Two years ago, the CEO of a heritage CPG brand — 75 years in grocery, household name, $200M in retail revenue — told me Amazon was "a nice-to-have channel." Last quarter, her Amazon business surpassed Walmart as her second-largest account. She didn't plan for that. Most CPG executives didn't.
The CPG eCommerce landscape in 2026 looks nothing like the 2022 playbooks described. The shifts aren't incremental — they're structural. Amazon's relationship with brands has fundamentally changed. Retail media has exploded into a $60B+ industry. Social commerce went from curiosity to revenue line. And the mid-market CPG brands that are Neato's core focus are navigating all of this with a fraction of the resources P&G deploys.
The biggest structural change: Amazon's migration from retail (1P/Vendor Central) to marketplace (3P/Seller Central).
Amazon's third-party marketplace now accounts for approximately 62% of total units sold, up from 58% in 2023 and ~50% in 2019 (Marketplace Pulse). For CPG specifically, the shift is even more pronounced — Amazon has been actively offloading mid-market brands from Vendor Central.
Dimension | 1P Model (Declining) | 3P Model (Growing) |
|---|---|---|
Who sets price | Amazon | Brand or authorized seller |
Who funds advertising | Negotiated (often co-funded) | Brand funds 100% |
Who manages inventory | Amazon | Brand or partner |
Who owns customer relationship | Amazon | Seller (limited) |
Amazon's revenue model | Wholesale margin | Referral fee + FBA + advertising |
The implication: CPG brands can no longer treat Amazon as a wholesale account. It's an operating environment requiring either internal capability or a partner — agency or 2P accelerator — to manage complexity.
What we see at Neato: 60% of brands onboarded in the last 18 months came from 1P relationships that were terminated or deteriorating. Average time from "Amazon is reducing our POs" to "we need a new model": 47 days. Brands that planned proactively fared dramatically better.
Retail Media Is CPG's New Tax
Retail media hit an estimated $62 billion in US spending in 2025 (eMarketer). Amazon accounts for roughly 75%.
For CPG brands, retail media has become a cost of doing business, not a growth lever.
Organic visibility is declining. Amazon shows 3–4 Sponsored Products ads before the first organic result on desktop, 2–3 on mobile. In competitive CPG categories, organic-only visibility is functionally impossible for mid-market brands.
TACoS is rising industry-wide. Total Advertising Cost of Sale for CPG on Amazon has risen from ~8% in 2021 to ~12–15% in 2026. Some categories (supplements, beauty): 18–22%. Structural margin compression that isn't going away.
The flywheel demands feeding. Amazon's algorithm rewards sales velocity with organic ranking. Advertising drives velocity. Reducing advertising reduces velocity, reduces ranking, reduces organic sales — requiring more advertising. It's a treadmill.
What smart CPG brands do differently: Not spending the most — spending the most efficiently.
Rigorous incrementality testing
Shifting budget from branded defense to non-branded conquest
Investing in DSP for full-funnel strategy instead of Sponsored Products alone
Measuring contribution margin, not ROAS, as the primary KPI
Supply Chain as Competitive Advantage
The 2021–2023 disruptions faded from headlines but left a permanent mark. In 2026, supply chain competence isn't operational hygiene — it's competitive advantage.
Amazon penalizes stockouts harshly. A listing that goes out of stock loses organic ranking. Recovery: 4–8 weeks of consistent sales velocity. One stockout can erase months of ranking progress.
Inventory placement fees changed the math. Amazon's 2024 introduction added $0.27–$1.58 per unit for brands not distributing across multiple FCs. For low-ASP CPG products, that's 5–10% of retail price.
FBA capacity limits constrain. Allocation based on sell-through rates. New sellers and slow movers get less space.
The brands outperforming their categories have either built internal supply chain operations for Amazon (rare among mid-market CPG) or partnered with operators who manage inventory planning, FBA inbound logistics, and replenishment as an integrated operation. The brands treating fulfillment as an afterthought post "Currently Unavailable" on their best-sellers during peak.
Brand Protection Is Getting Harder
Despite Amazon's investment in Brand Registry, Transparency, and Project Zero, the unauthorized seller problem in CPG continues to grow.
As more brands move to 3P, sellers per ASIN increase. Amazon's marketplace design encourages multiple sellers — it drives price competition and ensures availability. For brands: more unauthorized sellers, more MAP violations, more gray market product.
New challenge: AI-generated listings. 2025–2026 brought an increase in sellers using AI tools to create listings mimicking brand-authorized content. Not counterfeit product necessarily, but unauthorized channels with unauthorized pricing and no quality control.
The impact is measurable. Pre-onboarding audits at Neato consistently find unauthorized sellers capturing 15–35% of Buy Box on top ASINs. At 25% average Buy Box loss, a $20M brand is ceding $5M annually to sellers they didn't authorize.
Sustainable solution: control supply chain, own the Buy Box through operational excellence as seller of record, enforce aggressively with every tool Amazon provides.
Social Commerce Crossed the Credibility Threshold
TikTok Shop in the US went from zero to an estimated $17.5 billion in GMV in 2025. For CPG, it's no longer hypothetical.
What's working: Impulse-friendly products under $30 with visual appeal. Creator-driven discovery (not search-based). Affiliate commission structures driving a parallel to Amazon's Influencer program with higher engagement.
What's not: Complex or premium products. Subscription and repurchase infrastructure (nascent vs. Amazon's Subscribe & Save). Operational complexity — different content (short-form video), different fulfillment, different creator management.
The short version: real revenue for the right products, but a supplement to Amazon — not a substitute.
The Mid-Market CPG Squeeze
This is the trend I watch most closely, because it directly affects Neato's brands.
Mid-market CPG ($30M–$300M revenue) faces pressures mega-CPGs and niche brands don't:
Too big to ignore Amazon, too small to resource it fully. A $100M brand with $20M in Amazon revenue can't ignore the channel but can't justify a 10-person internal team.
Caught between 1P termination and 3P complexity. Amazon is offloading mid-market brands from Vendor Central (where things were simple). 3P requires sophistication most haven't built.
Outspent on retail media. Mid-market brands can't outspend P&G or Nestlé. They have to out-execute — which requires exceptional internal talent or the right external partner.
Margin compression. Rising ad costs, fulfillment fees, and operational complexity are squeezing Amazon margins. Brands doing 15% net margin three years ago are now doing 8–10%.
The strategic response: Make a clear decision about your operating model. Not "we'll figure it out" — an actual choice:
Build internally. Director of Amazon, dedicated team, tools and training. 12–18 months to mature. $500K–$1M annually.
Hire an agency. Delegate execution, retain control. Requires internal oversight. $100K–$300K annually plus management time.
Partner with a 2P accelerator. Transfer operational ownership. Simplest operationally. Requires finding the right partner and accepting less direct control. (Explore →)
The worst choice is no choice — defaulting into a reactive posture where Amazon happens to you.
What's Coming in 2027
Amazon will formalize a 2P program. Amazon has been quietly testing structures allowing approved partners preferential treatment as authorized resellers. I expect formalization within 12–18 months, legitimizing 2P as a recognized pathway alongside 1P and 3P.
Retail media measurement will mature. Inflated ROAS, questionable attribution, minimal incrementality testing — unsustainable. Industry pressure and third-party measurement providers will force honest reporting.
Category consolidation among mid-market partners. The 2P space is fragmented. Expect M&A as larger players acquire smaller operators to build category depth and portfolio scale.
Methodology
This report draws on:
Operational data from Neato's brand portfolio (anonymized and aggregated)
Published research from Marketplace Pulse, eMarketer, Profitero, and Amazon
Conversations with 40+ CPG brand leaders, Q3 2025 – Q1 2026
Amazon advertising and marketplace performance benchmarks from internal data
Sources noted inline. Estimates and projections flagged. We welcome corrections — reach out directly.
Anthony Connelly is CEO at Neato, where he leads the company's mission to give CPG brands certainty and simplicity on Amazon. Neato is a 2P eCommerce acceleration partner — we buy inventory, become seller of record, and grow brands on Amazon with certainty.
