Procter & Gamble has sought to improve its understanding of consumer needs and drive sales through online stores, pop-ups and subscription programs such as the Tide Wash Club. Last summer, Unilever went headlong into consumer direct with its $1 billion acquisition of Dollar Shave Club.
What’s clear is that every dollar consumers spend with manufacturers is a dollar that doesn’t go to retailers. So, why is Amazon.com, a reseller of these very same CPG brands, trying to convince manufacturers they should sell directly to consumers?
According to a Bloomberg report, Amazon has invited large CPG companies to a three-day meeting in Seattle in May. The event will feature a presentation by Jeff Wilke, Amazon’s worldwide consumer chief, that will focus on the changing nature of the consumer brands market.
An invitation to the event obtained by Bloomberg reads: “Times are changing. 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.”
What’s not clear is where Amazon will position itself vis-a-vis CPG vendors, considering it is also a retailer that sells national brand products. Does Amazon see itself as a fulfillment vendor or in some other role(s)? Whatever its position, it seems likely Amazon is looking to drive a wedge between the brands and retail competitors, Walmart included.
- Amazon Wants Cheerios, Oreos and Other Brands to Bypass Wal-Mart – Bloomberg
- What does Unliever’s acquisiton of Dollar Shave club mean – RetailWire
- Will consumers buy subscriptions for Tide from P&G? – RetailWire
DISCUSSION QUESTIONS: What do you think is behind Amazon’s consumer direct pitch to large CPG brand manufacturers? Do you think many CPG brands see consumer direct as a major piece of their business in the future?