In 2014, Amazon is set to open Pantry, a new consumer bulk good division of the company for online shoppers, USA Today reported earlier this week. Amazon, an e-commerce giant, with total revenue about $61 billion in per year, is looking to grab a share of the $470 billion per year consumer packaged goods market. While details have not formally been released by the company, the basic premise of Pantry will provide consumers with the option to buy consumer products online, such as cleaning supplies, paper towel rolls, dry grocery items like cereal, and some beverages. The idea is to have shoppers put as many of these items into a set sized box, up to a specific weight limit.
Up to this point, no company has been able to successfully ship bulk items in this manner because of the high shipping costs associated with the service. Amazon’s plan to encourage consumers to purchase multiple items into a single box increases revenue from each order; theoretically, this could help Amazon cover the shipping cost. So can Amazon blaze the way into new territory and be profitable? The sheer size of Amazon gives them a huge advantage in this endeavor because, sources say, that the company has designated at least four fulfillment centers to store Pantry inventory and process orders.
Tom Furphy of Consumer Equity Partners notes that Amazon can also use its extended network of fulfillment centers "to enable better shipping economics than the current .com business so they'll be able to carry heavier and/or less expensive items than they have been able to previously."
If Amazon is able to successfully break into this market, bulk consumer goods clubs, such as Sam’s Club and Costco will face formidable competition. Consumer packaged goods is reportedly at $470 billion per year industry. Amazon has sights set on gaining approximately half of this market share. Lofty goals for a new venture and a relatively new market. Can the e-commerce giant break into this new market and change the way that consumers buy bulk goods? The fact that Amazon is the world's largest online retailer may be an indication that the company know how to successfully market and sell products online. Amazon.com started as an online bookstore, but quickly diversified, selling products, such as DVDs, CDs, video and MP3 downloads, software, video games, electronics, apparel, furniture, toys, and jewelry. The company also produces consumer electronics, particularly, the Amazon Kindle e-book reader and the Kindle Fire tablet computer, and is a major provider of cloud computing services.