VC Negotiation

Amazon Vendor Central Negotiations – Being invited to Amazon’s Vendor Central can be a bit overwhelming and it’s up to you to make the decision as to whether being a third-party seller or first-party seller is more beneficial to your business. However, if you do decide to join the Vendor Central program, it’s important to understand the terms of having Amazon as your direct customer.

Here is an exampleinvitation email beginning the process

Just because Amazon offers you a proposal doesn’t mean you should immediately accept it. Before signing your vendor agreement, it’s important for you to calculate the cost of doing business with Amazon and ensure the relationship is also beneficial for yourself. Amazon’s first offer will most likely be skewed in their own favor and it will be up to you to negotiate. 

If you move forward with the process, you will receive an initial term proposal like this

You can temporarily accept the terms given and move forward with setting up your account, but negotiate with your Vendor Manager before accepting the terms within the account itself. Once you enter your account, you will see a link to review and formally accept the terms of your business relationship with Amazon.

Any seller that is invited to the Vendor Central platform will have a Vendor Manager assigned to them. In order to truly how to work with your Vendor Manager, it’s best to understand exactly what the Vendor Manager’s responsibilities are and what they can help you with.

The Vendor Manager’s position involves not only negotiating with potential vendors, but managing every aspect of the category they areassigned to. As stated, this doesn’t just mean negotiations, but includes customer experience, marketing, promotions, profit and losses, as well assales.

When you begin negotiations with your Vendor Manager, it’simportant to understand the previously stated responsibilities. Push too hardfor your own benefit and your contract will be likely rejected.

It’s also good to know exactly what is negotiable on the contractas not everything is flexible. Here are some of the top points for negotiation:

·      Coop Agreements

·      Returns

·      Freight

·      Payment Terms

In order to properly negotiate your Allowances and Accruals, it’s important for you to know the sum of allowances and the cost of your products. Amazon has its own metrics to follow in this regard, including freight, marketing, damages, and Subscribe and Save (SNS). Depending on the product category, return rights, and freight costs, Amazon will push in Allowances and Accruals in order to make sure it is meeting its metrics.

You will want to push for no returns or at least a lower rate on overstock before giving full return rights on undamaged overstock. The inflexible portion of returns is that you will almost certainly have to acceptfull returns on defective products and those damaged during shipping by the carrier. Amazon will take responsibility for products damaged in their own warehouses.

You basically have two options when negotiating freight. Either prepaid or collect for freight. For better cash flow, you’ll want to try and push for collect for freight.

Amazon will always ask for the longest possible payment terms. It will be up to your negotiating as well as your relationship with your Vendor Manager to press for shorter term limits that work better for yourbusiness. It will generally be easier to have Amazon agree to lower term limitsif you can give Amazon a quick pay discount, such as 1% for payments made within X amount of days from date of invoice.

In conclusion, it’s best to not only understand what you are able to negotiate, but also how to negotiate. Understand business to business negotiations as well as all the details of the vendor agreement. Know that your vendor manager has more responsibilities than just your account and make time to build a relationship with them, if possible, even meeting them in person. All of these things will help you in negotiating a vendor agreement that is not only beneficial to Amazon and will allow you to build a successful business on Vendor Central.

This article was written by the Professor of Amazon who has been writing about Amazon since2009. This is an alias used to protect the author from any unwanted complaintsor inquiries. Please be aware that much of the existing and future information can be construed by many in the industry as an attack on their business models.As such, the Professor of Amazon has chosen to protect himself from any action.