Amazon vendor negotiations are stressful and high-stakes, whether it’s your first-time negotiating or you’ve already been talking with Amazon for years.
Every year, Amazon invites select vendors from the Vendor Central program to negotiate rates, profit, sales, and growth. These deals are usually meant to bring more customers to the platform and increase sales in a specific category by giving popular, relevant, and unique products more visibility and discounts during seasonal or time-relevant deals. Examples of these are during Christmas, Black Friday, and so on.
If you’ve been invited to join the Amazon vendor negotiations, then you shouldn’t worry about “finding leverage.” Being invited means that you’re already a high-sales vendor with a great track record. Now, the only difference between you and the other vendors is how you leverage and frame your data to ask for better margins.
What is the Amazon Vendor Negotiations Program?
The Amazon Vendor Negotiations Program (AVN) is also known as Joint Business Plans (JBPs) or trade negotiations. It’s an annual process where Amazon meets its vendor partners to negotiate trade terms for the upcoming year. These terms are all about pricing, marketing investments, promotional activities, payment terms, growth projections and more.
The AVN is a big, technical process where the vendors and vendor managers find a middle ground that benefits both Amazon and the vendors.
Amazon typically pressures vendor’s rates or undermines their impact on the platform, while vendors use data and reports to argue for the opposite. Their impact, the sales they have generated for Amazon, and why Amazon should partner with them to highlight their products and give them discounts. In the AVN program, vendors need to secure visibility, payment conditions, and more while sweetening the deal for Amazon to continue working with them.
Understanding Amazon's Priorities
Negotiation is all about leverage, and leverage is how you use and frame your data to influence choices. Before we start framing and aiming your data, we first need to understand Amazon’s biggest priorities so we can target those.
- Customer retention to Amazon: Getting customers to join Amazon is more expensive than keeping them in the space. So Amazon wants its customers to join Amazon and then never leave.
- Unique product offerings: Amazon wants products that can’t be found in offline shopping sources. This makes customers NEED to go to Amazon to purchase.
- Early access to unique products: New products enter the online market earlier than retail stores. Amazon loves new and unique products with tons of traffic.
- Data ownership from customers: Customer data keeps Amazon on top of trends, behaviors, and ultimately gets customers to keep buying.
These are the priorities that make Amazon vulnerable. Here, vendors should gather leverage that aim for these weak points and highlight those during negotiations. For example, you can leverage having other distribution channels, because customer retention is threatened by selling on other platforms.
Aside from these priorities, Amazon also has key performance indicators (KPIs) that let them measure a vendor’s performance. So, familiarize yourself with KPIs like sales growth, customer satisfaction, and other metrics. Well-performing KPIs are great leverage for showing Amazon that you’re outperforming other vendors.
Ultimately, all Amazon wants are brands that will:
- Increase sales
- Improve customer satisfaction and retention
- Diversify category selection and encourage competition
- Optimize operational efficiency with manufacturing and costs
So, now that you know what pain points to target, it’s time to look at your data and find what leverage you can use to negotiate a better deal for yourself as a vendor.
How to Get Leverage on Amazon Vendor Negotiations
Vendor managers are expert negotiators and will do their best to give Amazon a good deal. It’s important to stick to data-driven facts and aim for goals that also benefit Amazon.
Open a Seller Central Account and Sell Products Yourself
Operating solely through Vendor Central makes you entirely dependent on Amazon, ultimately weakening your negotiating power.
Opening a Seller Central account for yourself and selling your products there disrupts this power dynamic. By being a multi-channel player, you’ll always have the option to leave the Vendor Central platform if Amazon doesn’t give you favorable rates and terms.
Now, this doesn’t mean you should leave Vendor Central and start selling on your own. The Vendor Central platform has numerous benefits that only key vendors can profit from. But, if the vendor manager knows you don’t have another channel for selling your products, they will take advantage of that weakness because they understand you have everything to lose if you don’t accept the negotiation terms.
Alternative Distribution Channels
You can also use a website, Shopify store, or even TikTok or Facebook shops to increase your distribution channels.
This is a much better alternative to joining the Seller Central platform, because all your activities happen outside of Amazon. A strong presence on other major retailers or marketplaces means Amazon losing customers and you gaining leverage as an independent brand.
However, vendors should be mindful of all the terms and conditions of other platforms to avoid conflicts with the Amazon agreements. This is a common mistake that vendors run into when diversifying their distribution channels. While we do understand that opening other distribution channels is easier said than done, it’s based on our experience that vendors with other channels can negotiate for better terms with Amazon. They also feel much safer knowing they have a presence outside of Amazon and can always grow their brand that way.
Brand Value and Uniqueness
Vendors with a unique product and a well-known brand should leverage customer loyalty to negotiate favorable terms with Amazon. You can highlight the loyalty of your customers and the impact it would have on Amazon’s traffic if those customers leave to purchase your products from another platform.
The best way to showcase your brand reputation is through data on market share. Use quantifiable information like the impact of your brand sales for that unique product offering or category, or highlight the exclusivity of your products or any intellectual property you have licensed in that product category. You can even leverage getting early access to your products or features for Amazon-exclusive customers.
Remember, Amazon is in this business just as much as you, so be ready to collaborate. Don’t use your leverage as aggressive “threats.” How you word your reports will go a long way in improving your relations with your current vendor manager, and ultimately Amazon for years to come.
Performance Data and Trends:
Have you been performing well and have plans to improve your performance even more next year? Then leveraging your performance metrics and proposing relevant, reachable, and big growth trends in your data will be huge for convincing vendor managers to prioritize you as a vendor.
- Quantify your success: Analyze historical sales, unit volume, and category ranking. Identify consistent growth trends exceeding Amazon's expectations. Visualize your wins with clear charts and graphs.
- Benchmark your dominance: Show how your performance surpasses category averages and even leading competitors. Demonstrate your ability to capture market share and drive category expansion.
- Let customer love speak: Highlight positive customer sentiment through metrics like review scores, net promoter score (NPS), and repeat purchase rates. Strong brand affinity signifies loyal customers and a thriving business.
- Highlight growth initiatives: Showcase concrete plans to support your projected growth. This could include marketing initiatives, new product launches, or operational improvements.
At the end of the day, data is king and it’s the best weapon to lead with if that’s your strong point. Vendors who are confident in their performance, sales, and projections should absolutely leverage this by comparing it with the competition and showing Amazon why you deserve better terms.
Be Clear if You Outperformed Your Previous Terms and Growth Projections
Vendor managers typically exaggerate or demand more growth than possible from vendors. So, if you’ve managed to outperform all your growth projections from the previous year, you should definitely use this as leverage to help you demand for more visibility and bigger discounts.
However, you do run the risk of the vendor manager projecting even higher growth expectations for the following year. So keep an eye out for that and always negotiate it down to as low as you can manage to hit comfortably.
Target Seasonal Deals Where You Make The Most Sales
Only getting deals and visibility during key dates in the calendar is perfect for some vendors. If you’re selling seasonal products with tons of sales during those seasons, negotiate with the manager to prioritize getting spots or deals for those dates instead of throughout the entire year.
This way, you can ask for more benefits and you can leverage not being visible or getting those same benefits during other times of the year.
Bonus Tip: Learn Amazon Jargon or Technical Terms
There are dozens of technical terms that Amazon vendors will bring up during the negotiation.
It’s absolutely important to learn those terms and jargon, so you’ll never be lost when discussing terms and doing reports. Learning the terms also protects you from the vendor manager who will undoubtedly use those terms to confuse you into a favorable deal for Amazon. At best, learning the terms will even strengthen your deal and negotiating power.
Building Strong Relationships with Amazon
Negotiating with Amazon often feels one-sided, especially for inexperienced or unprepared vendors. That’s why it’s always important to remember that Amazon needs you just as much as you need it.
Yes, you can open another distribution channel, but Amazon is already a great platform to sell. Amazon can also look for another vendor, but if you’ve been in the industry for a while or you’re a rising talent, then they invited you for a reason and not another competitor. Amazon is more likely to bend on terms if they see a long-term partnership and benefit to working with you as a vendor. At the end of the day, you’re building a bridge, not a wall.
Leverage is also not about being aggressive or threatening, it’s all about showing Amazon that losing you or not giving your more visibility is a bad decision. Whether it’s about losing sales, losing loyal customers, or leaving relevant and unique products from their catalog, anything works.