If you are a 1P vendor on Amazon, annual negotiations can be a stressful, high-stakes time. The opportunity to redefine your terms in the marketplace comes but once a year, and with proper organization and goal-setting, you can strike a deal that makes a big difference in your bottom line.
Here are five straightforward tips to prepare for your annual negotiations and win big where it matters most.
Set aside some time to organize the investments you’ve made in your Amazon presence over the past year. What have you contributed to the platform, and how has your brand’s success benefitted Amazon? The efforts you’ve made can provide efficiencies and better margins for the retailer, which should be factored into negotiations.
It’s easy to approach a business negotiation with an adversarial mindset, but you’ll often make more headway by demonstrating to your vendor manager that you are on the same team. Look for ways to co-op initiatives and meet them halfway where you can.
Before you enter into this important conversation, you’ll want to pre-determine which levers you can pull to gain more favorable terms.
This is your chance to talk about damage allotments, freight agreements, price increases and any programs that will affect the coming year. Know where you’re willing to give and what you want in return, whether it’s Vine credits, discounted special event promotions, or something completely different.
The better you define your end goals ahead of negotiations, the more likely you are to walk away feeling like a winner.
The negotiation process is a give-and-take. Show your vendor manager that you are fully invested by offering platform exclusives where possible.
Committing to only selling certain products on Amazon will strengthen your position at the negotiating table and increase your vendor manager’s motivation to meet you halfway on key terms.
You may also consider buying into some of Amazon’s vendor programs, like the Direct Import Program or the Amazon Pallet Program. These can also create additional margin and efficiency on both sides, which means additional leverage during negotiations.
If your business has the capacity to process your own returns or handle fulfillment on certain items rather than relying on Amazon’s logistics, the retailer may be willing to pass some of these savings back to you.
However, before you offer to take over part of all of the fulfillment process, be completely certain that you are up to the task. Dropping the ball can cause a cascade of adverse consequences that harm your relationship with the platform.
One of the biggest barriers to success in your annual negotiation is the sheer volume of acronyms and Amazon-specific lingo you’ll need to wade through in order to understand your current terms and ask for more favorable ones.
Because so much is riding on the outcome of this meeting, investing in a marketing partner with Amazon expertise can pay dividends. Approach your negotiation with clearly defined goals and a deep understanding of the platform itself, and you’ll set your brand up for success in the coming year.