EcommerceBytes-NewsFlash, Number 3174 - October 15, 2013     3 of 4

Amazon Sets up Distribution Inside Manufacturers' Warehouses

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Amazon is expanding its distribution centers in a new direction, one that's unlikely to please its competitors or third-party sellers. The Wall Street Journal reports that Amazon has set up operations inside Proctor & Gamble's manufacturing warehouses, enabling it to fulfill products cheaper and faster than if the manufacturer shipped the items to Amazon's own warehouses.

"The e-commerce giant is quietly setting up shop inside the warehouses of a number of important suppliers as it works to open up the next big frontier for Internet sales: everyday products like toilet paper, diapers and shampoo," wrote the Journal.

Sellers have come to expect eBay to make special deals with brands and manufacturers, while expecting their greatest competition on Amazon to be from Amazon itself. Sellers have learned to accept that certain categories are not open to them, or to only a small group of sellers - such as the clothing category.

But now instead of opening up categories, Amazon is closing some categories to sellers, EcommerceBytes recently reported. Amazon is prohibiting its third-party merchants from selling cosmetics and certain beauty products on its marketplace, and deals like the one with P&G may be part of the reason for such changes.

The Wall Street Journal said P&G began sharing warehouse space with Amazon 3 years ago and has made agreements or is in talks with other such manufacturers. The program is called Vendor Flex. "By piggybacking on their warehouses and distribution networks, Amazon is able to reduce its own costs of moving and storing goods, better compete on price with Wal-Mart and club stores like Costco Wholesale Corp., and cut the time it takes to get items to doorsteps."

The Vendor Flex program shows just how powerful Amazon has become.

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to

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