EP254: Amazon's First-Party Expansion: What It Means for Sellers

This is the High Voltage Business Builders Podcast. Daily intelligence for serious e-commerce portfolio builders across Amazon, TikTok Shop, Shopify, Walmart, and every channel that moves the needle. Neil Twa and his Voltage team, all day, every day since 2012. Let's get into it.

Here's a number worth sitting with: 60%. That's the share of Amazon units sold by third-party sellers in Q1 2026, Down from 61% the quarter before. 1 point sounds small, but this is the first consecutive quarterly decline in third-party seller share since 2004. More than 2 decades of uninterrupted growth reversed. And if you sell on Amazon at any level, from your first private label product to a multi-brand portfolio, that shift has real consequences for your business.

Let's make this concrete.

If you're doing $20,000 a month on Amazon, a 1% share erosion across the marketplace doesn't sound like your problem.

But the underlying driver is what you need to pay attention to.

Amazon's grocery business, specifically perishables, grew 40 times year over year. 40 times! And same-day delivery categories, led by grocery, now make up 9 of the top 10 same-day items sold on the platform.

Amazon isn't just winning back unit share; it's winning it back in the highest-frequency, highest-loyalty categories in retail. That matters to you whether you're selling supplements, home goods, pet products, or apparel. Because when Amazon competes directly in categories that drive daily consumer habits, it changes how shoppers think about the platform. It changes what they search for first. It changes which brands they discover and which ones they scroll past. The question isn't whether Amazon is getting more competitive; it clearly is. The question is: What does a smart seller do? When the platform itself becomes your biggest competitor in the categories that matter most, and how do you position your brand to survive and grow in that environment?

To understand what's really happening here, you need to separate 2 things: the headline number and the structural shift underneath it. The headline— third-party share dropped from 61% to 60%— is a signal. The structural shift is the story.

Amazon has been quietly building the infrastructure for a grocery and perishables business for years, Whole Foods, Amazon Fresh, same-day delivery networks, ultra-fast fulfillment centers in dense urban markets. That investment is now producing results at scale. Perishable sales growing 40x in a single year isn't a trend; it's a category unlock. And when perishables dominate same-day delivery, Amazon 1P wins by default because third-party sellers simply cannot compete in fresh food logistics. Here's where it gets strategic for your business. The categories Amazon is winning back are high-frequency and habitual: grocery, fresh food, household staples. Consumers who come to Amazon daily for perishables don't stay in that lane; they browse, they discover, they buy. Amazon's 1P grocery expansion is effectively a customer acquisition engine that feeds traffic across the entire marketplace, and Amazon controls where that traffic goes next. If you're spending $2,000 a month on sponsored ads, you've likely already noticed cost-per-click pressure in adjacent categories. When Amazon drives more owned traffic through its 1P grocery funnel, it has more leverage over where that attention flows— and less incentive to send it to third-party listings when its own brands or vendor relationships can capture the sale. For a seller at $10K a month, this is a visibility conversation; for an operator at $500K a month, it's a margin and category strategy conversation. But the underlying mechanic is the same: Amazon's first-party expansion compresses the organic and paid visibility available to everyone else. Understanding that compression is the first move.

Let's look at how this plays out on the ground, at 2 different scales. First, a seller in the Health and Household category doing about $35,000 a month. Clean label supplements, strong reviews, solid BSR, and a competitive niche. In early 2026, they noticed something. Their organic rank on core keywords started drifting down, despite no changes to their listing— no drop in conversion rate, no review issues. Their ad spend stayed flat, but their ACOS climbed from 18% to 26% over 2 quarters. What happened? Amazon had expanded its same-day delivery footprint in their top 3 metro markets, and the algorithm began weighting same-day eligible listings— many of them Amazon-owned or vendor-fulfilled— more heavily in default search results. This seller wasn't doing anything wrong; the floor shifted under them. Their response? They leaned hard into Subscribe& Save, pushed their email list toward direct-to-consumer repeat purchases, and restructured their ad spend toward longer-tail keywords where Amazon's 1P presence was thinner. Within 60 days, ACOS came back down to 21%.

Not perfect, but stabilized. Now zoom out to a brand doing $800,000 a month across 4 categories, 2 of which are adjacent to Amazon's expanding grocery footprint. Their team identified the same signal earlier, tracking 1P ASIN expansion in their subcategories monthly. They used the compression window to acquire a smaller competitor whose traffic was declining, consolidating keyword authority before the market repriced. They also accelerated their off-Amazon DTC channel, reducing their Amazon revenue dependency from 91% to 74% over 18 months. Same disruption, 2 different scales, 2 different execution plans, but the same core instinct: sellers who survive platform shifts see them coming and move before the market forces their hand. That's what separates builders from bystanders.

3 moves.

Every seller can act on these. The scale of execution differs, but the principle is the same at $15K a month or $1.5 million a month. Move 1: Audit your category for 1P encroachment. Now, go into your top 5 keywords and look at who owns the top organic positions. Are Amazon-owned brands, AmazonBasics, or vendor-managed ASINs appearing more frequently than 6 months ago? If yes, you're already in a compression zone. For a smaller seller, this means tightening your listing differentiation and leaning into subcategory keywords where 1P hasn't penetrated yet. For a larger operator, this means a formal quarterly 1P share audit across your entire catalog, Not just your top SKUs. Move 2: Build a Subscribe& Save and repeat purchase moat. The categories Amazon is winning are high-frequency. The defense is locking in your own repeat buyers before Amazon's algorithm can intercept them. If you're not actively pushing Subscribe& Save enrollment, you're leaving retention on the table. A seller at $20K a month should be aiming for 20-30% of revenue on Subscribe& Save. A larger operator should be modeling LTV by cohort and treating S&S enrollment as a core KPI, Move 3: Reduce single-channel dependency. This one is uncomfortable, but non-negotiable. If more than 80% of your revenue runs through Amazon, the platform's 1P expansion is an existential risk, not just a competitive inconvenience. Start building your DTC channel, your email list, your owned audience. You don't have to abandon Amazon; you have to stop being entirely dependent on it. Even moving from 90% Amazon to 75% Amazon meaningfully changes your risk profile and your negotiating position with the platform. These 3 moves work at every level.

Start where you are.

What you heard in this episode isn't a warning to panic; it's a call to build smarter. Amazon's first-party expansion is real, it's accelerating, and it's already reshaping the competitive landscape for sellers at every level. The sellers who will come out ahead aren't the ones who ignore the shift; they're the ones who see it clearly, adjust their strategy, and build businesses that don't depend on any single platform's goodwill to survive. That's exactly the kind of thinking we bring to every business we work with at Voltage. For more than 13 years, we've been in the trenches with Amazon sellers— from the builders just getting their first brand off the ground to operators running 8-figure portfolios. We've seen platform shifts before— algorithm changes, fee restructures, category lockouts, 1P competition. What separates the businesses that grow through those moments from the ones that get squeezed out is preparation. Positioning, and having the right operator-led team in your corner. If you're ready to build a brand that can compete and win, even as Amazon plays a bigger role in its own marketplace, we want to talk. The Voltage team works directly with sellers who are serious about building durable, scalable e-commerce businesses.

Not quick wins.

Real businesses, with real margins, real cash flow, and real staying power. Visit voltage dm.com to learn more about how we work and whether it's the right fit for where you're trying to go. The shift is already happening. The only question is whether you're building to take advantage of it or waiting to react when it's too late. This is the High Voltage Business Builders Podcast. We'll see you in the next one.

That's a wrap on today's episode. If something we covered today sparked an idea or made you wonder where you actually fit in in the e-commerce landscape, there's a good place to start. Head over to voltage dm dot com slash discover, answer a few questions, And we'll point you toward the right path for where you are right now. We'll be back tomorrow with another Edge. Until then, stay high voltage.