To increase profits in its retail business, Amazon is asking brands with cheap but heavy or bulky items to change packaging and ship from their own warehouses
eliminat ing some items and pressing manufactur ers to change their packaging to better sell online Via @laurastevens @sharonterlep @anniegasparro http://www.wsj.com/... @wsj : Amazon is having second thoughts about certain sales that don't make money http://www.wsj.com/... Conor Sen / @conorsen : It would be foolish to say that e-commerce has peaked. But certain kinds of e-commerce have probably peaked: http://www.wsj.com/...
Context & Ripple Effects
Amazon has spent years trying to make its own boxes cheaper: the padded mailers and packing algorithms it built in 2017 aimed to ship orders in one correctly sized package, and back in 2015 rising package volumes already had it hunting alternative delivery routes as costs strained ties with UPS (UPS relationship). This report marks a shift in who absorbs that cost — instead of optimizing its own network further, Amazon is telling makers of cheap, heavy, or bulky goods to redesign packaging or fulfill orders themselves.
The move lands on a Marketplace already under scrutiny: New York Magazine's reporting on profitable third-party seller services filling the Marketplace with junk products shows the fulfillment business is both a growth engine and a quality liability. Conor Sen's framing in the article — that certain kinds of e-commerce have probably peaked — is the analytical throughline: some categories simply don't clear their shipping costs.
First-order effects
- Brands selling low-priced, heavy, or bulky items now face a choice — reengineer packaging to cut dimensional weight or move inventory into their own warehouses — while Amazon eliminates some of these listings outright.
- Amazon's first-party retail margin improves immediately by shedding the money-losing shipments rather than repricing them.
Second-order effects
- Manufacturers of commodity household goods absorb logistics costs they never priced in, squeezing margins or forcing online price increases that narrow the price gap with brick-and-mortar retail.
- Sellers pushed off Amazon's fulfillment gain an incentive to build direct-to-consumer shipping of their own, feeding the third-party seller-services line even as it dilutes Marketplace quality.
Third-order effects
- If the pattern holds, e-commerce selection bifurcates: dense, high-margin goods stay Prime-native while bulky cheap goods migrate to brand-run fulfillment or drop offline entirely — validating the argument that certain kinds of e-commerce have peaked.
- Packaging design becomes a negotiated interface between retailers and manufacturers, with Amazon's sizing algorithms effectively setting de facto product-design requirements across consumer goods.
The trend: Amazon is shifting the unit-economics burden of unprofitable SKUs from its own logistics network onto brands, trading catalog breadth for retail profitability.