Amazon (AMZN) is testing out a new way to accelerate the delivery of common household items.
The Internet shopping giant has set up small distribution units inside the warehouses of major consumer goods manufacturers, including Procter & Gamble (PG). Amazon workers receive goods directly from the manufacturer and fulfill customer orders on the spot. Amazon calls the program Vendor Flex. By leveraging the manufacturers’ distribution systems, the retailer reduces its own logistics costs, the Wall Street Journal notes.
Sources say that Amazon is currently in talks to open fulfillment operating in the warehouses of other companies including Georgia Pacific and Kimberly Clark (KMB).
That cost cutting allows Amazon to compete with discount retailers like Walmart (WMT) and Costco (COST) on price, while also trimming delivery times.
While Amazon is trying to boost consumer goods sales, everyday household items still comprise a tiny portion of online sales — just 2%, according to analysts. However, the market has the potential to grow sharply in coming years.
Shares of Amazon were flat in Tuesday pre-market trading.