Will suppliers get on board as Amazon takes on the mults?

Amazon has slashed prices on thousands of own-label and branded products since late March, undercutting supermarkets.

The online retailer has been the cheapest or equal cheapest compared with Tesco, Asda, Morrisons and Sainsbury’s for nearly two-thirds of the 2,313 products stocked by both Amazon and one or more of those full-range supermarkets.

Impressive – but are the market-beating tactics sustainable?

In a sense they are, says former Amazon senior category manager turned vendor adviser Martin Heubel – but only because the company can make up the cost elsewhere. “Amazon measures profitability over a period of time, not just based on the margin of the basket checked out,” he says.

“It knows where shoppers go after they have purchased a discounted grocery item, and [that] over six to 12 months the customer value exceeds the cost of the discount.”

Cheaper groceries has the potential to tempt consumers into the wider – and more profitable – Amazon ecosystem, says consultant and Nesta advisor Louis Bedwell. “For Amazon, grocery can justify lower margins because it supports Prime, frequency, data and wider household spend,” he says.

But it won’t necessarily lead to sustainable growth. “Food retail is hard work. Price cuts only make sense if they build repeat behaviour.

“Amazon cannot build a serious grocery business on price alone,” Bedwell adds. “It needs range depth, better forecasting, cleaner operations and supplier confidence.”

_{Analysis of over 2,000 SKUs stocked by Amazon Fresh and at least one full range supermarket, using Assosia data. Includes loyalty prices and multibuys pro-rated. % of items where Amazon provides joint or exclusively cheapest price.}

Supplier support is something Amazon may find itself short of, says Ged Futter, director of The Retail Mind and former Asda senior buying manager. “Its way of working is to say ‘we are Amazon so this is what we want and you will give it us or we won’t deal with you’,” he says.

Unlike the bricks & mortar discounters Aldi and Lidl, “long-term, collaborative relationships with its suppliers is not something Amazon values”.

In the latest Groceries Code Adjudicator’s GSCOP compliance rankings, published in April, Amazon is the most improved, increasing its score from 66% in 2025 to 69% in 2026. But it still lags significantly behind every other major grocer in the market (the next lowest-scoring was Morrisons, with 89%).

Amazon is also under investigation by the GCA over alleged delayed payments to suppliers and concerns over deductions. Launched last year, the investigation came after the GCA warned Amazon in 2024 that it must take swift and comprehensive action to demonstrably comply with the code.

In contrast, Tesco last month unveiled five strategic priorities, among them: “being the most strategic partner for suppliers”.

“When you have the UK’s largest grocer calling for better, more collaborative relationships with suppliers, where would you choose to invest?” Futter asks. “In a retailer that values suppliers or one that doesn’t? Amazon may well have lower prices than some of the retailers, but who cares? This is not a strategy that will see suppliers flocking to do more business.”

The Amazon/supplier dynamic is “really a love-hate relationship”, says Heubel. “Love, because Amazon offers access to the most sophisticated retail media network for brands to reach shoppers and access data points. Hate, because Amazon offering grocery items in single-pack sizes at ultra-low price points comes at a cost.”

Beware of change

Suppliers also have to be cautious not only of “growing their dependency on an Amazon-subsidised grocery strategy” but of unexpected changes to this strategy, Heubel adds.

“This dynamic particularly comes to light during annual vendor negotiations, where Amazon has repeatedly shown it will introduce short-term friction in order to access more funds from suppliers to improve its own bottom line,” he says.

There are signs Amazon is changing tack. It has been holding talks with current and potential suppliers, and giving them tours of its robotic distribution centre in Dunstable.

But “Amazon wouldn’t be Amazon if it didn’t ask and ‘incentivise’ suppliers to pay their share in this growth cycle”, says Heubel.

“In my work with fmcg brands, they are often asked to fund so-called margin support agreements, which are designed to stabilise and at least in part offset the negative margin impact Amazon incurs. Brands mostly comply, because Amazon is one of the few relevant retailers that drives meaningful growth on an already large online revenue base.”

Suppliers may be able to negotiate harder, given the pressure Amazon is under.

It is “approaching the maturity phase” across many of its categories, just as competition has intensified in e-commerce with the arrival of Joybuy, says Heubel. So it “must win grocery” to grow its share of the consumer wallet.

Amazon’s UK grocery market share sits at 1.9% [Worldpanel Plus by Numerator 12 w/e 19 April 2026]. Even with price cuts, it is “more likely to win coffee, petfood, nappies, household, health and cupboard staples than the full shop”, says Bedwell. “Full baskets are harder. Fresh quality, substitutions, availability matter.”

But it must still be taken very seriously, says Heubel.

“The tech giant has shown an unbelievable resilience, iterating its grocery strategy at least two dozen times since 2020. I have high hopes of it cracking the code in the next few years, first in the US, then the UK and Europe. While many have already written it off in the grocery space, I’d not accept this conclusion too soon.”

Amazon has reduced prices across thousands of products since late March, in many cases undercutting the traditional supermarkets