Sep 07, 2023 12:00AM
Rethinking your Amazon price hike? Read this. Amazon's Vendor Managers are likely to push back on price raises this year. If you're a 1P brand, come prepared with solid data to justify your hike. Thanks, Martin.
Are you planning to raise cost prices in the upcoming negotiations with #Amazon? 🔺💰 You may want to think twice about that.
Vendor Managers have a known track record of rejecting price increases of 1P brands.
And as a price follower with low inventory levels, the online retailer tries to delay cost increases for as long as possible.
But at some point, buyers still had to accept cost increases to continue trading.
This year, however, could be different.
🚨 That's because unit prices of CPG items significantly exceed CPI inflation rates.
Instead, the chart below shows that previous price increases by manufacturer brands may have been done in part not only to cover increased cost structures.
But also to unlock greater profit opportunities.
Coupled with a continued deflation in raw material and logistics costs, Vendor Managers will come prepared to demand that CPG brands:
- Reduce their cost prices
- Grant cost support agreements
- Provide funding to prevent delistings
So if you're a 1P vendor planning to raise your cost prices with Amazon, make sure you follow a data-driven approach.
Highlight which commodity price trends and cost centres are supporting your cost increase.
Then, refer to your ASP and Net PPM trends at account and market level. If these metrics have increased over the last 3-6 months, chances are your Vendor Manager will have a hard time rejecting your cost increase.
And if Amazon has not accepted your cost increases in the past, you can now use this opportunity to adjust your cost prices to bring them in line with other retailers.
What's your approach to cost increases with Amazon this year?
Let me know in the comments!