By Martin Heubel, Amazon Strategy Consultant at Consulterce
1. Announce the cost increase early.
You can’t just expect Amazon to accept your cost increase without giving plenty of notice. Your Vendor Manager will expect a min. of a 60-day heads up in most countries.
2. Increase your list price (MSRP) in line with cost prices.
If you don’t, you limit the margin potential of an ASIN for Amazon twice:
First, by increasing your cost price. Second, by limiting the maximum achievable selling price. In these cases, Amazon will reject your CPI request outright.
3. Understand ASP trends at account and ASIN level.
If your Average Selling Price has increased in the last 6 to 12 months, your chances of getting the CPI approved are much higher. So make sure you enforce your sales control strategy before any cost increase.
4. Don’t agree to Cost Support Agreements (CSAs).
If you do, you will set a precedent for future CPIs. Your Vendor Manager will expect you to sign a CSA for every CPI they accept. Instead, follow step 5.
5. Set clear deadlines and offer a final order at the old cost.
Remember that Amazon is mainly a price follower. So, if other retailers have more stock in their warehouses that they bought at the old cost price, they will pass on the CPI to end customers later.
Since Amazon usually only has a few weeks of inventory in its warehouses, they are the first to be affected by a CPI.
Offering a bulk order at the old cost price ensures that your Vendor Manager can soften the impact of the CPI without you having to give them a cash injection to stabilise their margins.
For further information and support, contact Martin Heubel here
