amazon grocery

Amazon’s push for expanding its grocery business now includes embracing Marketplace sellers. An email was sent out to approved grocery item marketplace sellers with the following information:

Dear Seller,

To help you list more products and keep prices competitive, we are offering you a limited-time referral fee discount on Grocery products. This fee promotion starts at 12:00 a.m. October 15, 2017 (PST), and will run through 11:59 p.m. October 14, 2018 (PST). During this promotion, the referral fee will be 8% of the total sales price for Grocery products that have a total sales price of $15.00 or less. The total sales price is the price paid by the buyer, including the item price and any shipping and gift-wrap charges.

Current Fees:
15% of the total sales price on all Grocery items

New Fees:
8% of the total sales price for items that have a total sales price of $15.00 or less
15% of the total sales price for items that have a total sales price of more than $15.00

Amazon eMail to Sellers

Apparently, this email went unnoticed by many sellers as there has been little news about it. It is not common for Amazon information to stay hidden for very long, so this seems to be a rare occurrence.

The key point of this promotion is that Amazon is trying to entice sellers to list more sub $15 items by cutting referral fees almost in half until October 14, 2018.

While the email seems to apply to both FBA and traditional sellers, it’s highly unlikely any seller that fulfills their own product has any significant traction on Amazon’s marketplace.

Therefore, for FBA sellers, the referral fees are only part of the equation they must also consider FBA storage and fulfillment fees. For heavier items or unusually large items that may not help sellers with sub $15 products.

Amazon’s Grocery Market Share Needs Help

The sub $15 category is probably a significant price factor for grocery items. Not too many products sold in supermarkets go beyond that price point.

In 2016, Amazon in the U.S. held about 0.8% market share in grocery, and Whole Foods Market had approximately 1.7% (now combined about 2.5%).

Most likely, those numbers are up for 2017, but they are still far from Walmart and Sam’s Club (Walmart’s bigger lots discount warehouse store) combined market share exceeding 21%.

No reliable market share figures exist for Jet.com, but the company recently launched a private label brand for grocery items called “Uniquely J“, which caters to younger urban millennials.

walmart neighborhood market store front glass brick
Image: Walmart

However, more of a threat for Amazon is Walmart’s continuing expansion of its Walmart Neighborhood Markets which now account for about 700 stores nationwide.

These smaller, typical grocery store sized markets, are increasingly becoming a factor, especially for grocery shoppers that dislike walking into a 5 to 6 times larger Walmart Supercenter.

While the acquisition of Whole Foods Market has brought a lot of attention to Amazon and opened up many possibilities for expansion of grocery and non-grocery sales. But the fact remains the company is still only a relatively small player in grocery.

Immediately after Amazon purchase of Whole Foods Market closed, the company went on a price slashing spree in the stores. So this was the first salvo to try to mainstream the higher end grocery store chain.

Amazon Marketplace Sellers are Important to the Company

Amazon has often said that it relies heavily on marketplace sellers for product sales and even acknowledged this year that it sells more third-party marketplace items than its own products.

Will this year-long promotion help bring more non-perishable products to Amazon.com? With little promotion for the promotion that is highly doubtful. However, if you sell products in non-perishable grocery categories and they are your own unique products, maybe listing more items for sale on Amazon can help your overall sales.

And we all know that Amazon tracks sales of marketplace sellers and the gamble may help you get a phone call from them to purchase your items in bulk.

What do you think about this promotion from Amazon? Let us know in the comments section below.

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