By Martin Heubel, Amazon Strategy Consultant at Consulterce
Feeling stuck improving your Amazon 1P margins? You may be using strategies that don’t match your maturity level with the online retailer.
Let’s face it: Not every brand is created equal.
- Some are category leaders
- Some are “stuck” in the middle
- Others are rising stars
Your maturity level directly affects how Amazon will manage your account.
Which is important to consider when preparing for your upcoming vendor negotiations.
So let’s take a closer look at each maturity stage:
Tier 3: Unmanaged Vendor Accounts
Brands with less than $1-3m in annual sales are largely unmanaged by Amazon. The online retailer does not assign manual resources to these accounts and mainly supports you through the case system in Vendor Central.
Suppliers looking to improve their margins can focus on growth initiatives to reach the next maturity stage, where they can access more attractive economies of scale.
However, Seller Central may be a viable alternative if you cannot grow the account to at least $10m in the next three years and do not retain margins.
Tier 2: Mass-Managed Vendor Accounts
Vendors in this maturity stage typically have access to an account or Vendor Manager.
Brands are eligible for strategic support from the Amazon Vendor Service and can also take advantage of some of Amazon’s supply chain programmes.
Improving vendor margins can be done by entering trade negotiations, but brands will have limited influence over enforcing their desired terms.
Tier 1: Managed Vendor Accounts
Most multinationals fall into this category. They can access the full bandwidth of cost-saving initiatives and run a complex operational set-up with Amazon.
Your best chance of increasing margins is to use your category position to negotiate terms and focus on distribution control.
If you regularly face sales disruptions from Buy Box suppressions or order stops, a hybrid 1P/3P setup can reduce your 1P dependency.
For further information and support, contact Martin Heubel here
