Effective negotiation skills are crucial for maintaining a successful relationship with your Amazon vendor manager. Understanding key metrics, such as Amazon's Net PPM (Net Profit Per Million), and asking the right questions can make all the difference in achieving favorable terms for your business.
Let's dissect the ins and outs of negotiating with your Amazon vendor manager, including the importance of Net PPM, the questions you should ask, and how to approach these discussions confidently and professionally.
Understanding Net PPM
Before entering negotiations with your Amazon vendor manager, it's essential to understand the significance of Net PPM. Amazon calculates Net PPM as a percentage using the formula (Average Selling Price - Cost Price + Trade Terms) / Average Selling Price.
A healthy Net PPM is unique to each ASIN, but general category guidelines suggest above 35 percent for soft lines/CPG and above 40 percent for hardlines. Familiarize yourself with these benchmarks and your products' Net PPM to ensure you're well-prepared for negotiations.
Prepare by Gathering Data
Data is your best friend when negotiating with your Amazon vendor manager. Analyze your sales performance, customer reviews, and any market research that supports your case. This data will provide you with a solid foundation for your negotiation and help you establish credibility with your vendor manager.
SmartScout, a market research tool, will help you understand what your market share is on Amazon. This will be helpful in knowing what your competition is doing.
Ask the Right Questions
When negotiating terms with your Amazon vendor manager, asking the right questions is critical.
Here are some key areas to inquire about:
- Damage Allowance: Ask your vendor manager about their policies on damaged products. Can you negotiate better terms, such as reducing the percentage of damaged products or adjusting the reimbursement rate?
- Freight Allowance: Discuss the possibility of negotiating more favorable freight terms, such as lowering freight costs or obtaining additional support for shipping expenses.
- Marketing Support: Explore whether Amazon can provide additional marketing support, such as promotion participation or access to advertising tools and resources.
- Payment Terms: Inquire about the possibility of negotiating more favorable payment terms, such as extending the payment period or securing better credit terms.
Be Professional and Confident
Approach negotiations with your Amazon vendor manager professionally and confidently. Be respectful, maintain a positive attitude, and avoid being overly aggressive or confrontational. Remember, your goal is to build a strong working relationship that benefits both parties.
Be Flexible and Open to Compromise
Negotiations often involve compromise. Be prepared to make concessions and consider alternative solutions. Remember that your vendor manager is likely working within specific guidelines and constraints, so finding a mutually beneficial solution may require some flexibility.
Follow Up and Maintain Open Communication
After your negotiation, follow up with your Amazon vendor manager to ensure any agreed-upon terms are being implemented. Maintain open lines of communication, address any concerns or issues promptly, and continue to foster a positive working relationship.
Negotiating with your Amazon vendor manager is crucial to building a successful partnership. By understanding key metrics like Net PPM, asking the right questions, and approaching the negotiation process professionally and confidently, you can secure favorable terms for your business and strengthen your relationship with your vendor manager.
Remember to be flexible, open to compromise, and maintain ongoing communication to ensure continued success on the Amazon platform.