By Martin Heubel, Founder and Director of Consulterce, a strategy consultancy for B2C Household & CPG brands.
So the online retailer achieved what many analysts were sceptical about:
- Layoffs started to lower Amazon’s fixed cost basis
- Capital Expenditures are down $4.9bn / -307bps YoY
- Automation and offshoring further lower var. costs
If you’re a 1P vendor, you may have felt relief during Amazon’s latest earnings call.
But here’s the problem:
Most brands today have a significant % of their revenue coming from Amazon.
All while the online retailer has proven that:
- Asking for cost support agreements
- Delisting unprofitable assortment, and
- Relentlessly focusing on Net PPM,
…have returned high profits for the online retailer.
So if you think Amazon will return to a partnership-oriented approach with its suppliers anytime soon, think again.
It’s not going to happen.
Too high is the pressure from shareholders to see sustained profit levels from the online retailer.
And the threat of the FTC breaking up the company motivates Amazon to put its retail division on its own (profitable) feet.
For vendors, this means only one thing:
Your upcoming trade negotiations will become even more challenging than before.
Vendor Managers will look to enforce their set Net PPM targets on your account.
So your teams should prepare strategies to protect your profit margins now.
For further insight and support, contact Martin Heubel here
