Amazon (Nasdaq:AMZN) competitors such as Walmart (NYSE:WMT) and Costco Wholesale (Nasdaq:COST) have reason to be concerned about Amazon's warehouse partnership with Procter & Gamble (NYSE:PG) and other major suppliers.
With its Vendor Flex program, Amazon has expanded its presence in the warehouses of Procter & Gamble and other household goods vendors such as Kimberly Clark (NYSE:KMB). In this scenario, suppliers bear the cost of storing and moving inventory, and then Amazon personnel ship the products directly from vendors' warehouses.
While P&G began sharing warehouse space with Amazon around three years ago, Amazon has expanded its VendorFlex program to at least seven P&G distribution centers worldwide. Plus, Amazon is in talks with – or in some cases is already partnered with – Kimberly Clark Corp. (NYSE:KMB), Georgia-Pacific Corp. and Seventh Generation on the VendorFlex program.
Amazon's rivals are aware of its arrangement with P&G and are not pleased. "Retailers don't like things that benefit their competitor but not them," Anne Zybowski, vice president for retail insights at consulting firm Kantar Retail, told The Wall Street Journal.
Amazon's move is expected to boost overall online sales of consumer packaged goods. If overall internet sales reach a certain level, Amazon could generate an extra $10 billion in revenue selling nonfood consumer goods, up from less than $2 billion currently, according to Mark Mahaney, an Internet stocks analyst at RBC Capital Markets in San Francisco.
"This is one of the biggest growth areas for Amazon," Mahaney told The Wall Street Journal.
-See this Wall Street Journal article
Walmart Competes with Amazon on Massive New Fulfillment Centers
Amazon to Compete with eBay on Streamlined Payment System
Favorite E-Commerce Sites? Count on Amazon, Walmart and Some Surprises
Staples Preps to Match Amazon's Prices
Costco Earnings Weaker Than Expected, but Investors Still Happy