Amazon is demanding grocery brands pay for losses on Prime Day for the first time

Amazon is demanding grocery retailers cover the costs of losses made on promotions during this year’s Prime Event for the first time.

Amid growing concerns over profitability at the retail giant, Amazon said it will charge “additional funding” from certain grocery brands if sales of their promotional products during the sales event result in a loss.

According to an email seen by CNBC, Amazon will in turn scrap the placement fee of around $500 it usually charges brands to run a Prime Day promotion.

“This year we’ve decided not to charge placement fees for inclusion in deal events but instead we request our vendors to fund a (listing) if it’s unprofitable for the duration of the deal,” the email to vendors read.

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“If additional funding is required, it will be based off total unprofitable units sold for the duration of the deal.”

It added that this new charge was intended to “fund the profitability gap”, providing a cushion for Amazon on its notoriously tight profit margins during the event.

Before this new system was introduced, brands would still have to fund the discounts they provided customers, required to be between 20 and 30 per cent, but weren’t required to pay for losses created by factors like shipping and storage fees.

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This comes as Amazon starts to implement a range of strategies designed to sure up its margins and increase its bottom-line profitability.

These including blocking adverts for unprofitable products, removing certain unprofitable products form its marketplace, and ceasing to order products from smaller brands.

It appears to be paying off for the ecommerce behemoth, which posted its fourth consecutive quarter of record profits in its most recent quarter.

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