Amazon annual vendor negotiations (AVNs) are a good thing.
(What are you talking about???)
Let’s get into it.
I’ve never met an Amazon account manager that enjoys going through AVNs. Many hope the AVN never even takes place as 9 out of 10 times it results in giving more away to Amazon. An increasing number aren’t even getting a face to face negotiation with a VM.
Amazon has almost all the leverage in the negotiation:
1️⃣ It’s growing 4x faster than the rest of the market
2️⃣ It’s growing $80 billion plus a year
3️⃣ And it continues to be a profitable account
Brands need Amazon and Amazon knows it.
So they put brands through the paces each year with AVNs, asking for anything that will help improve their margin over the next 12 months.
They’ll push for it all – lower prices, more co-op, higher damage allowances, and so on – more often than not offering a very limited rationale (see above: almost all the leverage). They’ll threaten to stop ordering products, relying on the third-party marketplace to fill the gaps – a ding to the VM but a major hit to the brand.
And on and on it goes.
But despite all the difficulty AVNs present, they’re one of the last remaining benefits of the 1P model compared to 3P.
Yes, despite a brand having very little leverage in the negotiation, they at least have a chance to create value for their business that a 3P seller doesn’t.
Experienced Amazon account managers know what they can say no to and they’re able to find the win-win areas within the negotiation, prioritizing long-term margin enhancements over short-term temporary cash fixes.
They prep well in advance and they have their senior team on board.
In other words, managing a successful AVN requires a great deal of skill and experience.
But in the 3P world, there is no similar opportunity. Amazon simply announces a new fee and it takes effect. There is no wiggle room. There is no way to find a win-win. It's take it, or leave it.
1P brands are forced to deal with a mercurial counter-party, while 3P brands are forced to rely on (what they’re hoping is) a benevolent dictator.
On this comparison, 1P wins.
Agree?