Amazon

Amazon Overhauls Low-Margin Products In eCommerce Shift

Amazon is making moves to get rid of items on its site known as CRaP, which is short for “Can’t Realize a Profit.”

According to a report in The Wall Street Journal (WSJ), items such as bottled beverages or snack foods — which tend to be priced at $15 or less, are sold directly by Amazon and cost more to ship — are all in the process of being eliminated, as the eCommerce giant puts pressure on manufacturers to change their packaging.

Earlier this year, Chief Financial Officer Brian Olsavsky admitted that eliminating CRaP items is “something that we do and work with our vendors on all the time.”

For example, Amazon used to offer a $6.99 six-pack of Coca-Cola-owned smartwater as the default order on some of its Dash buttons. However, in August, after telling Coca-Cola it was losing money on the smaller shipments, Amazon changed the default item to a 24-pack for $37.20. In addition, Coca-Cola will now ship the orders directly to consumers so Amazon can eliminate that expense.

Coca-Cola isn’t the only company making concessions: Unilever-owned Seventh Generation changed its selling strategy in recent months after talking with Amazon, said CEO Joey Bergstein. He revealed that his company has developed new product formats that are more profitable to sell online, including smaller, lighter laundry products. He added that Amazon is “really clear that they have a profitability threshold. We’ve been clear about saying, ‘Let’s make sure what we’re selling is profitable, and we’re not just lining Amazon’s pockets.’”

In addition, Mars Wrigley Confectionery and Kellogg’s executives have seen a boost in products that were changed after Amazon said they were unprofitable.

While the changes might cost these companies more (like Coca-Cola taking on shipping costs), major brands really have no choice but to accept Amazon’s terms. In fact, not selling on the site “is not an option anymore,” said Guru Hariharan, CEO of growth automation at Boomerang Commerce. “They have the power; they have the shoppers.”

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