By Martin Heubel, Founder and Director of Consulterce, a strategy consultancy for B2C Household & CPG brands.
Closing terms negotiations is a key priority for most Amazon vendors right now. The problem is:
Many of you will have reached the ceiling of what you can offer to invest this year. Yet, your Vendor Manager wants more.
So how can you find a way out of this deadlock?
Should you:
- Go and find more budget?
- Forego your growth targets?
- Stop selling to Amazon?
No. It’s none of the above. Here’s what to do instead:
First, bring your senior leadership on board.
This forces your Vendor Manager also to invite their Category Leader or Director, which helps you to leave short-sighted business discussions behind.
Second, encourage creativity in negotiations.
What’s the starting point of Amazon’s business model?
Having selection. Without it, Amazon can’t spin its Flywheel.
So make sure you highlight that raising terms each year isn’t a sustainable option.
And that if Amazon insists on reaching its investment target, your teams will have to reduce the available selection.
Third, create the solution.
Now that your Vendor Manager understands that fixed investment demands won’t yield the desired results, you need to provide them with a way out.
When you reach the stage of a management escalation, there is an opportunity to direct the discussion away from cost prices and trading terms.
Instead, you can focus on mutual cost savings through, e.g., supply chain improvements, portfolio mix management, etc.
This bridges the gap between what you can offer and what Amazon needs to close the annual negotiations.
Unfortunately, most vendors shy away from this approach.
They think bringing their managers to the discussion is a sign of weakness. But it is the single most effective way to break the cycle of lopsided investments year after year.
For further insight and support, contact Martin Heubel here
