Amazon takes on warehouse Club Stores: Watch out Sams, Costco

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According to three people with an inside track on the project, Amazon is preparing to launch a wholesale consumer packaged goods business dubbed Pantry in 2014. Pantry, headed up by Billy Hegeman, a senior manager in the vendor management and consumables market at Amazon, will be aimed at Amazon Prime members. The Pantry service will launch with about 2,000 products, consisting of cleaning supplies, kitchen paper rolls, canned goods like pet food, dry grocery items like cereal and some beverages. Prime members who enlist for the service will be able to put as many of these items into a set sized box, up to a specific weight limit. If all the items ordered fit and they don't exceed the weight limit, Amazon will ship the box for a small fee.

Alistair Barr of USA reports "Pantry will put Amazon into much closer competition with Costco and Sam's Club, which specialize in selling a limited number of items in huge volume at very low prices, according to retail industry experts.

"Amazon has the clubs in their cross hairs," said Keith Anderson, who leads RetailNet Group's Digital Advisory practice."This will be a potential issue for Costco."

Warehouse club members tend to be higher income households with kids — the type of shoppers that have huge lifetime value to retailers.

The demographics of an Amazon shopper are similar to the club store shopper and Amazon wants to appeal to that audience, one of the people familiar with the effort explained.

The consumer packaged goods, or CPG, market is worth about $850 billion a year in the U.S., but most of that spending still happens in physical grocery stores. This gives Amazon a big new sector to grow into, if it can successfully tackle some of the problems inherent in shipping big boxes of cereal and heavy cans to people's homes"