Vendors Underwriting Amazon Prime Discounts

Supplier claims of 10% ‘scanback charge’ and other fees.

July 09, 2018

AUSTIN, Texas – Amazon is charging vendors for the 10% discount that Prime members now receive on select products from Whole Foods, according to a report in Fooddive, a food industry website.

Reportedly, one distributor told its supplier customers that a 10% “scanback charge” would be applied to any Prime sale product purchased by consumers. In May, Whole Foods began implementation of 10% Prime discounts on rotating sale items, and that perk expanded to all stores just one month later. 

The Wall Street Journal reports that Whole Food suppliers dislike the new fees and policy changes, and some are refusing to sign new contracts with the grocer. Suppliers are accustomed to footing discounts of 10% or more, but typically, they have better control over those discounts. Some complain that they aren’t receiving good communication about the new policies and charges.

Whole Foods has centralized all buying efforts at its headquarters in Austin, Texas; instituted merchandising fees of between 3% and 5% of manufacturers’ total; begun charging for in-store demos, and now bars suppliers’ brokers from stores. Most of these policies were put in place before Amazon purchased the grocery chain, but Amazon approves.

Despite the complaints, the new charges and policies may be well worth the trouble for suppliers. Data shows traffic is up substantially at Whole Foods, and many vendors see opportunities for crossover success between Whole Foods and the Amazon website.