Negotiations
If you're a Retail vendor (Amazon Vendor Central) then you may be aware that Amazon aim to improve their trading terms each year. Amazon refer to this process internally as the Annual Vendor Negotiation or AVN. Amazon will typically start this process at the beginning of the financial year, with the ultimate aim of improving their forecasted profitability position based on the previous twelve months of trading.
In a nutshell, Amazon will ask for more money.
Amazon will find a solid basis to justify their claim for requesting an improvement in commercial terms. For instance, they may have evidence that shows product returns have increased above the agreed value, which in turn is causing Amazon to incur additional costs, which they are now seeking to recover via the AVN. Or rather, more contentiously, they have may lost profit by selling one of your products at an ultra-low price [due to matching a competitor] and are now seeking to recover this lost profit from you – this would be on the basis that you, the manufacturer/vendor, are responsible for your distribution strategy and you have allowed your product to be de-valued elsewhere in the marketplace and that is the central cause of the issue – at least that will be Amazon’s argument.
Many Vendors feel cornered by Amazon’s request; especially if delivered by a Vendor Manager, who will use an intimidating number of data points (which are both difficult to understand and to explore further). Moreover, if Amazon feel things are not progressing in their favour, they may even throw a couple of veiled threats out there, often suggesting switching off a couple of products or even the whole account! The net result is that many vendors yield to Amazon’s request – even when not truly justified. It ultimately means you are paying more to trade with Amazon i.e. you’re losing profit.
With careful strategic planning you can transform this process into one of opportunity.
Use this process to get what you want from Amazon – do not give anything away without getting something in return. It’s the perfect time to hold Amazon to account for any operational or marketing issues, or anything else which has caused you problems throughout the year. It shouldn’t be this way, but often times, you might be surprised how quickly some of these problems are resolved when Amazon are appropriately incentivised!
How can we help?
- We can evaluate the validity of Amazon’s terms request and whether they have a sound basis to pursue improved trading terms.
- We can de-mystify the process, help you get organised with goals and targets and to formulate a list of concessions to trade.
- We help to reduce the severity of any terms increases.
- We know how to create value in the process, so there is mutual benefit.
- In a deadlock, provide perspective and context to map a way forward.
- We can create a “terms impact calculator” that will model the impact of any changes to your commercial terms.
If Amazon have sent a request to increase your trading terms and you feel unprepared then, then we are here to help.
Please do get in contact and we can discuss exactly what you require.
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