Amazon is making grocery brands pay for losses on Prime Day promos

As Amazon grows more profit-conscious, it is making sure grocery brands cover losses on low-priced products sold during Prime Day, one of its biggest sales events of the year.

For this year’s Prime Day, Amazon is charging “additional funding” to certain grocery brands if sales of their promotional products result in a loss for Amazon, according to an email seen by CNBC. Amazon said the change is intended to “fund the profitability gap” of such products, which Amazon purchases wholesale and sells on its own.

In return, Amazon is waiving the placement fee required to run Prime Day promotions, which typically costs $500 per deal.

“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,” Amazon’s email to vendors said. “If additional funding is required, it will be based off total unprofitable units sold for the duration of the deal.”

The policy change reflects a broader push by Amazon to squeeze profits out of a historically low-margin business. By replacing the promotion fee that would have grown its overall revenue with payments that prevent it from losing money, Amazon is showing its willingness to forego top-line growth if it’s able to protect its bottom-line.

It’s the latest example of Amazon’s increased focus on profitability. As CNBC previously reported, Amazon has been more aggressively blocking ads for unprofitable products this year. Amazon has also been getting rid of certain unprofitable products lately, forcing brands to change their packaging to make them more cost-effective, according to the Wall Street Journal. The company abruptly stopped ordering products from smaller brands earlier this year, in part due to profitability reasons, Bloomberg reported.

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