By Martin Heubel, Amazon Strategy Consultant at Consulterce
Consumer confidence is recovering but remains below pre-Covid levels. Here’s why that will impact your annual vendor negotiations (AVNs) with Amazon.
But first, let’s understand the Consumer Confidence Index (CCI). It’s a standardised indicator for future household consumption and saving. According to the latest OECD – OCDE figures, consumer confidence is recovering from its lowest point since the pandemic.
It’s easy to see why:
Real income growth has strengthened in recent quarters in markets like the UK. Official data now show wage growth running well above the inflation rate, which is back on target.
But this doesn’t mean that customers won’t remain price-sensitive. In fact, one of the biggest challenges for CPG brands is re-engaging shoppers who have traded down to cheaper alternatives.
Speaking to my industry contacts, it’s clear that volume growth will be a key target for manufacturers in 2025. And Amazon will capitalise on that.
In fact, it’s Amazon’s trained muscle to offer growth in exchange for higher margins. Vendors must prepare for a difficult round of AVNs, as Vendor Managers will seek to reap the benefits of this situation.
So how should 1P brands prepare?
1. Keep a laser focus on Return on Investment
It’s easy to get pressured into investing more to avoid a confrontation in negotiations. However, raising your investments in trading terms with a limited ROI will hurt your business in the long run.
Instead, keep negotiations focused on how Amazon can help expand your market share. Any investment should be directly linked to this NorthStar metric.
2. Make future NPD launches part of your trade negotiations
If you plan to launch new products with Amazon, make them part of the negotiation! Don’t just list them with the online retailer.
Instead, link the decision to list NPDs to a broader discussion about trade terms. If Amazon wants access to your entire portfolio, you may want to lower trade investments.
3. Focus on sustainable growth initiatives vs impulse-driven sales discounts
Similar to point 1, but keep your growth investments in check. It’s easy to expand your price promo investments to drive sales. But these will primarily be impulse-driven.
For CPG vendors, it often makes more sense to expand your SnS discount range. Which will increase your repeat purchasing rates and lower your media CAC.
For further information and support, contact Martin Heubel here
