2025 Amazon Annual Vendor Negotiations (AVN) companion guide for brands

Understanding the AVN Framework

Amazon's Annual Vendor Negotiations (AVN) are a cornerstone for aligning vendor terms with Amazon’s operational and profitability goals. As a vendor, understanding the nuances of this process and Amazon’s unique negotiation approach is essential for achieving mutually beneficial outcomes.

Amazon's AVN process is a data-driven negotiation that revisits trade terms annually. Unlike other retailers that focus on long-term relationships, Amazon’s approach emphasizes operational and commercial improvements. Vendor Managers (VMs) primarily assess metrics like Net Pure Profit Margin (Net PPM) growth, revenue (shipped COGS) growth, and operational performance of your selection vs. other brands in your category.

Components of Amazon's Negotiation Process

Base Terms

Marketing Allowances: Contributions for on- and off-platform marketing efforts that enhance product visibility.
Service Program Fees: Fees for participation in programs like Subscribe & Save or Amazon Vine that drive customer engagement and repeat purchases.
Operational Investments: Costs like volume incentives, damage allowances, and freight contributions that impact Amazon’s operational efficiency.

Critical Metrics Amazon Cares About

Shipped COGS Growth: A reflection of your sales performance and a key indicator of Amazon’s inventory investment.
Net PPM Growth: Evaluates profit margins after all costs, ensuring the vendor is contributing positively to Amazon’s bottom line.
Operational Efficiency: Including chargebacks, shortages, and procurement out-of-stock trends that directly affect customer experience.

The Negotiation Process

Navigating the AVN process requires a combination of strategic planning, data-driven arguments, and adaptability. Learn how to engage with Amazon’s Vendor Managers effectively and avoid common pitfalls.

1. Kickoff Meeting

The kickoff meeting sets the tone for the negotiation. Be prepared with a comprehensive performance review and a clear understanding of Amazon’s priorities. Use this opportunity to highlight your successes and set the stage for constructive discussions.

Review of past performance metrics: Shipped COGS, Net PPM, and Buy Box performance.
Expect Amazon to propose aggressive terms; avoid agreeing immediately.

2. Counteroffers

Counteroffers are your chance to align Amazon’s demands with your capabilities. By anchoring your proposals in data and emphasizing past contributions, you can steer the negotiation toward a mutually beneficial outcome.

Leverage ZOPA (Zone of Possible Agreement) to define acceptable outcomes.
Highlight past contributions like delayed cost increases or enhanced supply chain performance.

3. Navigating Challenges

Challenges are a natural part of the AVN process. Staying calm and focused, even in the face of pressure tactics, ensures you remain in control. Use escalations strategically to resolve impasses and gain access to decision-makers.

Be prepared for Amazon to use tactics like pausing orders or reducing Buy Box visibility to pressure compliance.
Escalate negotiations when necessary to involve higher-level stakeholders.

4. Finalizing Terms

The final stage of negotiations requires meticulous attention to detail. Cross-check all terms to ensure they align with your expectations and verify that all agreements are properly documented.

Ensure alignment between proposed terms and actual service timelines.
Verify agreements with audit teams before signing.

Data-Driven Preparation Strategies

Preparation is the backbone of successful AVN outcomes. Vendors must enter negotiations armed with data, clear goals, and a well-thought-out strategy. This section delves into the steps and tools necessary for effective preparation, ensuring you can meet Amazon’s demands while safeguarding your profitability.

1. Data Collection and Analysis

To counter Amazon’s proposals effectively, ensure you’re equipped with robust data:

Shipped COGS and Net Receipts: Highlight sales growth by product or category.
Net PPM changes by product and category: Compare Amazon’s reported margins with your internal calculations.
Operational Data: Defect rates, chargebacks, and shortages.

Gathering accurate and comprehensive data allows you to build a detailed picture of your account’s performance. Leverage Amazon’s Retail Analytics tools to access relevant metrics and identify trends that can inform your negotiation strategy.

2. Budget Planning

Build investment plans that account for projected growth.
Align internal budgets with Amazon’s key metrics and initiatives.

Budget planning involves projecting your financial contributions and understanding their impact on both your profitability and Amazon’s operational goals. This proactive approach ensures you’re not caught off guard by Amazon’s investment requests.

3. Scenario Modeling

Prepare for best-case, realistic, and worst-case outcomes.
Develop contingency plans for potential disruptions.

Modeling various scenarios enables you to anticipate Amazon’s demands and craft responses that align with your business objectives. From pricing adjustments to supply chain optimizations, having scenarios ready ensures flexibility during negotiations.

4. Assessing Leverage

Use category rankings to determine your bargaining power.
Identify high-performing products that have driven significant growth.

Understanding your position within Amazon’s ecosystem is critical. By highlighting your contributions and unique value, you can strengthen your negotiation position and push back effectively on unreasonable demands.

5. Continuous Improvement

The AVN process is iterative. Use each negotiation cycle as a learning opportunity to refine your strategies and deepen your understanding of Amazon’s priorities. By continuously improving your approach, you’ll position your brand for sustained success.

Leveraging Reason Automation for AVN Success

It’s crunch time, and AVN waits for no one. Between wrapping up Q4, planning for 2025, and finding time for holiday cheer, preparing for Amazon's Annual Vendor Negotiations can feel like a last-minute marathon. But don’t worry—we’ve got your back.

Our AVN Toolkit takes the heavy data & analysis work off your plate, delivering the insights and tools you need to own your negotiations. We’ve built a solution that’s designed for busy sales leaders and their support teams, helping you save time while driving smarter decisions.

All-in-one Amazon view: Get a holistic overview of all your Vendor Central accounts in every country.
Category performance: Sales growth insights by product and category.
Profitability metrics: Detailed breakdowns of PPM (Amazon’s margins) and EBITDA (your margins)
Cost trend tracking: Analyze defect rates, chargebacks, shortages, and pricing claims.
P&L modeling: See your negotiation inputs come to life in one comprehensive model.

Learn more →

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