Allume Group

How to not get eaten alive during your annual Amazon negotiations

Check out my recent episode on the Jason & Scot show on Negotiating with AmazonAlso, next week, I’ll be speaking at ChannelAdvisor’s Catalyst conference in San Diego – hope to see some of you there!

Amazon’s March 31 annual negotiated contract terms deadline has come and gone, but many of our clients are still negotiating. Your annual negotiation with Amazon can set you up for success or hurt your profit for years to come. Here’s how to navigate the process gracefully and get what you want!

Know your opponent – Are you a category leader in your space, doing a large annual business on Amazon? If so, you probably have the ear of your retail category team. Ensure you’re focusing your conversation on more than damage and freight allowances. Bring in ALL asks, such as why Amazon doesn’t order enough of your new items, your interest in participating in Private Label (or concerns about private label marketing on your detail pages), and their lack of adherence to your MAP policy. It’s all up for negotiation, especially if they’re asking you for more money.

Are you a small, sub $5M/year brand on Amazon? You’re probably negotiating with Artificial Intelligence (AI) via email. Looks like a real person, but at least for the first few back-and-forths, it isn’t. (Yes, you’ve been talking to a robot.) Sticking to a script and short, succinct answers will serve you better.

Amazon also has US-based, highly-trained, professional negotiations teams. If you’re negotiating with one of these folks, important to note that they won’t know much about your business or the category dynamics, so use that to your advantage.

If you do get a live person on the phone (Hurrah? Watch out?) ask, ask, ask away. You’ll want to deduce as much as possible about your position in the category, opportunities, etc. to establish your leverage points.

Prepare, prepare, prepare – Too often when negotiating with a brand, I discovered they not only weren’t aware of their current terms with Amazon, they weren’t able to calculate how changes to their contractual terms would affect their total cost to serve Amazon. Create a tracker, or download mine here, to calculate how changes to each term add up the total. Ensure you are including ALL costs (accruals, Subscribe & Save, ARA Premium, etc.) in your calculation – often emails from Amazon will list a limited set of terms that do not tell a complete picture.

Read the fine print – Amazon often indicates in emails what will happen if you refuse to budge on terms. If you’re a big brand in your category, Amazon is unlikely to stop ordering. If you’re small, Amazon could likely do without your products. See the screenshot below from a client for an example of a threat. You don’t have to accept their demands, but if the threat is strong, consider a counter-offer that provides Amazon a small improvement in terms. Also, pay attention to the dates on the contracts. Many of their contracts are retroactive, meaning they’ll attempt to collect the new terms going back to January of this year!

Focus on win-wins – Some investments help drive your business or lower your cost structure (AMS, Subscribe & Save, Cross-Dock, etc.) Some do not benefit you and only hit Amazon’s bottom line, such as site merchandising investments, damage allowances, etc. Focus and drive the conversation to investments that help you AND Amazon mutually benefit.

Don’t click through and approve anything until you are sure you’re ready – This one speaks for itself. There’s no “undo” button.

What has helped/hindered your annual negotiations with Amazon this year?