Amazon looks to limit cheap 'CRaP' products to boost profits
E-commerce giant Amazon is looking at ways to boost its profitability, including reportedly targeting items on its website that don’t turn a profit – like some packaged foods and drinks.
Internally known as “CRaP” products – an acronym that stands for “can’t realize a profit” – the retailer is eliminating or attempting to repackage lower-cost items that aren’t boosting its bottom line, The Wall Street Journal reported, citing brand executives and people familiar with the company’s thinking.
CRaP products are typically under $15, heavy or bulky and sold directly by Amazon, which limits their overall profitability, sources told The Journal.
In some cases, the effort has resulted in halted sales of some package sizes.
For example, Amazon reportedly told Coca-Cola that it was losing money on smaller shipments of Smartwater – like the $6.99 six-pack – and instead changed the default automatic reorder advertisement to a 24-pack priced at $37.20, raising the per-bottle price to $1.55 from $1.17. Additionally, the food and beverage giant will be responsible for shipping those orders directly to customers, the Journal reported, as Amazon looks to trim costs.
Amazon’s market dominance and increasing use of third-party sellers allow it to exercise this type of leverage with sellers, the Journal noted.
Amazon declined to comment when contacted by FOX Business.
In the third quarter of 2018, the retailer said net sales rose 29 percent to $56.6 billion, while operating income increased to $2.9 billion.
The company’s muted guidance for the fourth quarter – covering the holiday season – concerned investors. However, its higher-margin business, like Amazon Web Services, showed continued strength.
In a press release, CEO Jeff Bezos noted that Amazon Business – its dedicated shop for business customers – reached $10 billion in annual sales.
The company’s stock is up more than 32 percent so far this year.
