Monday, May 12, 2014

How Will Amazon Pantry Affect Grocery Sellers?

Amazon's Prime Pantry is a new service that allows Prime members to order enough "qualifying" grocery items to fill a specific size shipping box, with the shipping cost of $5.99 regardless of the number of items or the weight. Some current Amazon sellers and others interested in venturing into the grocery niche have expressed concern about how Amazon Prime Pantry will affect their sales. From my observation, it won't. Here's why:

1. According to the program description, qualifying items are "not cost effective to ship on their own." When browsing the qualifying items, I noticed that many products are large or heavy items priced under $15 like large jugs of detergent, 12-count boxes of soft drinks or sports drinks, 16-pound bags of pet food, and 14-pound plastic jugs of cat litter. I wouldn't recommend the typical "at-home" Amazon FBA seller offer these types of items anyway because they aren't profitable and the inbound shipping and storage fees would not be cost effective. Plus, who wants to handle big heavy items all day long when you can sell smaller lightweight items for much higher profit?

2. The other side of "qualifying items are not cost effective to ship in their own" is that many qualifying items are Add-Ons, selling for less than $10. Again, something I wouldn't recommend for the average at-home FBA seller because the profit isn't there, and Add-Ons can sit for a long time before they sell.

3. Qualifying items are only a tiny fraction of the 665,000 items in the grocery category. Here is how many qualifying items are available in each subcategory right now:

4. All of the items I clicked on are only offered by, not third party sellers. My observation is that these are products that we don't (or wouldn't) offer anyway and Amazon is testing out a new creative way to move cheap products in a more cost effective way. For example, what self-respecting FBA seller is going to bother with one can of soup sold for $1.88?  Or a 12-pack of Diet Coke for $3.64? Or a box of toothpicks for 85 cents?

So grocery sellers, don't despair. There is still plenty of opportunity for everyone because we all have access to different regional products and so many new grocery items hit the shelves each year it is physically impossible to buy and resell everything with an opportunity. (Like this Snow Cone cookie mix - I mean really? Who comes up with this stuff?)

The grocery category is unique in that sellers can often find a product in their area that no one else is selling, or bundle items in a unique way, and sell those items for months or even years with no competition. Just figure it out and keep replenishing every week. Not many other categories offer that benefit.

Check out my downloadable Amazon Grocery Course which is focused on:

Understanding how to sell products with very little competition

Understanding demographics and buying habits of Amazon grocery customers so you can serve them better with more products

How to avoid products that will go into Add-On status

How to test products before making significant investments in inventory

The types of products that are easiest to work with, sell the best over time, and are most cost effective with regard to inbound and outbound shipping

Related Articles:

Top 5 Summer Foods to Sell on Amazon

Top 10 Grocery Clearance Items to Sell on Amazon

Top 3 Grocery Items to Sell on Amazon


Unknown said...

My concern though is why would a buyer buy my multipack of an item that runs about $5 per bottle when they could buy ONE for $3?


Suzanne A. Wells said...

Hi, Angie, thanks for visiting!

I can think of a few reasons why a buyer would still buy a multipack of an item when a single could be available for less through Amazon Prime Pantry:

1. Amazon Pantry isn't available everywhere yet, it is only in limited areas. So if it isn't available to a customer, the $3 item might be an add-on and the only way they can get it is by ordering a multipack that isn't an add-on.

2. I don't believe Amazon Pantry is eligible for FBA Export. Some non-food grocery items can be shipped internationally, and if the international customer can't order from Prime Pantry, they will order a multipack as usual.

3. What if a customer simply doesn't want to order an entire box full of groceries? Maybe they just want their multipack of brownie mix and nothing else.

Those are just a few reasons I can think of. Would love your feedback!

Unknown said...

Thanks, hadn't thought about not wanting to buy a whole box load.

Have you heard any skuttle but as to when it will expand.

I accidentally found a taco mix that is listed in the pantry. (It was in my reports as something I might consider selling) When I clicked on it to check it out there were zero offers....but still had a price. Which makes me think that even though the Pantry will be open to FBA they are going to price fix so there will be ZERO profit. (And more than likely LOSE money)

I was talking to another seller. She went to check out the mix and found out that she COULD buy it.

I'm a little bit concerned about this change because even though I sell some beauty and H&P, I'm mainly grocery.

At least I've made it a habit of going wide and not deep, so I can bail if the time comes.

Thanks for responding!

Suzanne A. Wells said...

Hey, Angie,

I haven't heard anything definite about expansion, only speculation.

I don't think we need to be too concerned about this change. Grocery provides unlimited opportunities because new items are constantly being released.

Book sellers thought their businesses would die when the Kindle was invented. That didn't happen.

Grocery sellers had to adjust to Add-Ons and those who did are doing just fine.

I don't see thousands of Prime Customers suddenly ordering boxes of groceries if that hasn't been their pattern of buying - and many won't want to pay the $5.99 shipping because they are already paying the annual Prime membership fee. JMO.

Unknown said...

Thank you SOOOOO much! I had thought about neither the Kindle analogy nor the add-on status. You are so right! We survived that. Had to adjust just a tiny bit, but survived easily enough.

Thank you SO much for this encouragement!!!