Amazon Fresh is bidding third-party vendors farewell. The Amazon subsidiary will no longer run a Local Markets Seller program as of May 30, creating a challenge for grocers that relied on Amazon Fresh as their sole method of digital delivery.
There are likely many in that boat: 42% of brands tracked in Gartner L2’s Digital IQ Index: Grocery rely entirely on third-party platforms to provide delivery, likely due to the substantial investment and technical know-how required to build out a distribution platform. For example, Price Rite lacks site sophistication, offering no product information or e-commerce. But by partnering with Instacart, it can outsource these offerings. Even grocers that have first-party fulfillment capabilities sometimes partner with third-party platforms to expand into same-day fulfillment and reach more online shoppers.
However, Amazon Fresh’s latest announcement proves that pairing up with an outside platform has its perils. While these platforms offer retailers enticing benefits, they also provide limited control. The reliance of grocers on third-party digital shopping interfaces resembles the e-commerce partnerships of Amazon with the now-bankrupt Borders and Toys ‘R’ Us—outsourcing fulfillment allows grocers to quickly provide e-commerce, but potentially weakens their bottom lines in the long term.
Though Amazon has remained silent about the announcement, the company has a track record for always having a few tricks up its sleeve. Now that Amazon Fresh will only be selling and delivering Amazon Fresh products, grocery brands will need to think up an alternate method of bagging online consumers.