USA Today reports that e-commerce giant Amazon.com is “working on a new business” called Pantry that could help the company expand even further into the CPG market and “take on warehouse club stores” such as Costco and Sam’s Club.
The newspaper reports that Pantry, run by Billy Hegeman, a senior manager in vendor management and consumables at Amazon, is set to launch in 2014; however, Amazon spokesman Scott Stanzel declined to comment on the venture.
Amazon will target existing members of Amazon’s Prime shipping program for Pantry, which will launch with about 2,000 CPG products such as “cleaning supplies, kitchen paper rolls, canned goods like pet food, dry grocery items like cereal and some beverages,” writes USA Today. Prime shoppers will be able to put these products into a sized box up to a specific weight limit.
“Amazon has the clubs in their cross hairs,” Keith Anderson, who leads RetailNet Group’s Digital Advisory practice,” told the newspaper, adding, “This will be a potential issue for Costco.”
Spending in the CPG market — about $850 billion a year in the United States — mostly takes place in grocery stores. To be successful Amazon will have to solve “some of the problems inherent in shipping big boxes of cereal and heavy cans to people’s homes.” There’s also high shipping costs for online orders, which Amazon could solve by encouraging customers to place multiple items in a single box from each order.
Bernstein Research suggests that Amazon can profitably capture significant market share. “We expect Amazon to take advantage of its strong relationship with Prime users, its existing infrastructure, and its leading online channel to continue to grow aggressively in CPG,” Carlos Kirjner and other analysts at Bernstein wrote in a recent note to investors.