Amazon Shipping from Supplier Warehouses
By Mark Kalaygian
October 24, 2013

Brick-and-mortar retailers have yet another reason to be concerned about competition from Amazon.com.

Last week, I read this article on The Wall Street Journal's website, which reports on Amazon's cozy relationship with Procter & Gamble Co. Apparently, the Internet mega-retailer has set up shop in seven of P&G's warehouses, where it receives product from the supplier and ships it right off to consumers. It is a practice that obviously takes transportation cost out of the supply chain, making Amazon even more price competitive with low-margin, bulky items like diapers and toilet paper, and allowing the company to devote more of its own warehouse space to higher-margin products.

But P&G is not the only supplier that is opening its warehouse doors to Amazon. According to The Wall Street Journal report, several other manufacturers, including Seventh Generation Inc., Kimberly Clark and Georgia Pacific Corp., have either let Amazon into their warehouses or are currently in talks to do so. Could pet food companies soon be on that list?

In fact, while P&G's pet brands—Iams, Eukanuba, Natura, etc.—are not mentioned among the products affected by this arrangement (the report focuses on paper products), the article does note that pet food is stocked in at least one of the P&G warehouses from which Amazon is operating. Given the fact that pet food shares a similar low-margin, bulky profile as paper products, it stands to reason that it may ultimately prove to be a good fit as well.

This is a situation that pet stores should watch closely over the coming months. If pet food manufacturers that focus on the pet specialty channel are among the next round of suppliers shacking up with Amazon, it would make an already formidable competitor even more dangerous by making its already low prices even lower. That is something that no independent pet store can afford.