Amazon.com, Inc. (AMZN) to take on Costco and Sam’s Club with Pantry

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Amazon.com, Inc. (NASDAQ:AMZN) is preparing a new service called Pantry to compete with the likes of Costco and Sam’s Club. Amazon Pantry will be led by Amazon.com vendor management and consumables senior manager Billy Hegeman. The launch is expected to take place in 2014. Amazon Pantry will target existing customers of Amazon Prime. There will be around 2,000 products available at launch, which are typically found in grocery stores.

Products will include pet food, dry grocery items (example: cereal), paper rolls, cleaning supplies, etc. Amazon Prime customers will be able to put many of these items in a set sized box and set a specific weight limit. If the products fit and do not exceed the maximum weight, Amazon will ship the box for a small fee.

Costco and Sam’s Club is known for selling a limited number of items in large volumes for a low price. The consumer packaged goods (CPG) market is estimated to be worth around $850 billion per year in the U.S. Most of that spend takes place inside physical grocery stores though. The CPG opportunity for e-commerce companies is worth around $470 billion per year though. Amazon.com could potentially capture around $222 billion of spending per year.

“We expect Amazon to take advantage of its strong relationship with Prime users, its existing infrastructure, and its leading online channel to continue to grow aggressively in CPG,” stated Carlos Kirjner, an analyst at Bernstein wrote in a note to investors.

Amazon has set up at least four of them fulfillment centers to store Pantry inventory and for processing orders.

[Source: USA Today]

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