Selling groceries on Amazon is one of the hottest growth sectors for e-commerce businesses. The online grocery market will reach over $100 billion in annual sales by 2025, with Amazon leading the market. Getting in on the online grocery game can be a fantastic way to grow your online business, increase profitability, and boost your Amazon sales in the process.However, there are some specific requirements you have to meet before you can sell in this category and some best practices to be aware of.Follow our beginner’s guide to selling groceries on Amazon to make the most of this opportunity.
How Profitable Is Selling Groceries On Amazon?
Realistically, groceries tend to be one of the lower ROI categories for online sellers because the profit margins on food on Amazon for each individual item are slim. For example, while a thrift store book I buy for a dollar could sell for a hundred dollars or more, or a toy I buy on clearance could sell for double, a good profit margin in grocery is around $4 per item. Despite the low profit margins, selling groceries on Amazon can be very profitable and well worth your time for one main reason: People consume groceries and will need to buy them again next week.
Online Groceries Are A Fast-Moving Product Category
What groceries lack in profit margin they more than make up for in sales velocity. For every book or toy that I sell, I can expect to sell four or five grocery items. Why?Because groceries and gourmet food products are consumables—products that customers have to buy over and over again—while most books, toys, clothing, or electronics are a one-time purchase.As a bonus, the high turnover rate for grocery products can boost your sales, protecting you from the potentially account-damaging effects of selling slower-moving, higher-profit products. Groceries are ranked near the bottom of Amazon’s product categories in terms of popularity, but they are also Amazon’s fastest growing category, increasing sales by 78.4% from 2020 to 2021. The low market penetration and exponential growth potential combine to make now a great time to get in on this under-saturated market.
Online Groceries Are Often Replenishable
Groceries are also an ideal item for a beginner to sell because of the low cost of entry and the high sustainability of sales for months to come.Unlike books, toys, or electronics that tend to have a limited stock of the profitable items you source, once you find a profitable grocery item, you can often replenish that item from the same store as needed. Sourcing replenishable items further automates your online business, cuts down on your sourcing time, and creates more time for you to grow your sales in other ecommerce categories.
Are You Approved To Sell Groceries On Amazon?
If you’re a new seller, the answer to this question is probably no. Groceries are one of Amazon’s restricted product categories, which means you will have to get account approval to sell, also known as ungating. If you think about it, the restrictions on selling groceries makes a lot of sense. Amazon has to be sure that its sellers are reliable and trustworthy, and that products sold on its platform are safe and high-quality, especially when it comes to consumables like food and beverage.But don’t worry.Ungating is a fairly simple and inexpensive process. If you follow the steps below, you’ll be on your way to selling in the grocery category in no time.
How To Get Approval To Sell in Groceries On Amazon
Getting approval is the first step to sell in the grocery & gourmet food category. To get approval, you’ll first need to sign up for a professional seller account if you haven’t already.Next, you’ll need an invoice for a restricted grocery item from a wholesale distributor and clear, high-quality photos of your product:
Step 1 Order At Least 10 Items from An Online Wholesale Company
The first thing Amazon requires in order to grant approval in a product category is an invoice from a distributor. There are many different distributors you can choose to go with. A good option is Weiner’s Wholesale because of its variety of products and low minimum order requirement.
Side note here: Most wholesale companies have minimum order requirements. While you’re getting ungated in groceries, you may want to order products that will get you approved in other categories and brands, such as topicals, household and safety, and OTC medication to get the most for your money.Whichever products you choose, be sure to order 10 of each item. This is the minimum order quantity Amazon requires to grant approval for a category or brand.
Step 2: Take Photos Of The Products Once They Arrive
When your products arrive, take good, clear photos of your items. I like to treat this as though I’m taking photos for a potential customer using a white background and getting the best photos possible. First, take a photo of one item from every side, making sure that the brand is easily readable. For grocery items in particular, be sure that the ingredients list and expiration date (if there is one) are visible. Next, take a photo of all 10 products together. Now you’re ready to submit to Amazon.
Step 3: Upload Documents To Amazon Seller Central
For each category or brand that you are getting ungated in, go to the Add a Product page and search for the product. Choose the listing that most closely matches your product. It’s OK if Amazon doesn’t have your exact size, flavor, or version listed. As long as the brand matches, you should be fine. You should see a button saying that you need approval to sell the product. Click on the button, upload your invoice and your photos, and then click submit. And that’s it! Amazon says that getting approval in restricted categories can take up to a week, but in my experience the process is much faster than that, taking anywhere from a couple hours to a few days.
Requirements To Sell Grocery & Gourmet Foods
After getting category approval, there are additional account and product requirements that online sellers have to meet in order to maintain their approval. These requirements are meant to ensure the safety and health of Amazon customers, and they’re more important than ever now that Amazon can be held liable for third-party sellers. Violating one of these requirements can jeopardize your seller account, so when in doubt, don’t send the product in!
To maintain eligibility to sell groceries on Amazon, your account will have to hit certain performance targets, These include:
- Order defect rate: < 1%
- Pre-fulfillment cancel rate: < 2.5%
- Late shipment rate: < 4%
Item Packaging Requirements
Grocery items that you send into Amazon need to be high-quality and properly sealed and packaged to keep the product from being damaged. Check all grocery items you source to ensure no seals are broken and that the packaging is fully intact.This is especially important if you’re sourcing at discount grocery chains. In addition, the packaging needs to clearly state the product’s ingredients, potential food allergens, dietary claims (gluten-free, dairy-free, etc.), the net weight, and the expiration date. The name and address of the packaging company should also be included somewhere on the package.All of these requirements are in place to ensure the safety of the products Amazon allows third-party sellers to list on its platform, and they also protect you and your account from liability and negative feedback on Amazon.
Shelf Life Requirements
Many of the grocery products you’ll want to sell on Amazon will have expiry dates or best by dates. Amazon requires that any product listed on its site should be able to be consumed in full plus be an additional 90 days from expiration. Amazon will only check in items that have at least 90 days until their expiration date and will dispose of units on their warehouse shelves that have fewer than 50 days until their expiration date.In practical terms, this means that while you’re sourcing, you’ll want to look for items with long shelf lives and expiration dates that are over 90 days away.The larger the product, the further out you’ll want the expiration date to be. For example, while chips and snacks can reasonably be consumed in a day, a box of 80 coffee pods will take months to consume, requiring a longer shelf life. Additionally, Amazon FBA has restrictions on meltable products. Amazon warehouses and trucks can get hot! Amazon accepts meltable products only from October to April, and all products that Amazon accepts at its fulfillment centers should be able to withstand temperatures from 50 to 100-degrees Fahrenheit.In other words, don’t send chocolate in the middle of the summer unless you want Amazon to throw it all away!
Most of the time, I list my products on pre-existing Amazon product listings, so this requirement isn’t as relevant to me. However, sometimes bundling products together can make grocery items more profitable, and I’ll need to create a new listing. If you need to create a new Amazon listing for a grocery product, remember at least one of your pictures needs to clearly show the ingredients list and the nutritional information.Be sure to use accurate and eye-catching product images. Your photos should be high-quality and at least 300-dpi.Finally, you can only show the product you have for sale with no accessory products or additional items—such as spices in a spice rack or coffee next to a coffee maker.
Sourcing Grocery Items To Sell
Now that you know all of the requirements and restrictions involved with selling groceries on Amazon, I’ll get to the fun part.Finding profitable products to sell. There are three main ways to source grocery items: Wholesale, Retail Arbitrage, and Online Arbitrage:
Buying grocery items wholesale can be a great way to build your ecommerce business, but it also comes with some drawbacks. First, the advantages. Wholesale suppliers offer larger lots of potentially profitable products at lower prices. Sourcing from a wholesale company couldn’t be simpler. A couple clicks, and you have as many profitable items as you want headed your way. However, the cost of entry is typically higher, and that’s assuming you can find profitable products to begin with. Because wholesale is so much simpler than physically going to a store and scanning items with the Amazon Seller App, a lot of online resellers use this option, making competition fairly steep.To make matters worse, Amazon also uses wholesale suppliers to source products to sell itself. When Amazon is on a listing, the price decreases and it becomes more difficult to win the Buy Box. Fortunately, Tactical Arbitrage software includes a Wholesale Search feature that eliminates the guesswork. Simply upload a wholesale manifest from a distributor and let the algorithm quickly analyze the data and deliver profitable deals to you.
Retail arbitrage is the process of going to traditional brick-and-mortar stores to source products that you can flip for a higher price on Amazon. A lot of online sellers love the retail arbitrage process, and we’ve written an entire retail arbitrage guide to help beginners get started with this sourcing method. Some of the benefits of retail arbitrage include the ability to find amazing deals on highly-profitable, niche products and the low cost of entry. Online sellers are able to buy a few profitable products at a time and use their cash flow to scale up, especially in grocery.Also, sometimes it’s nice to get out from behind your computer and move around a bit. Of course, the drawbacks of retail arbitrage are the time that it takes to source and the sheer number of options.Many online sellers who do retail arbitrage have told me that the first few times they went scanning for profitable products, they felt completely overwhelmed looking at all the shelves and products, and they didn’t like the feeling that other shoppers or employees were watching them. All of these downsides can be overcome with time and practice, though. Once you start figuring out which stores are best in your area and which products are the most profitable and sell the most quickly, you’ll get faster and more efficient, knowing exactly where to go and what kinds of items to scan.You can also pair Tactical Arbitrage with your retail efforts, finding deals ahead of time that you can buy in-store when you go out to scan.
Online arbitrage is the process of sourcing good deals on one online marketplace for the purpose of reselling these items at a higher price on another marketplace. In this case, Amazon. While it sounds simple, online arbitrage can be time-consuming and frustrating if you attempt to crunch the data yourself. I highly recommend that you read my online arbitrage beginner guide before you get started. For my money, online arbitrage is the way to go if you want to quickly source profitable grocery items and thousands of other products—especially if you use an online arbitrage software. Instead of going out, using up gas, and spending tons of time trying to find profitable niches, or spending hours comparison shopping online, you can let powerful software do 90% of the legwork for you while you source from your couch. With software like Tactical Arbitrage, you can even set up search parameters for products on your watchlist and run searches every morning when you first start your day.This feature is particularly important for low margin products such as grocery and household and for seasonal products.
Overall Grocery Selling Tips & Best Practices
If you want to scale your online grocery business quickly and increase your profitability, follow these tips and best practices:
Pay Strict Attention To Product Quality
I’ve already detailed Amazon’s selling and listing requirements above. The bigger picture here, though, is to never send in an item that you would be disappointed to receive yourself.Sure, you can probably get away with sending in an item with dented packaging every once in a while, but your account health will suffer in the long run. Focus on quality and the sales and positive feedback will follow.
Polybag Liquids And Powders
Ensure a better customer experience by polybagging all liquids and powders before you pack up your Amazon FBA box. Amazon does its best, but the warehouses and mail trucks can be rough places.Items such as coffee syrups, pancake mix, and spices will be better protected in a polybag, And, in case the packaging breaks in transit, the polybag protects your customer’s other purchases from leaks and spills.Online sellers can purchase these bags in bulk for about five cents a piece, and they add a lot to your customer’s impression of your store.
Shop At Discount Stores
Discount chains like Ollie’s, BG’s, Sam’s Club, Dollar General, and Big Lots can be gold mines for online grocery sellers. Get to know your local discount stores and start looking for profitable niches.It’s an easy, low-cost way to get started. Just be sure to double-check packaging and expiration dates. You don’t want to sink money into products that you can’t send in.
Look For Replenishable Items
I’ve mentioned replenishables before, but I want to go into them in a little more detail here. When you first start sourcing groceries to sell on Amazon, you shouldn’t go all in on any one item no matter how profitable it is because you don’t know how quickly it sells yet.Instead, go a mile wide and an inch deep. Every time you find a potential profit-maker, buy three to five of the items and see what happens. When you find a fast seller, go deeper on that product. Continue to go back to your source and flip the product for as long as you’re able. It’s like printing money, and you’ll maximize your sourcing efforts when you keep returning to the same well.
Look For Bundling Opportunities
Finally, one great way to increase your profitability in the grocery category on Amazon is to look for bundling opportunities. Many products that aren’t profitable or worth sending to Amazon FBA as an individual item become profitable in a bundle.This happens because you’ve enhanced the perceived value for the customer, and you’re saving money on Amazon FBA fees.For example, I recently found some grilling spices selling for $0.99 at a discount grocery. They weren’t profitable individually but were selling for $23.78 in a bundle of all six flavors for a profit of $9.00. I also found a profitable bundle of popcorn seasonings from the same brand. Even if a bundle doesn’t exist already, you can create your own. Look for highly-popular items that come in a variety of flavors and try bundling them together in a variety pack.Again, go an inch deep and a mile wide. Create one or two bundles to start and see how they sell. As you’re creating new bundles, remember to abide by the listing requirements listed above.
Selling groceries on Amazon can be fun and profitable if you’re smart about it and know where to look. If you’re interested in learning how to source groceries through online arbitrage but aren’t ready to take the plunge yet, try our free trial.You’ll get the Tactical Edge for a full month and have the opportunity to learn a lot before you commit to a subscription.
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