Woolworths warns brands thinking of joining Amazon e-commerce platform

Woolworths says manufacturers could cut their own throats if they sign up with Amazon and allow products to be sold more cheaply.

Woolworths CEO Brad Banducci with chairman Gordon Cairns at today’s AGM. Pic: Aaron Francis

Woolworths chairman Gordon Cairns has issued a thinly veiled threat to grocery and brand manufacturers considering joining Amazon’s Marketplace e-commerce platform, warning that retailers could replace products with private label alternatives if Amazon triggered a price war.

Mr Cairns said these brand owners needed to consider the “ramifications” of allowing their products to be sold cheaper on Amazon sites than in traditional bricks and mortar stores, including products stripped from the shelves.

Mr Cairns said brand manufacturers toying with joining Amazon Marketplace — which is expected to launch today — needed to give serious thought to the reaction of bricks-and-mortar retailers “before they step into the breach’’.

Marketplace enables third-party sellers to sell new or used products on a fixed-price online platform alongside Amazon’s regular offerings.

Mr Cairns said Woolworths would do what it needed to to compete in this situation.

Denying his comments were a threat, or even advice, Mr Cairns told journalists after Woolworths’ annual general meeting that manufacturers could lose control of their brand and pricing if they set up on Amazon’s platform, while also losing the loyalty of the supermarket chains.

“Having come from that side of the industry, manufacturing, the question I think they should be asking themselves is how do we retain control of our brand and our pricing, because if they go on to Amazon and Amazon cuts the prices substantially then what that forces other retailers to do is to reflect on whether they should be stocking the brand, if they can’t do it and make money.

“So eventually what happens is they can end up cutting their own throat,’’ Mr Cairns advised.

The comments are the first pushback from a major Australian retailer to the looming arrival of Amazon, with Mr Cairns’ remarks especially bold as Woolworths is the nation’s biggest retailer and supermarket.

Many retailers are anxious that grocery and other manufacturers, ranging from sports goods to electronics, could be selling items more cheaply on Amazon’s platform then in their own stores, handing Amazon a competitive edge.

“So eventually what happens is, then the danger is the retailers — I’m not suggesting Woolworths would do this — I’m suggesting more from the manufacturers’ side, then the danger is the retailer says ‘well if we can’t compete on the branded product then we have to produce our branded product to compete’,’’ Mr Cairns said.

“I’m not suggesting, I’m not sitting here telling them what they should and shouldn’t do, but I think before they step into the breach that perhaps they should consider what the long term ramifications are.

“I would say they have to think whether by going on the Amazon platform they actually are able to control their brand and their pricing.’’