Sep 12, 2023 12:00AM
Unlock Better Amazon Terms with Net PPM. Optimize your product mix and logistics to influence Net PPM and secure better terms with Amazon. Plan wisely for win-win deals. Thanks, Martin.
Can you reduce terms with Amazon in your upcoming vendor negotiation?
✅ Yes, you can.
✋ But only if you can bridge the subsequent Net PPM impact.
That's because your Vendor Manager is targeted on this key margin metric.
So instead of cutting down investments and risking Amazon to stop ordering on your account …
… make sure you prepare your game plan.
You can bridge the resulting Net PPM impact by:
1 - Driving your portfolio mix
When you activate products through advertising or price promotions, you are likely not only stimulating growth.
Instead, you're also driving an impact to your overall account Net PPM. So if you can reliably sell more of your margin-accretive items, this net margin benefit allows your teams to position a reduction in trade terms to your Vendor Manager.
2 - Launching logistics initiatives
Reducing the cost along your shared supply chain with Amazon is another way to reduce trade terms. While Vendor Managers ask for investment in logistics initiatives by default, your teams need to pause and evaluate which side is actually saving costs.
For example, setting up a Vendor Flex or Direct Fulfilment node should almost always be compensated through 1) an increase in cost prices, or 2) a reduction in trade terms.
This is because you, as the vendor, bear a greater share of the variable handling costs that Amazon saves because it does not inbound the items in its warehouses.
3 - Improving your price-pack architecture
This point is particularly important for CPG brands: If your product portfolio includes many low-ASP items, your Amazon buyer must command higher trade terms to offset the cost of handling and shipping these items to end customers.
So if you launch SIOC/FFP-eligible products or introduce new value bundles at higher price points, you can ask for a reduced trade investment in exchange for listing these items on Amazon.
What other ways can you think of to reduce your terms with Amazon?