Optimizing Amazon Vendor Agreements and Pricing
It is now to be noted that when requesting a cost increase through vendor central, it can take Amazon months to approve this increase. If you are not able to pre-negotiate it with your buyer or vendor manager, with this being said, it is advisable to include an additional buffer within the cost to Amazon.show more
So as to prevent running at a loss or a break, even for several month. While waiting for Amazon to approve a cost increase request. We know that while shipping rates may remain stable for a year or may fluctuate rapidly, if currency exchange rates are involved, you may need to then consider adding an additional 2% for freight.
If you are shipping prepaid, other than this, you need to bear in mind that Amazon will have annual increases on the aforementioned agreements of basic accrual damage and freight allowance. And this total increase across all three agreements can be anywhere between 3% and 5% per Ann. It is therefore advisable to list your products initially with Amazon, with this additional buffer in place in the cost.
Another item, which may be of concern to you as a vendor, should you be shipping via import or shipping to Amazon across country borders would be any customs duties or taxes that you may be liable for. It is therefore absolutely imperative that when negotiating freight terms with your buyer or vendor manager, initially that you get in writing everything that Amazon will cover.
If you choose collect, otherwise, if you intend shipping prepaid, you would need to find out from your preferred carriers and customs agents, what additional taxes and duties you will be liable for. And fact, these. Once you have your initial cost and completed for your products, you wish to list with Amazon.
Remember that every time you do a cost increase, you need to consider those added buffers so that you are never running at a loss. You must also remember that this cost calculation does not give you much in the way of profit from Amazon. So you would need to factor in a markup or margin of your. Over and above this cost to give you some form of profit when selling to Amazon as a vendor, remember you will still have your profit from your base cost X, your warehouse.
That is the cost you started the calculations from. We are now talking of an additional buffer profit for other expenses through selling to Amazon. As per our example, we have included an additional 20% profit into the cost to Amazon. And this will also act as our buffer for any chargebacks, etc. If you intend running multiple promotions on your products, you may want to increase this profit buffer percentage to allow for this in the future.
Alternatively, these expenses can be applied to marketing costs in your. Instead. So as to protect your buy as in profit, and so you can have a more modest buffer, profit, such as 10% for chargebacks or minor promotions vendors often calculate two little profit into their cost price to Amazon because they do not include all terms or agreements.
That is your co-op defective allowance, payment terms, freight allowance, etc. And overhead costs such as shipping and bulked. Amazon. If no freight allowance is in place taking care of returns, if no defective allowance is in place, etc, in general, the more profit, the better. Vendors also have to stay competitive and obviously do not want to make a loss on Amazon.
A bigger company with high volumes might accept an 8% profit margin. Whereas a smaller company essentially needs 15%, many vendors do sign a loss on Amazon because they do not see the bigger picture of all costs. Therefore it is recommended to always calculate with an extra three to 5% profit margin.
Compensating for chargebacks and overseen costs. For example, price protection, agreements, promotions, etc. You are also welcome to include any additional buffers you may feel are necessary, but bear in mind that if your cost to Amazon is what they consider too high, then they will reject your listing.
You need to be reasonable when calculating your cost to Amazon. And it would be wise to see what similar products are already being sold on Amazon and at what sales price, so that you can calculate their cost to Amazon and compare it with your own.