Amazon Moves To Dump CRaP Products
Suppliers to Amazon may have to rethink their product mix after Amazon who has been operating in Australia for just over 12 months moves to revaluate the products they stock.
The big US retailer is having second thoughts about products that they ‘Can’t Realise A Profit’ from.
(CRaP) this is a phrase that is set to become popular with a lot of retailers.
What Amazon is moving to is a big focus on its bottom line in addition to its rapid growth, it is increasingly taking aim at CRaP products, according to major brand executives and people familiar with the company’s thinking.
In recent months, it has been eliminating unprofitable items and pressing manufacturers to change their packaging to better sell online, according to brands that sell on Amazon and consultants who work with them.
One example: bottled water from Coca-Cola Co. Amazon used to have a $6.99 six-pack of Smartwater as the default order on some of its Dash buttons, a small device that allows for automatic reordering with a single press.
But in August, after working with Coca-Cola to change how it ships and sells the water, Amazon notified Dash customers it was changing that default item to a 24-pack for $37.20.
The same applies to small packs of cables and CE accessories.
Originally a term used internally by Amazon, it has grown in the industry and is now synonymous with one of the largest issues Amazon retailers are facing.
This product-focused philosophy is causing shockwaves for CPG brands, as their traditional brick and mortar retail partners typically look at a brand’s performance across a wide product suite when determining profitability.
According to Shafique Niazi a Manager at Amazon, Amazon will always match an eComm website’s price.
He claims that this quickly becomes a vicious cycle as a retailer can mark down a product due to a promotion, and Amazon will follow suit.
When that promotion ends, and the site sends its own respective crawlers to determine the best eComm price, it finds Amazon’s discounted price and matches it.
The profitability issue is also being assessed along with the issue of carrying too much inventory
If Amazon finds that it’s holding too much for too long, Amazon will mark down your product’s price to get it out of the warehouse.
A functional impact of decreasing the price is that Amazon reduces its margin.
Once Amazon reduces a product’s margin, that product is now on its way to become a CRaP product.
Another issue is products with a low cost-to-weight ratio that are tough to ship and maintain a high margin.
For big consumer brands, not being on Amazon “is not an option anymore,” said Guru Hariharan, chief executive of Boomerang Commerce, which makes e-commerce software.
“They have the power; they have the shoppers.”
Amazon also has greater leeway to curb CRaP items because of the rise of independent sellers on its site.
They have added hundreds of millions of items, helping ensure that Amazon’s virtual shelves are stocked with the variety shoppers expect. And those sales tend to be more profitable for Amazon, which typically collects a 15% cut plus fees for warehousing.
Chief Financial Officer Brian Olsavsky said earlier this year that eliminating CRaP items is “something that we do and work with our vendors on all the time,” adding that it hasn’t caused a change in profitability for the company in 2018.