Amazon Adds Minions to E-Commerce Shipping Competition
The online retailer’s deal with Universal Pictures may offset costs for distributing millions of daily parcels
Amazon.com would not disclose details of the marketing deal, but it is the first time the company turned its boxes into advertising real estate. PHOTO: AMAZON.COM
As U.S. retailers are trying to find profit from e-commerce fulfillment, Amazon.com Inc.is thinking outside the box—or at least about the outside of the box.
In a deal with Comcast Corp.’s Universal Pictures and Illumination Entertainment, the online retailer is packing shipments in bright yellow boxes decorated with characters from the coming movie cartoon “Minions” until the film’s release on July 10. Customers have started posting photos of themselves with the colorful boxes on social media, part of a hashtag sweepstakes from the companies to win a $1,000 Amazon gift card.
Amazon declined to discuss the financial details of the marketing agreement, which also includes a dedicated online storefront for Minions merchandise. But it is the first time the company, which handles millions of parcels a day, has offered its boxes as advertising real estate.
Depending on the arrangement, the deal could help the company offset the costs of shipping goods as the online retailer seeks to move its parcels to consumers faster while offering steep discounts, including free shipping. Meanwhile, traditional brick-and-mortar retailers are trying to find sustainable shipping models to compete. Wal-Mart Stores Inc. is gearing up to offer a fast-shipping subscription service to compete with Amazon Prime and Macy’s Inc. has turned its department stores into fulfillment centers, but experts say companies are still trying to figure out how to serve the e-commerce market profitably.
Analysts estimate that online fulfillment can cost as much as 25% of sales, however, while retailers including Kohl’s Corp., Target Corp. and Best Buy Co. have said it cuts into their margins.E-commerce growth far outstrips sales growth at brick-and-mortar stores and the online sales are expected to reach $414 billion, or 11% of all U.S. retail sales, by 2018, according toForrester Research. Having an online storefront can also lead to more sales, by driving more foot traffic to brick-and-mortar stores, according to a recent survey by United Parcel Service Inc. and comScore Inc. that supports what is known as an “omnichannel” strategy.
But that hasn’t stopped Amazon from making offers that ramp up service expectations while seeming to drive down the prices for shipping. The company just started offering free shipping for a range of small products that sell for under $10, suggesting little room for profit in the fulfillment of those orders.
That’s what makes the Minions campaign so interesting, experts say—Amazon is leveraging its volume in an indirect, unconventional way to offset costs.
‘There is a possibility of making money through scale by doing things that haven’t been done. ’
“The Amazon Prime box is a very recognizable box now. I think it’s a neat concept,” said Satish Jindel, president of SJ Consulting Group Inc., a parcel industry research firm. “There is a possibility of making money through scale by doing things like this that haven’t been done…and then building the scale even more.”
Mr. Jindel’s group estimates that Amazon ships an average of 3.5 million parcels a day. Other parcel companies, including UPS andFedEx Corp., at times have allowed corporate customers to put their own branding on their own shipments, he said, but this appeared to be first time an operator had put third-party advertising on its parcels.
“It will make it harder for [other retailers] to compete with Amazon. Because if Amazon can keep giving free shipping without recovering the cost of it,” Mr. Jindel said, Amazon’s competitors will be at a disadvantage if they don’t respond.
