Amazon wants to cut costs and that is why it will charge manufacturers with logistical fees more quickly. Up until now, the American online retailer often took it upon itself, but that move no longer seems profitable.
Logistical costs grow exponentially
The logistical costs grew 43 % to 25 billion dollars (20 billion euro) in 2017, which is the main reason for Amazon to alter its approach. The costs grew faster than its overall turnover growth, which stood at 31 %. To counter that growth, Amazon has apparently investigated each article’s delivery cost and decided to charge manufacturers more in certain cases.
The new rules are allegedly mostly to the detriment of the manufacturers of drinks, diapers and other large and heavy articles that are not delivered as easily. Procter & Gamble is apparently ht hard by the new approach.
Add-on
Amazon also wants to avoid customers ordering for small amounts and that is why more articles are now labeled “add-on”, which only clears them for orders when the overall order exceeds 25 dollars. The company is now planning to expand that system in certain product categories to every item worth less than 7 dollars.
The now approach is probably a result of Walmart’s aggressive strategy, which has closed the price gap on Amazon a lot. In order to keep its own prices as low as possible, Amazon needs to find margins elsewhere and it has now found those at the manufacturer’s expense.
