Amazon are cutting fees from around 15% to as little as 8% for non-perishable groceries priced under $15 in an attempt to boost their choice and selection. According to Recode, the discount will run for at least a year though to mid October 2018.
The problem Amazon have is that by the time you add up the Amazon per item sales fees and tack on FBA costs there is very little margin left in the grocery sector which typically operates on razor thin margins. Amazon are known for using fees to encourage or discourage third party retailers – Cutting fees for grocery products is a pretty big sign that they want more products on sale. When they have amply supply themselves they think nothing of hiking fees and/or delivery expectations as they did for media products earlier this year.
It’s also worth remembering that Amazon’s grocery business is relatively new but is also a minnow so far as major retailers go. Don’t be fooled by media reports hyping Amazon’s growth, which to be fair is impressive, just remember that no matter how large Amazon’s grocery business is it’s only beating other supermarket’s online sales. Walmart turnover something like $450 billion annually and Tesco in the UK turn over some £55 billion. Offline sales mean that supermarkets are way out in from of Amazon’s circa $135.99 billion turnover.
However online is the fastest growing sector and we’ve seen from recent product releases (Amazon Fresh, Amazon Pantry, acquisition of Wholefoods etc) that they are highly motivated to grow their grocery business.
If you are a supplier of groceries (and don’t forget that can include just about everything from Pet food to razors, shower gel and razor blades) it’s worth considering how you sell on Amazon and if the time is right to put your products into Amazon FBA making them available for fast shipment and free or very much reduced carriage charges for consumers.
