4. E-Commerce

Third Party Online Retailers


Third party online retailers fall largely into two types of businesses:

First, marketplaces act as a “shopping mall” of sorts in which individual users can sell products, whether through a single listing or a storefront. Online auction sites generally follow the marketplace model, though employing a bid vs flat pricing model. 

Second, are online retailers that act similar to brick-and-mortar stores, selecting and selling products. These retailers often serve a specific product category, market niche or geography.

Online Marketplaces

Amazon: As an e-commerce pioneer, Amazon is ubiquitous in its reach and product assortment, which may be both a blessing and a challenge for food businesses. It can provide access to a vast number of customers but accessing them comes with higher costs and can result in high levels of competition, often focused on price.

To sell on this platform, a food business needs to create a Seller Central account from which it manages its Amazon business including adding products and product information, tracking daily sales and other business metrics, making inventory updates and managing payments. To establish the account, a business needs a few key pieces of information they’d likely have for offline work including a bank account and routing number, a chargeable credit card, a government issued national ID, a tax ID and a business phone number.

Amazon has a number of fees to participate on their platform including both fixed monthly account fees and variable fees tied to transactions. The variable fees, known as Category Referral Fees, are a percentage of the total price including shipping and any extra service charges like gift wrapping. For grocery, the CRF are currently 8% or 15% depending on the sales value.

In return, this option provides an opportunity to promote your products in order to move them higher in product rankings and making it more likely your products will appear in users’ searches. Sponsored items appear near the top of the search feed and brands where the sponsoring brand appears near the top of the page with multiple products highlighted. In addition to listing and promoting individual items, a food business can also create a storefront on Amazon. This is a multi-page subsite within the site where a business lists all of its items and carries more opportunity for branding than available to items listed singularly.

Once an order is taken, it must be fulfilled – packaged and sent to the buyer. Fulfilling orders on Amazon occurs in one of two ways, Fulfilled by Merchant (FBM) and Fulfilled by Amazon (FBA). In FBM, the food business accepts the order through Amazon and manage all aspects of shipping the product outside the Amazon logistics system. In this case, Amazon never touches the physical inventory. In FBA, the food business ships a quantity of inventory to a warehouse from which Amazon fulfills orders that come through the system. Rather than managing individual transactions and inventory, the food business needs to only ensure that the Amazon warehouse has adequate stock, similar to how they would with a brick-and-mortar wholesaler or retailer. FBA allows products to participate in Amazon Prime. However, the program comes with several fees including for inventory storage, order fulfillment, managing returns, fees for resolving items not received by Amazon in a format that makes it easy for them to fulfill to the customer and disposal fees for unsold product.

Note, refrigerated and frozen products are not allowed within the FBA structure. Also, perishable items such as fruit, vegetables or meats may be prohibited at certain times of year due to temperatures expected in the FBA warehouse system.

It’s important for a food business to consider the tradeoffs of the two approaches. There is certainly a value to the pick, pack and ship offered by FBA in terms of ease and ability to participate in Prime. However, if the business’ product sales are low or the business can ship inexpensively themselves then FBM may be preferred.

You should use Fulfilled by Merchant if…

  • You want more control over your customers
  • You have excellent customer service practices in place
  • The products you sell are oversized or heavy
  • You already have logistics in place
  • You’re able to mitigate the expenses involved in fulfilling your own products
  • Your inventory turns over slowly

You should use Fulfilled by Amazon if…

  • The products you sell are small and lightweight
  • You’re okay surrendering control of your customers to Amazon
  • You want Amazon to handle your customer service
  • Your inventory turns over quickly
  • You do not have logistics in place
  • Your expenses would be higher if you fulfilled your own products

Other Marketplaces from Leading Brick-and-Mortar Retailers

Similar to Amazon, leading brick and mortar retailers have created their own marketplaces, including Walmart Marketplace, Target+ and Albertsons Marketplace. All operate on similar models to Amazon, featuring a vast product portfolio, in fact, carrying an assortment well beyond what they sell in their stores. It’s also worth noting the behind-the-scenes operations of these marketplaces are distinct from the store websites that offer online sale of the products carried in store. Notably, selling through a marketplace does not necessarily create a path to selling in their physical stores. Exploring other brick and mortar retailers that have created similar marketplaces is a potential path to expanding geographic distribution for food brands. UNFI, the leading wholesale distributor, also recently launched an online marketplace that is open to retailers and non-profits, but not to consumers.


Rangeme.com is a unique marketplace that allows manufacturers to present their products to leading national and regional retailers. The manufacturer creates a product page that highlights much of the same information that might typically go into a sales presentation (brand story, product assortment, suggested price, promotions, etc). Buyers are able to search and view the listings as they search for new items to add to their assortment. While there is no actual commerce that takes place on the site, manufacturers can leverage a premium membership to submit their products directly to retailers for review.


With a focus on handmade, artisan goods, Etsy offers a unique opportunity for cottage or artisan food brands. Similar to other marketplaces, food companies can create a product offering and sell product directly to consumers through the platform. Distribution is arranged directly between buyer and seller in a fulfilled by merchant model. It’s worth noting the presence of food items is relatively small on Etsy, though it may represent a good opportunity for gourmet or artisanal brands consistent with the hard and soft goods typically offered on the site.

Facebook Marketplace

Despite the ubiquity of Facebook as a social media site, its marketplace is limited in its food offerings. Facebook Marketplace is largely driven by a rummage sale model for selling used goods. As such, food offerings are limited. A food company could use the platform to access local buyers and take payment or linking them to a website for the actual purchase. In either case delivery would be coordinated directly with the buyer.


Sitting somewhere between Amazon and Facebook Marketplace, eBay also offers a viable platform for food companies to sell online. While originally an auction site, eBay sellers can offer single items or offer multiple products in its portfolio and do so at fixed prices. While the system does not allow for storefronts, users can easily search for all listings from a given company. eBay provides for electronic payment, though shipment occurs through a fulfilled by merchant model.

Category Specific Retailers


For those targeting the food service segment, Webstaurantstore.com brings the offerings of a broad line food service distributor online. This site is truly an online retailer vs a marketplace meaning they control their assortment. Further, they inventory and fulfill most items offered on their site.


Foodservicedirect.com bills itself as a marketplace offering foodservice items under both fulfillment models. It will stock fast-turning items and let slower turning items be shipped in a fulfilled by merchant model.

Not surprisingly, other platforms exist including some focused on specialty markets such as bakersauthority.com and bulkapothecary.com which both focus on the ingredients market. Food businesses with a unique customer base are encouraged to search for marketplaces that serve their specific niche.

Local/Regional Online Commerce Opportunities

Outside of selling on one of the large online marketplaces or through your own website, a number of unique e-commerce opportunities for small food businesses exist. Many of these could be categorized as category-specific online retailers, though many of their models are somewhat unique.


Barn2Door is an online storefront for farmers to sell products directly to consumers or restaurants. The service operates on a monthly fee schedule based on transactions and provides an interface that can be embedded and linked to your website.


An online storefront for farmers to sell products directly to consumers and restaurant customers. It provides a basic interface to list products and maintain inventory. While there is no monthly subscription fee, the seller will pay a small per item and royalty fee.


GrazeCart is a web platform and shopping cart for farmers and other sellers of perishable products. The interface allows for both unit and weight-based transactions as well as setting customer pick up locations or selling via shipment.


Harvie is a customized crop share platform that allows farmers and consumers to connect through a traditional farm share model, but with the added value of allowing consumers to customize their purchase – both in volume and types of products. The platform offers packaging and logistics consultation to make delivery easier for producers.


Open Food Network provides both an online marketplace as well as open-source shopping cart software for food companies and growers. The company is global in nature but has local networks throughout the country.


Forager is a marketplace concept intended to connect local farmers to buyers. Rather than just a retailer, Forager allows sellers to also search buyers and their staff will make connections between buyers and sellers (though they do not act as a middle man).

Shopping Cart Systems

Unless you’re selling through an online merchant or retailer, conducting e-commerce requires a storefront and a shopping cart system. While most DIY web builders offer multiple shopping carts, there are two platforms worth highlighting.

Shopify is a hosted e-commerce website builder that allows businesses to create an online storefront from several customizable templates. Whereas a service like web.com or wix.com offers a DIY solution for creating a content-driven website, Shopify offers a similar approach for those businesses looking for an e-commerce approach. The platform is global in nature with more than 800,000 businesses worldwide, many of them small and medium sized companies.

Various pricing tiers are available with higher priced tiers offering additional reporting, lower credit card processing fees, discounted shipping and integration options. While the platform offers credit card processing services, companies are free to use an outside system. The platform also offers the ability to be used as a brick-and-mortar point-of-sale system.

Shopify provides for integration into multiple online environments, including social media channels like Pinterest, Facebook and Instagram, as well as other retail platforms like eBay, Amazon or Walmart Marketplace. If you already have an existing website for your company, Shopify can integrate into your site.

While Shopify provides the ordering platform, discounted shipping rates with preferred vendors and can coordinate inventory levels between multiple online channels, it does not offer fulfillment services. The individual company is responsible for the actual physical inventory and for coordinating the shipment of goods to customers either through Shopify’s preferred vendors or through a separate service.

Shopify offers a few different marketing and promotion options, like audience targeting (built in blog and Search Engine Optimization), campaign creation (promoting products through email marketing, Google Smart Shopping & Facebook Ads), marketing automation (marketing apps for download to boost awareness, drive sales, and email customers), and analytical tracking and performance metrics accumulated across all channels and campaigns.

WooCommerce is a free, open-source shopping cart plug-in on the WordPress platform. It’s notable for its ubiquity as it powers nearly 30% of all online storefronts7. Many of its features are similar to Shopify in that it provides a storefront, shopping cart, payment management, label printing, preferred shipping partners and the ability to support online marketing.

While WooCommerce is a plug-in, a food business without an existing website can begin developing its e-commerce efforts directly through WooCommerce. In essence, the program simultaneously helps the user create a WooCommerce storefront on a WordPress site.

As a free plug-in, there are no costs tied directly to WooCommerce. However, the food business will still need to pay domain hosting fees for its WordPress site and for its credit card processing.

Shopping Cart Considerations

In addition to Shopify and WooCommerce, sites like BigCommerce and 3dCart are routinely cited as leading platforms for small business. Whichever platform a food business chooses to use, it should consider a number of key issues:

    • Does the program offer an ecommerce site or just a shopping cart?
    • Will it integrate with social platforms or the company’s website to make selling on multiple platforms easier?
    • What are the design capabilities or limitations?
    • How are payments processed? Does it have a dedicated merchant account provider, or can the food business use one of its choosing?
    • What are the costs? Look for monthly fees and per transaction fees.

Other Online Resources

Frank & Ernest: Frank & Ernest is a Minnesota-based online farmers market where growers and small food companies can sell their product. They operate on an online order and pickup model.

NearestYou.com: NearestYou is a digital mapping and brand marketing platform. Primarily it provides a product locator tool that integrates into a food company website, but can also be leveraged for tastings and event maps, and trade association member directories.

CSAware.com: CSAware.com is a software platform specifically designed to manage ordering, membership, delivery scheduling and payment for CSAs.

Minnesotacooks.org: A program of Minnesota Farmers Union, Minnesota Cooks provides a database of Minnesota artisan and farm products in two different formats. The site does not execute commerce but redirects users to company websites.

Minnesota Grown: A long-standing program, Minnesota Grown offers a website that redirects users to other company websites including CSAs, farmers markets and individual companies.