For years Amazon has operated its retail business with little or no profit. A big reason for that has been what Amazon insiders refer to as CRaP products. The acronym stands for “can’t realize a profit.” Now Amazon may attempt to trim some of those products form its sales. Laura Stevens, Sharon Terlep and Annie Gasparro write for The Wall Street Journal:
Now, as Amazon focuses more 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.
That raised the price per bottle to $1.55 from $1.17. And Coca-Cola will start shipping those orders directly to consumers, sparing Amazon the expense of shipping from its warehouses. Manufacturers shipping from their warehouses is something Amazon has asked more brands to do to cut its own costs.
Amazon told Coca-Cola that it was losing money on the smaller, cheaper shipments, according to people familiar with the matter.
Coca-Cola responds that it works with partners to learn together and constantly evolves its offerings.
Read more here.
Jeremy Jones, CFA
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