Annual Vendor Negotiations 2025: What Really Happened?

Podcast transcript

Introduction

Paul Sonneveld
Hi everyone, I am your host, Paul Sonneveld. Now, normally we get straight into it, but today I'm really proud to announce that we are an official sponsor of Amazon Accelerate coming up in September 16th to 18th. Now we've managed to get our hands on a limited number of complimentary tickets normally valued at $499 each, you are actually the first audience we're offering them to. So if you want to go and grab them while you can, just head over to pages.merchantspring.io/accelerate25 and claim your complimentary ticket to Amazon Accelerate before they are gone. 

All right. Now, let's get into today's episode. Marketplace Masters is all about going deeper into the challenges that vendors face to lift performance through practical actions and insights. And today, I am joined by none other than Martin Heubel from Consulterce. Let me bring him on screen while I introduce him. If you've been following the Amazon OneSpace space, you'll know that Martin is one of the sharpest minds when it comes to vendor strategy. 

Earlier this year, he ran an in-depth survey capturing vendor sentiment and expectations heading into the 2025 Amazon Vendor Negotiation cycle. Now, he's back with a follow-up survey that reveals what actually happened, how negotiations unfolded, what changed, and of course, what can we learn from it? 

Martin founded Consulterce to help consumer brands reliably increase their profits with Amazon Vendor Central. And prior to founding his consultancy, Martin spent several years at Amazon in Europe, managing key vendor relationships. Martin, welcome back on the show. It's always great to have you.

Martin Heubel
Hi, Paul. Hi, everyone. Thanks for joining and thanks for having me back. Very excited to dive into the kind of key intricacies of the vendor negotiations that have happened over recent months. I think it was certainly a roller coaster ride for a lot of us and to put some numbers against that and hopefully lift the curtain on what are the kind of best practices that we've seen in 2025.

Paul Sonneveld
Absolutely. I can't wait to get into it. Just a reminder, by the way, this is a live episode, which means if you're watching us on YouTube or on LinkedIn, you can actually write us your comments or your questions, more importantly, in the comments section. And I will do my best to put them in front of Martin before the episode is over. So I encourage you to go ahead and do that. Now, Martin, to kick us off, just explain to us a little bit more about like this survey. Like why did you decide to do a follow-up survey? You know, what gaps were you looking to fill? And who participated in this survey?

Martin Heubel
Yeah, absolutely. Look, I think what is always critical is to put data points against the qualitative opinions that all of us have in the Amazon space. And I think everyone goes to industry events, everyone reads articles on LinkedIn, on certain service providers' websites, which bring often a perspective that is already very deep, but often lacks then also the wider industry picture of what's happening beyond an individual set of categories. 

And when I started out as a consultant, what struck me the most is that there were very few and very little research out there around the annual vendor negotiation process. And this is why I partnered and teamed up with the folks at Stratably, so together with Russ Dieringer, as well as Claire McBride. To really kind of put some numbers against the perceptions and the observations that I think everyone of us has made over recent years. 

Amazon becoming much more focused on profitability that then also transpires into, yeah, the annual trade discussions that we all have when it comes to the conversations with vendor managers and even with the mid-year negotiations. And we particularly focused on key marketplaces such as North America, but also European vendors just to get the full picture of the two biggest regions and really wanted to understand okay what's happening there and what is also the kind of key elements that we need to prepare ourselves for when we're looking ahead into the 2026 negotiations.

Paul Sonneveld
Fantastic. Well, that's great. I'd love to maybe ask, Martin, if you can maybe take us through some of the things that you're seeing in this survey. What are the things that stood out to you and really kind of surprised you as you review the results?

Martin Heubel
Yeah, of course. It often makes sense to just kind of put really the numbers in front of us. So let me share my screen here and really kind of dive first of all through the kind of profile and demographics of the survey participants. When we're looking at the overall kind of picture, we had roughly 180 brands participating this time in giving us their opinion and their feedback about the annual vendor negotiation process for the 2025 discussion. 

42% came out of food and consumer goods, so fast-moving consumer goods or FMCG categories. Almost half, the 49%, came out of hard lines and soft lines categories, that includes fashion and apparel. The revenue skewed towards particularly the mid-market brands that make between 10 to 50 million in annual sales with Amazon, but we also had a good participation of smaller brands between zero and 10 million in annual sales, and then also roughly a quarter of brands who were making more than 50 million in annual sales with and on Amazon. Participation was heavily skewed towards North America, which is unsurprising because it's also the largest region that Amazon performs in. European brands were making up 44% of the survey participants and a fraction of that also coming from Asia or the APEC region. 

When we are looking at the key results from this survey, then we see that, without much surprise, the geopolitical shifts, the uncertainty about tariffs, have certainly transpired into the vendor negotiation process, with 71% of participating brands citing some degree of challenge as part of the annual vendor negotiations that can entail discussions about very confrontational discussions about cost price increases or decreases that were often put forward from Amazon. And this also reflected itself in the length of the overall discussion. 

So while a lot of our leadership teams may think, OK, let's just negotiate with our vendor manager. It's a done deal. We just need to kind of get a little bit of a win here and there. And it should take us four weeks. Well, the reality is slightly different. On average, brands negotiated 3.2 months from start to finish, which was roughly one and a half weeks shorter than in the year before, even though that may not feel like it. It was actually a faster negotiation cycle for most brands. 

However, biggest surprise, I think, for all of us is that Amazon has been able to, again, significantly increase its trade terms with most first-party vendors, not only by a few basis points, but by 91 basis points. Let's put that into context. Last year, it was only 69 basis points that Amazon increased. Now we're seeing more wins, particularly on basic rules, particularly on the AVS and damage allowance, which we'll take a look at in a second. 

But Amazon has really upped the scale on its demands on which kind of investments they need to see in order to avoid product detail page suppressions, in order to avoid any kind of sales deceleration and growth deceleration that could be actively and manually put in by vendor managers. And that really forced a lot of vendors to concede on a lot of their own demands, but also poses the challenge on how to then maintain, of course, healthy growth and net margin for themselves. 

Roughly 18.6% make up the average trade terms percentage of net sales that vendors have. And we'll dive into a couple of these elements in a second. But I think the overall picture clearly shows that, yes, also the ABN 2025 cycle was a huge win for Amazon, despite all of the cited challenges around tariffs in the US and also weakening consumer sentiment that we're seeing across most markets. But Amazon has been able to actually make things off all of that to push its own priorities through yet again.

Paul Sonneveld
That is really quite stunning to see that 91-basis-point increase. I certainly wasn't expecting, I guess, the improvement on last year as well, particularly given I thought Amazon would be, I guess, a little bit more lenient this year. But hey, plus 91 basis point, that doesn't necessarily mean it's not a win-win, right?

Martin Heubel
It doesn't mean that. As you mentioned, I think one of the key interesting results to answer also that part of your question, is that Amazon is still very much growing above the category averages in a lot of cases. So we asked specifically brands about, OK, what do you feel and what do you think is Amazon? How is Amazon performing right now? Is it growing in line or much faster or faster than the category average? Or is it actually growing slower than the category average that you see across your other retailers? And two or three brands actually said that it is fairly in line or even faster than what they see in the overall category. 

And while on the first glance this may look like a huge win for Amazon, It is not necessarily a win-win situation for brands, because if you're looking at the split across different product categories, what we're seeing is that particularly in soft lines, but also to a large extent in consumer goods categories, Amazon still is an outperforming online marketplace, so grows ahead of the category at a faster or much faster rate. But that also puts these brands into a difficult position because if Amazon becomes one of the key growth drivers for them across different channels, that also means that they grow their dependency and reliance on this online retailer in order to drive growth for their wider business. 

Of course, Amazon and particularly vendor and category managers keep a close eye on how their category is performing compared to other retailers in the wider market. And if they see that Amazon is driving significant growth in the category for the participating brands in those vendor negotiations. Well, then they will also be less open to conceding, making concessions, but also making any kind of reductions to their overall offerings when it comes to cost prices, when it comes to trade terms. 

So if you're finding yourself in the outperformer bucket, you will often think and feel that this is not necessarily the best spot to be in. I think those baseline players are very comfortable because they say, okay, great, we have more flexibility to also hold firm against whatever Amazon is throwing at us in those negotiations. Whereas, of course, if you're in the laggard zone, so to say, where Amazon grows much slower or slower than the category average, we would need to look a little bit closer at, okay, what are the root causes for this? Is it that we do not have our entire catalogue listed? Is it that we are losing market share and we actually need to kind of conquest this a little bit better, also during tenfold deal events like Prime Day? 

But I think for everyone who's also tuning in today, and listening to this, it's always pretty interesting. OK, where am I standing with Amazon? Am I here in the middle? Am I maybe a little bit growing slower with Amazon than my wider category average? Or am I in this outperformer bucket? And what does the commercial implication of that is for my brand? It often means that if I'm in the outperformer bucket, I need to be very careful on how I'm positioning myself up for success going forward as well.

Paul Sonneveld
That's very, very telling. Did you get a sense, Martin, as you were conducting the survey, the specific levers that Amazon was going after in terms of negotiations this year? Obviously, we saw the increase, but come through sort of, you know, co-ops, freight. Were there particular trends that you'd observed around Amazon's agenda? 

Martin Heubel
Yeah, absolutely. Let's have a look at the results again, particularly when we look at the negotiated change in trade terms and trade investments year-over-year. So, as we already discussed, Amazon raised its trade terms by an average of 91 basis points year-over-year on average versus 69 basis points in 2024. And I think the staggering overview here that we're seeing is that only 7% of participating brands in the survey indicated that they were able to reduce their trade terms with Amazon. 

The vast majority actually saw an increase anywhere around 50 to 100 basis points. And then you see a long tail of brands who have actually larger concessions, either because their net PPM was much lower than where they needed to be in order to overcome continuous PDP suppressions that were due to profitability or a lack of their profitability. And when we are flipping through one question further to answer your question. 

Amazon was particularly focusing on non-innovative areas this year. So they asked for higher basic rules. So these core marketing funds, discretionary funds that we all know and often dread, that don't necessarily provide much higher value, but often mean that Amazon has a higher profitability basis without having to provide any kind of service. And almost half of all brands indicated that their ethicals actually increased here. 
Followed then by the Amazon vendor service where vendor managers were particularly nuanced around ensuring that updated rate cards were being met. 

And there's also kind of a stricter focus on avoiding straight payments as compared to in previous years. So Amazon really wants vendors to pay into the AVS service as part of an accrual instead of straight payments that could dilute the profitability for Amazon if the account grows beyond the forecasted sales performance that Amazon has added to its systems. And then interestingly, payment terms, Amazon business, and supply chain programs followed thereby and thereafter. 

Payment terms, probably not a big surprise for many, because Amazon's really in this phase where it wants to improve its free cash flow even further. So, particularly if you are getting onboarded as a new vendor, Amazon will often ask you for 90 days, up to 120 days in payment terms, depending on whether you are selling to them domestically or via a direct import setup. And then Amazon Business, so the B2B opportunity of Amazon, which has been the hidden champion of growth for the past few years, is becoming more focused and is getting into focus for a lot of vendor managers. 

This is partially driven by the fact that the online retailer is associating more account managers in its B2B program going forward, trying to push profitability in that particular channel, but then also want to differentiate its offer through added bulk buy discounts, industry segmentation of discounts that are being offered more as compared to what we've seen in previous years. 

Does Amazon do a good job of advocating the benefits and also the impact that Amazon business has on brands? Clear answer, yes. No, we see still most of Amazon's marketing material being stuck in the year 2023, but a lot of these industry reports haven't been updated. But yeah, it clearly shows that at least their commercial teams want to put it more into the focus of vendors and brands to invest in. And then, as you see, we had a long tail of other topics. 

I think one of the more interesting points, data points here, is that the damage allowance was only touched, as well as S&S, so subscribe and save, only 2% of brands, which clearly highlights that, yes, the past focus on rectifying returns and the cost of returns hasn't been as much of a priority for Amazon in 2025 as it was and used to be in 2025.

Paul Sonneveld
It's very telling here. Certainly, if you would have asked me to draw this chart based on my guesses, I would have drawn quite a different chart, particularly around the AVS strikes me. I mean, I think higher basic rules, I mean, that's phenomenal in the sense that because that's building it into the base, right? That's the benefit that we'll keep on giving in future years from an Amazon point of view, particularly getting away from straights. And as you're saying, you don't have to renegotiate the straights next year, right? Because it will be a percentage. 

In terms of the AVS, did you get a sense, and maybe this is too detailed for this, but did you get a sense for how much of that was just Amazon sort of removing previous discounts or them sort of really kind of re-emphasizing and actually trying to onboard vendors onto this program more actively than they have in the past.

Martin Heubel
This is a little bit more anecdotal feedback, but what I'm seeing across all of the clients that I'm also accompanying during the vendor negotiation process is two different things. First of all, Amazon has also set targets that were communicated by some vendor managers that they ideally want to improve the percentage and accrual investments of the AVS by 0.25 to 0.5% year over year, because they're saying we also of course, add more headcounts, sometimes part-time headcounts for specific areas such as logistics or direct import to support brands better in these areas that they have constantly highlighted to us that ABS falls short of if you are just giving them one generic point of contact. 

And I think this is a key takeaway here for brands that are listening, that yes, I mean, if you are shifting investments from a basic rule to an AVS, or you're considering even to add incrementality into the AVS investment, that you shouldn't just accept the notion that Amazon is giving you one point of contact. You can actually ask for additional headcount that Amazon associates then towards catalogue themes, towards work streams that are related to your supply chain or whatever the key issues are that you are currently facing. Even though that may be sometimes temporary, you can still negotiate that and I would highly recommend it. 

The second part is that Amazon has yielded a lot of wins in the AVS bucket because it no longer sets the straight payments that a lot of brands have been able to keep in as part of their trade term setup. So vendor managers are becoming notoriously annoyed if you're saying to them like, look, let's just invest 250,000, 300,000 US dollars into AVS and then we call it a day. 

And it may not even be in the best interest of the brand, because if you outgrow your original sales forecast, well, then a straight payment, which is fixed, has a diluting effect to your overall margins or to Amazon's net PPM, so to say. And that means that while it's great for you, it is not so great for your catalogue, which then also faces more likely suppressions, crap, as Amazon calls it, so profitability-related suppressions of the buy box in order to rectify that. 

And you'll then pay it in a different line item that is often called matching support or cost support that then your AVS or your vendor manager are asking from you. So I think there will be some brands that are still listening to this who have straight payments, and well done to you. But it becomes increasingly rare, and this is certainly reflected here also.

Paul Sonneveld
Talking about brands who are able to achieve some things that others weren't able to, going back to that 7% on that previous slide, it's a small percentage. But of course, I wouldn't be doing my job if I weren't going to ask you whether any insights or learnings for that particular cohort? I mean, was it just that they were shrinking their business dramatically, and it's a sort of a portfolio play? Or, or actually, were you able to pinpoint any specific strategies or insights when it came to that 7%? And I'm sure maybe the sample size of these quite small when you get to 7%, but I have to ask.

Martin Heubel
Yeah, of course. So I think the preparedness, overall preparedness, is always a key factor, right? If you have your scenarios planned out, if you understand very easily, OK, what is my market share? And am I tracking behind that? Or am I actually moving forward in the category? And is Amazon becoming increasingly or less dependent on my brand in the wider category. That is a data point that has given a lot of brands that have been able to reduce their terms a lot of opportunity, who then also ask for cost price increases, ask for trade terms reductions, because they knew the commercial dynamics and they also knew how much they contributed to the overall sales performance of their vendor manager. 

I think a key takeaway here for everyone is to, and now is a good time to do it, to ensure that there is a strong link between your and Amazon's leadership teams of the respective category. So not only your vendor manager should have with you a regular QBR session, but ideally you should have at least a biannual touchpoint with category managers, sales directors, and your leadership team would be connected to them in order to then also escalate. 

One of the more interesting parts that falls into this dynamic is, of course, that also those brands who have been able to reduce their trade terms and also not only trade terms discussions, but also cost price discussions. And if you're looking at those results, it becomes quite clear that before tariffs were being announced and implemented on the 2nd of April, Amazon had a high push to all of its vendors participating in the vendor negotiation process to lower cost prices, resulting in a lot of concessions that vendors had to make. 

And 3% of brands were actually giving Amazon more than a 5% cost price decrease, arguing that they would get any other kind of savings. And we're also able to then reduce their trade terms in exchange sometimes in order to keep their margins net neutral. However, then following the implementation of tariffs, we actually saw the opposite, right? A lot of brands are starting to increase their trade and reduce their trade terms or wanting to at least increase their cost prices. And if Amazon said, look, we cannot help you as part of your cost base to get it increased, this position brands very well to then also yield a reduction in their trade terms as a concession from Amazon in order to keep certain items live. 

So again, while the change was not present for roughly half of the brands, there's an even split between those brands who have actually made concessions also in their bond margin versus those that have been able to actually increase it following the tariff frenzy, rising raw material prices as well of course, the overall cost that may have gone up as part of their overall supply chain in order to mitigate the impact from the incoming US tariffs as well, forwarding orders, paying extra to their freight forwarders in order to expedite shipments and so on, which then are also reflected as part of the negotiation outcome that has been wrapped up in April or May time.

Paul Sonneveld
Thank you. I'm looking at the clock and we've already used 27 minutes and I do try and stick this to sort of half an hour slot. I'm not sure that's going to work today. Apologies up front. We do have a lot of questions. I've got some more of my own, but I want to give priority to some of the questions from our audience now. So let me, I'm not going through these in no particular order, by the way, but let me start with Andrea's question. Thank you, Andrea. Really appreciate it. His question is, what are the current net PPM targets Amazon is setting for hard lines, soft lines and consumables?

Martin Heubel
Yeah, it's always very difficult, and you'll appreciate that, right, to give you a good benchmark simply because it will be vastly different on the subcategories. Consumer electronics is very different from household or kitchen and major domestic appliances. You can still group it into ranges. I would say, like, particularly in hotlines, you see it creeping up more towards the 43 to 47, 48 percentage points. 

Similarly, in consumer goods, where it previously was between 30 and 35, we're now seeing more weighted averages between 34 to 38, sometimes even 40, 42%, depending on the weight and attributes of your product assortment. Especially in premium categories, this may itch more towards even the 43, 44 percentage points. And in soft lines, again, it depends on how much of your assortment is really seasonal versus non-seasonal. And Amazon is accounting for that very strongly. But it's probably the least mature one from a net PPM perspective, where you typically still find certain brands that have 28% to 35% of the net PPM on average and across categories. But once again, we are also seeing then the outliers that go all the way up to 38% to 40%.

Paul Sonneveld
Thank you. Let me move on to Emma. Thank you, Emma. Emma says, I have been told by Amazon that there will be a shift for the next round of AVNs from net PPM more towards top line. Are you able to substantiate this rumour, Martin? Have you heard something similar?

Martin Heubel
I haven't heard anything similar, but it's a logical consequence. And let me tell you why. I think when we look at the wider geopolitical context, Arabs are certainly a challenge, not only for manufacturing brands, but also for Amazon. Why? Well, because the introduced uncertainty that is particularly happening in the US market has a direct effect on the investment willingness and the willingness to experiment of brands. We've seen this play out by the fact that Amazon has extended its prime date from only two to now four days. With varying levels of success, I think the overall industrial consensus is that it has been working quite well, but not as well as most of industry experts also have predicted.

Now, the second factor that we need to consider is that while Amazon is a very big company, an internationally globally active company, still the majority of its sales comes out of the US market. The US market is facing significant headwinds introduced due to the fluctuating and weakening consumer sentiment around tariffs. We're also seeing that brands are a little bit more hesitant to be bold. 

That introduces significant top-line headwinds for Amazon that it will then have to counter, first of all, by making concessions to brands as part of the annual vendor negotiation process in the US, but then second also in Europe. Why? Well, because Europe is Amazon's second-largest marketplace for its retail business. And if the US market is not performing and outperforming anymore from a top-line perspective as much, then the pressure automatically transfers into the European markets as well. 

Where Amazon's leadership will have to make up for the losses and headwinds that Amazon sees from a sales growth perspective in its home market, the United States. We're seeing more of the likes of Temu and Shein, so it's Asian-based competition and rivals, refocusing on the European Union markets as well, including the UK, which again means there's more activity in the wider markets. In the US, you have Target and Walmart who've become more aggressive, particularly Walmart with its marketplace approach. So it's unsurprising that Amazon will have to end its profitability cycle quite soon. 

And I would expect that as well for the 2026 cycle. Amazon will not all of a sudden drop its net PPM targets, but will much more focus on top line growth and thereby also try to find a balance between how do we grow profitably instead of just how do we grow our bottom line because growth is no longer given and growth is no longer something that brands are willing to incrementally invest in if their margins are not supporting it.

Paul Sonneveld
Thank you for your question, Emma. That solicited a very interesting response. Thank you. I'm just trying to squeeze a few more in here, Martin, trying to do justice to our audience here. Mikhail's asking, can introducing the Amazon Vendor Direct Fulfillment Program be beneficial during negotiations with Amazon? And are there any downsides you can think of?

Martin Heubel
It's always good to be diversified, right? I mean, the less you are dependent on Amazon's fulfillment centers and ordering behaviour, because you are having the stock on site and your direct fulfillment nodes, the better. And that also means that you can skip, particularly in the peak quarter, Amazon's suppressions or also ordering restrictions that they introduce into their own FC network. It doesn't help you when Amazon is suppressing your product detail pages as a punitive measure during your vendor negotiations. Because if the product is not available to the end shopper, it doesn't matter what backend system, from a fulfillment point of view, you're having active with them.

So whether you're shipping towards their fulfillment center network, or whether you're shipping it out of your own DF node, so to say. However, if you do not have a direct fulfillment node active yet, then yes, taking out products and taking out volume of Amazon's fulfillment center network can help, particularly for heavy and bulky products to reduce and mitigate a lot of the cost centers that Amazon incurs in its own contribution margin, and thereby can be made part of a wider negotiation approach. 

And for those brands who already have a direct fulfillment node, I think it's always worthwhile to just kind of review, how much of your assortment is currently flowing through that? What is the sales share that is going through the Direct Fulfillment node? And offering Amazon, instead of incremental investments, a larger share of products or sales to be onboarded to a Direct Fulfillment setup as well. That would need to assume, however, that it is fully prime enabled, so can cater to same and next day shipping speeds, and may need a setup where you at least have one on the East Coast, one on the West Coast in the US and also a more sophisticated setup here in Europe if you want to cater to it. But it's certainly a benefit.

Paul Sonneveld
And it feels certainly anecdotally increasingly popular. Maybe popular is the wrong word, but I certainly see a small, gradual shift towards direct fulfillment. OK, I'm going to Matt last, Matt Briggs. His question is, how would you best position an argument to invest in more advertising spend or margin accretive essence versus investing in a higher basic rule? As the retail advertising teams work on different P&Ls. How do you get recognition for all that advertising spend?

Martin Heubel
Quantifying the impact that unit has on sales growth as well as net PPM. So what I always also recommend my clients is just to kind of invert and inverse the understanding that we both are having. So me as a brand and my vendor manager on who's actually driving growth in the category and by how much. 

You will often see that you can attribute return on investment from your price promotional investments, from your subscribe and save investments, from your advertising investments, very clearly and very easily almost against the sale dollar value that you have driven through it. So to make that very simple, you invest $1 in subscribe and save, you invest $1 into advertising. The question you really want to ask and answer is, how much does this $1 drive my growth? So if I invest $1 in advertising, does it drive on average $2, $3, $4, $5 in growth? Great. 

Then you ask the same question for a basic rule. So how much can I add against the basic rule? And typically, once you deduct all of the brand-led marketing levers and growth levers, so Subscribe and Save, funded purchasing orders, advertising, so AMS, key campaigns, et cetera, all the levers that you actively take and all the levers where you actively invest in, and for all of these levers, you understand how much growth you have driven, well, then you can deduct these levers from the growth that you have seen in 2025 so far. And what's left over is your organic growth. 

And this is the first positioning statement that I would always highlight to Amazon. Look, we've seen 20% of growth year over year so far, but 18% of those 20% have actually been attributed to all of the levers that we invest into beyond the annual vendor negotiation. So that leaves us with a 2% contribution from basic rules, which is not necessarily justifying an increased investment going forward.

So next, we'll need to take a look at profitability. And if profitability is the key question here, now I want to understand, OK, if I drive $4 for every dollar invested into advertising, How does it change my overall mix and what is the impact on my gross margin as well as on the net PPM of Amazon if I fuel the fire and focus this advertising investment, for example, on products that are net PPM accretive? And then I can scenario plan and model fairly quickly what the rest of the year would look like if I would focus 50%, 60%, 70% of my available advertising investments towards those products that have a strategic relevance for me and Amazon. and B, are attritive to my and ideally also Amazon's net PPM. 

This then creates a conversation as part of the annual negotiation process that is much more sophisticated, goes away from the pure conversation about please invest more, no I don't want to do it, and gives really a framework where you can hold each other accountable with your vendor manager and AVS by ensuring that these products are available, and you yourself by ensuring that you also spent the committed investment from advertising against the predefined products that drive the creativeness on the account, but still also make sense from a strategic angle to activate for you as well as for Amazon. 

And this is really the conversation that needs to happen in most vendor negotiations, but isn't. And I think educating both vendor managers and Amazon vendor service brand specialists or customer success representatives into this direction before the negotiation even begins and introducing these frameworks and introducing the logic of those frameworks into the overall conversation. Also, when we are heading into the fourth quarter, is incredibly important so that you can then thread the needle further as part of the AVN process. And to basically say, look, we already sufficiently as well as successfully trialled this system as part of our fourth quarter. 

So now let's basically use it as a foundation for AVN 2026. But we no longer will only look at profitability, but profitable growth. And here's the system which we already have in place in order to make that work. And that's usually then also something that vendor managers maybe not in the first instance say immediately yes to, but when you show to them with data points that you can execute on the system and you can reliably drive 50 to 100 basis points and net PPM accretiveness for them by just refocusing the available advertising spend against mutually defined products, it unlocks the whole new different conversation. And then the last point, and then I close my monologue, is to also ensure that your leadership teams are aligned, right? So insist on at least one top-to-top ahead of the AVN 2026. 

Make sure that these systems, these frameworks, these processes are mutually aligned and agreed upon, because your vendor manager may often be very short-term oriented, but their leadership team will be more interested in listening to what you have to say and how you plan to grow profitably with them. And that then usually sets you up for success. But you will need to start this process now, not in end of November or early December, when it's only one or two weeks out to the kickoff meeting to the vendor negotiation. By then, it is too late.

Paul Sonneveld
Thank you, Matt. That was a great question. And thank you, Martin, for an even more comprehensive answer. Let me wrap up with one final question from me here. You sort of alluded to it already, right? Forward-looking here. What practical advice do you have for vendors that are already thinking about the next round of AVN? What would you leave with them before we close out today?

Martin Heubel
I would say three to six things. First, collaborate across functions. Don't leave the negotiation only up to you as the sales team. Ensure that you also align with your ops, marketing, and finance teams. Understand the hidden cost factors in your P&L, which then also transfers into number two, right? Know your numbers. 

You need to understand your line-level performance of your P&L and quantify the return investment of past investment decisions. So has direct fulfillment really added the cost savings that you anticipated? Or do you actually see that it doesn't drive the incremental value that you hoped for? And that should then also be forming part of your vendor negotiation preparation. 

And be proactive, right? A common mistake I still see up to today is that vendors wait for Amazon to table the first proposal. But if you do that, well, then Amazon has been able to frame the whole conversation and anchor the negotiation against you as well. So be proactive, communicate feedback deadlines and your expectations, but also give a first proposal to Amazon. Even though it may be anchored very low, it still helps you to also psychologically anchor and counter the expectations that your vendor manager will have with you. 

And then it's really about utilising also your commercial leverage. Understand whether you're adding or subtracting value from Amazon's overall growth in the category. So are you growing above or below the average? Is Amazon becoming increasingly dependent on you? And if so, well, then that is a great signal that you can also head into the negotiations even more proactively than you would usually do, and maybe a little bit more assertively. 

And then also don't give value away for free. Make new product developments, listing decisions contingent on value exchange, for example, the acceptance of the tariff-related cost price increase or any other chargeback waivers of newly introduced chargebacks. 

And define, lastly, then also the escalation levers, processes, and trigger points before you even head into the negotiation. And that means primarily that you'll need to talk to your leadership team really about what are the expectations both from a timeline and outcome perspective, and what are the trigger points that would initiate a stock shift, for example, or top-to-top with Amazon's leadership team. 

For that to be effective, you need to know who's the leadership team on the other side. So if you currently cannot answer the question who's your sales director, who is your category manager and category leader at Amazon, now is a good time to actually create these crazy charts so that you understand, OK, who's responsible for your accounts at Amazon, and then to start at least an introductory meeting between your leadership team at Amazon.

Paul Sonneveld
All right, Martin, thank you so much. I really appreciate you joining us today. Your insights, as always, are spot on and incredibly actionable. Amazon vendor negotiations can be really complex, frustrating, at times overwhelming, but you've certainly helped shed some light on what's really happening behind the scenes and how brands can better prepare for the next AVN that's around the corner. For any viewers or vendors that are tuning in today, interested in learning more or working with you, what's your preferred way for them to get in touch with you?

Martin Heubel
Couple of ways, usually the best approach is just kind of add me on LinkedIn. You can also go to consulterce.com, where I share a lot of industry-level articles. You'll also find all of the survey results on there. And if you have any questions, feel free to scroll down on the website. There's a contact form that will land you directly in my inbox and I'll try my best to respond to you within 24 to a maximum 48 hours.

Paul Sonneveld
Fantastic. Thank you so much, Martin. Really appreciate it.

Martin Heubel
Thanks again for having me, Paul. And thanks, everyone, for joining us today.

Paul Sonneveld
Take care. All right, everyone. Thank you so much for joining us today for this really special episode of Marketplace Masters. Don't forget, if you haven't registered, go and do that. All registrants will receive a recording and a link to Martin's survey results as well. So make sure to check your inbox. Of course, if you'd like to see how MerchantSpring can help your vendor business navigate Amazon with confidence, visit merchantspring.io for exclusive offers available only to viewers of this show. 

And lastly, before I go, we had a few people ask, I just wanted to sort of put this up, a quick reminder on those complimentary tickets when it comes to Amazon Accelerate in Seattle in September. We will be offering them to a wider audience later this week. So they are limited. So go and grab your complimentary ticket, head to pages.merchantspring.io/accelerate25 or just drop me a message and I will get that link to you as well. All right, that is a wrap for today. See you next time for another Amazon vendor special. Take care.