You may or may not be aware of news announced recently that Amazon now falls under the Groceries Supply Code of Practice (GSCOP) in the UK. In this blog post, we explain the implications of Amazon and GSCOP for your vendor business.
What is GSCOP?
The Groceries Supply Code of Practice is legislation put in place to protect suppliers that deal with major supermarkets from being unfairly treated. GSCOP rules the behaviour of top grocery retailers such as Tesco, Sainsbury’s, Asda, and now Amazon.
Grocery items covered by the GSCOP include food items, beverages, toiletries, household, and cleaning products. In order to qualify as a designated GSCOP retailer, the company’s grocery sales turnover must be over £1 billion in the UK.
What does this mean for Amazon?
Amazon’s increasing activity in the grocery sector with its online Amazon Fresh proposition and opening of its Amazon Go stores has meant the retailer is now required to abide by GSCOP rules. This means Amazon will have to alter their trading practices in a bid to protect brands from potential unfair business practices.
The code encourages more transparency between the retailer and vendors with regards to payments, charges, and rebates, requiring Amazon to prove these costs are genuine or risk breaking the rules. While this is a positive for brands, this could also be beneficial to Amazon as greater transparency on grocery spend could mean that vendors are more inclined to invest in growth-led initiatives.
What does this mean for your brand?
While we don’t yet know how Amazon will respond to new rules, we can predict that they will likely seek to recover from any profits lost as a result of increased financial and operational costs and they’ll likely do this through cost price reductions and increased base terms. The uncertainty around the impact of GSCOP could lead to cautious growth planning by many brands.
Meanwhile, thanks to GSCOP, brands from affected categories who may be facing pressure from Amazon with disincentives can leverage more negotiation power and settle on a lower year-on-year margin improvement.
Want more information about Amazon and GSCOP?
Compliance begins from 1st March, and most brands will be considering the implications of Amazon and GSCOP on their business.
If you're looking for advice on how best to take advantage of these new regulations as part of your annual negotiations, please don’t hesitate to get in touch. Our team of Amazon and Grocery experts have a wealth of knowledge on what this could mean for you.