If you’re a vendor with Amazon, it’s that time of year again: annual negotiations. Here are a few big mistakes that are often made in negotiating with Amazon, along with tips on how to avoid them!
1. Not knowing your cost to serve Amazon
Amazon only includes selected terms in their email asks for a reason – hoping you’ll forget about the other terms they aren’t mentioning. Example: The email might mention the MDF and damage allowance, but not the freight allowance. As a result, the vendor doesn’t include the freight allowance when assessing their total cost to serve and signs up for more increases than they would have.
We recommend creating a comprehensive list of your current terms with Amazon…or you’ll wind up paying more than you should. Make sure you use a tracker, like the one you can download via this link, and fill out relevant data in advance. When you have this on-hand while talking with Amazon, you can instantly determine how different terms can affect your total cost to serve.
2. Signing up for unlimited funding, such as Margin Guarantees and CRaP allowances
Instead of asking for back-payment for lost profits, or to keep CRaP items alive, Amazon has designed a new agreement type – Margin Guarantees. In addition to signing up for unlimited funding, these agreements will drive a disproportionate amount of sales to items that are lower profit for you. See our video where we provide our perspective on margin guarantees, as well as some alternatives.
3. Responding too quickly
Unless Amazon is threatening to stop orders, stalling can’t hurt. If you’re not a top brand in your category, they may de-prioritize your negotiations. Several mid-market clients last year stalled long enough that Amazon simply extended their current terms for another year. Ask a great many questions, request supporting data from Amazon, and let them know you need time to review with your leadership.
4. Trying to keep your CRaP alive
If you haven’t already transitioned away from sub $10 price points on Amazon, you’ll want to start doing it now. You need e-commerce-friendly pack sizes that ship profitably for both you AND Amazon (and Walmart.com, Target.com, etc.) Let’s face it, soon, all sub $10 items will be sold in two+ packs online. If multi-packs don’t make sense for you, consider bunding different complementary products together. Also, request MOQs to be put in place for your sub $10 price point items.
5. Not being vocal
Many situations may exist in which it’s important to tell Amazon that you’re dissatisfied: Is Amazon holding your cost increase proposal hostage? Threatening to CRaP out half your assortment? Copying your product with Private Label? Putting Private Label ads on your pages?Annual negotiations are a great time to remind them of these issues.
Current clients should contact their client success team with questions. If you’re not already a client and want to learn more about our Amazon managed services offerings, please contact us! Contact Us