Amazon Vendors: Challenges and Solutions for Working With(in) Amazon

Amazon vendors, also known as first party, or “1P”, have a different relationship with Amazon than Amazon sellers (3P). Vendors sell their products wholesale to Amazon and Amazon, in turn, sells them to customers. 

In the 3P (seller) relationship you have more control over your brand, but you also have more responsibility for logistics, marketing, inventory, and customer service.

Vendors, on the other hand, work directly with Amazon.

This relationship conveniently places most responsibilities on Amazon, but also requires vendors to adapt to Amazon's unique – and sometimes complicated – operational style.

In order to navigate this partnership effectively, 1P vendors must take proactive measures to monitor and maintain a healthy business.

Be proactive in your vendor relationships

Amazon is a behemoth, which means things can and do fall through the cracks. There's nothing wrong with running close watch on Amazon operations and drawing attention to needed changes in order to adjust for improvements.

If your average selling price (ASP) is increasing, for example, it's worth having a discussion with your Vendor Manager. Amazon may not ordinarily like off-schedule conversations about cost increases, but in this case they'll take it.

Don't wait for annual negotiations.

Similarly, if there are issues with your Brand Specialist or AVS (Amazon Vendor Services), don’t wait to make them known. Ask to speak to an AVS Team Lead. It's their job to ensure you're satisfied with the service and that it's delivering.

Amazon's profit as well as your own can be impacted.

Be proactive when it comes to your dealings with Amazon. Waiting for the annual negotiation cycle, or even the QBR (Quarterly Business Review), to align your business forces may cost you lost revenue.

Delisting

In the same way, you'll want to stay on top of products that aren’t returning a profit. Delisting them is always an option, and may be a tactically good move.

Also, when it comes to tactics, product delistings can be an effective lever when negotiating with your Vendor Manager.

Remember, Amazon’s business model favors its own margins, not yours.

Stay Ahead Of Pricing

Price erosion is not a given, but it is never a bad idea to stay ahead of your distribution strategy. 

Amazon follows the market price, which means you can use Amazon to adjust your distribution setup – which, in turn, leads to higher margins long-term.

As well, it's possible to recover lost profits due to chargeback fees, shortages, and overbillings. Products like chargeguard by Carbon6 help you reclaim lost revenue.

Exclusives

Another strategic error often made by vendors is that they avoid launching channel-exclusive selections because of the initial upfront development cost (R&D, testing, etc).

Our advice? Do it anyway. 

Add channel-exclusive items to your NPD (New Product Development) pipeline with Amazon, or risk the cost of inaction, like missing out on potential sales and market differentiation. 

Focus More On Strategic Goals

One way is to offload repetitive tasks. By focusing more on strategic goals while saving time where you can on daily operational functions you free resources and brain-power for crafting and overseeing your larger objectives.

Offload your operational needs to automations and specialized tools and services when and where possible. Carbon6 offers a full suite of tools and services to help you do just that.

Don’t Wait To Escalate

At the end of the day it’s your products that are being sold.

Yes, Amazon bought them and is doing the work, but your vigilance in spotting snags or bogs and escalating solutions (where needed) ultimately means better margins for you.

Regular strategic reviews offer chances to align Amazon’s operations with vendor objectives more closely. By maintaining active involvement and pushing for necessary changes, 1P businesses can better manage their partnership with Amazon and optimize their business outcomes.

Matching Objectives

It's important to steer Amazon as close as possible to your own objectives – which may require bringing neutral stakeholders into the equation.

Escalations are not a sign of weakness. If negotiations are stalled, the best way to reset may be to bring in those outside viewpoints.

Vendor Managers may only be looking at short term margin performance. Take the initiative when needed.

Embracing Negotiations

Taking proactive steps, monitoring Amazon, sharing your observations and getting them implemented helps move the needle in your favor.

Negotiations are the backbone of your 1P relationship.

Annual Vendor Negotiations 

Because of the deeply interconnected nature of 1P selling with Amazon’s own operations, vendors have the unique opportunity to renegotiate fee rates with Amazon each year.  

These discussions are opportunities to raise concerns and get them addressed, to evaluate terms, improve your supply chain, and ultimately protect your margins.

Amazon is your ally. Though at times the friction may be real, remember they want to win as much, and as often, as you do.

1P: Working With, For, and Within Amazon

For Amazon vendors, it’s less David versus Goliath, and more David working with Goliath. In order to navigate this partnership effectively, 1P vendors must take proactive measures to monitor and maintain a healthy business. 

Being even lightly involved helps keep things on the trail, so to speak, as well as helping to alleviate worry. With an eye on things, and a bit of input, you’re no longer just along for the ride; you’re in the cockpit.