Defensive Sales Strategies for Amazon Vendors During Annual Vendor Negotiations (AVNs)

Are you an Amazon 1P Vendor looking to protect your sales during tough annual vendor negotiations (AVNs) while still reaching your growth targets? Join Carina McLeod, former Amazon Vendor Manager and CEO of eCommerce Nurse, along with special guests Rob Murray (Client Services Lead at eCommerce Nurse) and Martin Heubel (Amazon Consultant and former Amazon Category Manager), as they explore key defensive sales strategies tailored for 1P vendors.

In this episode, you'll learn why it’s essential to plan ahead for your annual vendor negotiation and how to maintain sales performance when conversations get more challenging with Amazon. Our experts will share actionable tips and best practices on:

1️⃣ Hybrid 1P/3P Approach: Learn how combining vendor and seller models can help you stay competitive and protect your sales ranking. 
2️⃣ Subscribe & Save: Discover how leveraging this program can secure consistent revenue, especially during tough negotiations. 
3️⃣ Accelerating Ad Spend: Find out how boosting ad spend during negotiations can enhance your bargaining power and maintain demand.

Tune in now to prepare for success in 2025 and beyond.

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Amazon Annual Vendor Negotiation (AVN) Defensive Sales Strategies

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Transcript

Hi there. Welcome to the eCommerce Nurse podcast and our new series tailored for Amazon Vendors. I'm Carina McLeod, ex Amazonian and CEO and Founder of eCommerce Nurse and Vendor Society. Today, we're gonna be talking about defensive sales strategies for 1P Amazon Vendors and how to profitably reach your growth targets in 2025 and beyond. We have 2 special guests, Martin Heubel and Rob Murray joining us today.

Martin, I'll let you introduce yourself. Yeah. Hi, Carina. Hi, Rob. Thank you for having me here, first and foremost.

My name is Martin Heubel. I'm an ecommerce strategy consultant and founder of Consulterce where I help first party vendors elevate their profitability with the online retailer and also assist them doing the kind of key negotiations when it comes to the online retailer such as cost negotiations as well as annual vendor negotiations. I'm very pleased to be here today. Very excited for our topic. I think it's a topic that is not talked enough about, so very happy to delve into this.

Great. Thanks, Martin. And I always call you the vendor negotiations guru. So Rob. Thank you.

Yeah. Hi. I'm Rob, Client Services Lead at eCommerce Nurse. We look after vendors and sellers, in the UK, the US, and beyond, helping them for everything from, helping them understand profitability through seller, through vendor, and also, helping them set up their listings and manage their day to day Amazon accounts, through our design teams and client operational teams as well. So keeping you in contact day to day to help you negotiate, and navigate Amazon.

Thank you. So we have a team of experts today and you can hear from each of our experiences in the room today. And we're gonna be, as I said, sharing our insights and best practices to help you with your business moving forward. So to start off, I'm gonna first delve into the actual topic itself, and to understand more why you as a vendor should be actually even considering thinking about this topic. Why do Amazon vendors need to be planning defensive sales strategies ahead of their annual terms negotiations?

I'm gonna hand that over to you, Martin, first of all, because I know you came up with this topic and it was really interesting when you did because in all honesty, it wasn't something that we really thought about. So if we as an agency hadn't thought about it, it made me think, well, I'm guessing there are a lot of vendors out there that are not even considering this topic. Yeah. Absolutely. And I think a lot of brands are not necessarily having this on top of mind.

But if you're looking at the last few years and how really relationships between Amazon and also vendors have evolved, then we've really been going through a cycle of massive growth, particularly during the pandemic years where Amazon really opened the floodgates almost to the customers that moved from offline shopping experiences towards its marketplace. And Amazon also had a high incentive to really serve those shoppers particularly in CPG categories when it comes to low ASP selection. But with the end of the pandemic we've also seen a swift change of Amazon's priorities away from a pure growth focus towards a more succinct customer of customer but also profitability focus still. And this margin focus has really unfolded during but also outside of annual vendor negotiations. If you think about it, more brands and vendors than ever before are confronted with very difficult cost support negotiation requests where Amazon asked them to lower their cost price basis, due to a lack of profitability as well as, of course, during the annual vendor negotiation cycle where vendor managers are increasingly at pressure to brands if they are not reaching the targets or net PPM targets and objectives that they have set themselves with a brand in the category.

And what that means is that a lot of brands are facing at least temporary, sometimes even longer lasting, suppressions when it comes to the buy box or when it comes to their listings, whether it's the suppression of a plus content or also the traffic redirection that some brands are seeing. And that really calls for certain defensive sales strategies where brands can ensure that they are not losing the sales rank and the traffic as well as the sales on items that may be very profitable for them and thereby also protect their bottom line from all of these actions that Amazon may take during as well as outside of vendor negotiations. And thankfully, there are a couple of those defensive sales strategies that we will dive into today and take a closer look at. But I would say, like, every brand needs at least to develop a plan to really understand and identify what are the actions that they want to take in order to protect their sales short as well as long term. It's really interesting when you come at that angle because it is something you don't always think about.

And there might be vendors listening today and they're thinking, well, that hasn't happened to me. But as they grow and become, I guess, more on Amazon's radar, then actually that could happen to them as well. And, yeah, sometimes it's definitely an interesting area to think that in a way that you have to. You'd think that as a retailer, a retailer is always sort of considering what's good for you in terms of those sales. But, yeah, it's an interesting negotiation, especially as an ex vendor manager.

His strategies and negotiations have changed. Rob, did you want to add anything to that to the topic? No. I think this is, yeah, a really great intro and to the session. So super excited to sort of get more into it and talk through some of the nuances and things that you need to look out for as well through, through the process.

Definitely. So hopefully, that gives a bit more insight into why we're why we've chosen this topic. And really now what we want to go on to and delve into, as you say, we're gonna talk today about 3 key strategies that you can implement into your business as a defensive strategy to help you ensure that your business doesn't get impacted by what Martin shared earlier. So let's talk first, strategy 1. So using a 1P 3P hybrid approach to stay competitive, protect your sales, and maintain your ranking.

Martin, would you like to share a bit more about that strategy and how that works? Yeah. Of course. I think we've seen 100 or even maybe 1,000 of LinkedIn posts, online and offline conversations that were circulating around a hybrid strategy. And if you're talking to agencies, if you're talking to service providers in this space, almost everyone tells you: okay, you need to kind of move towards 3P because it can yield better profitability for you.

But I would challenge this notion. It doesn't necessarily yield better margins or higher profitability for you by default because it really depends on your operational setup, your capabilities that your organization has in order to really define the kind of margin opportunity that there is. An angle that most service providers, but also our industry, is not talking enough about is that a hybrid approach can primarily protect your sales during times of more defensive, yeah, and potentially more proactive disincentives that vendor managers or Amazon in general may apply on your account. Especially here in Europe where Amazon does not deploy strict guidance or also not have the legal foundation to restrict you from opening a 3P account. There is really the case to be made that if Amazon has with you a very tricky vendor negotiation.

And let's just take the example that USD Brand wants to increase your cost prices, you have a national cost increase and Amazon is rejecting it through and through. And it comes to the point where you're reaching the deadline of the cost increase and you're having to implement a trade stop with Amazon. Well, the result of that would be that you would be running out of stock on your product listing eventually unless you're finding an agreement with your vendor manager. But if your margins are already razor thin, sometimes you are not in a position to actually give up, your cost increase or to make other major concessions in your trading terms. And then thinking about a hybrid strategy that was planned well ahead of this situation can really make the difference to make or break your Amazon business.

Because if Amazon is eventually running out of stock because they are not agreeing to a new cost price, then you have a good chance to at least recover those lost sales by ramping up your, for example, FBA or FBM inventory and ensuring that you are having sales actively being engaged on Amazon and protecting also your sales rank, your best selling rank, etc. And I think this expands also during the annual vendor negotiation when Amazon sometimes applies proactively disincentives or punitive actions as they sometimes call it on your account. So picture a situation where you have negotiated for 3 months, you weren't really successful, finding a resolution in your vendor negotiation. So your vendor manager and yourself, you couldn't simply agree on, yeah, a trade space that both are happy with. And even if you had a senior escalation call, it hasn't necessarily yielded the right results.

Amazon may decide to actually redirect traffic away from your brands towards other brands. And once again, what's critical here then is to have a backup solution and a backup option that can be in the form of a 3P or hybrid strategy, that helps you at least to kind of regain those otherwise lost sales and sleep a little bit better because you're also creating negotiation leverage. If Amazon cannot put significant pressure onto your brands when they are taking away sales or suppressing the buy box on your listing because you can recover those sales through your own 3P account or the partnership with a 3P distributor well, you're in a much better position to actually negotiate firmly back with your vendor manager. And thereby, a hybrid approach is not necessarily yielding better profitability because it comes with a lot of different and additional cost centers even. But it can really ensure that you are not having these kinds of bibs in sales where your rivals and peers in the category can potentially capitalize on whenever you're in a more difficult negotiation situation with your online retailer.

Definitely. And you touched on something really interesting a bit earlier there about the legality part because we've had conversations in the past with brands where they want to move to 1P, but there's been fear of moving, moving from 1P to 3P. But there's been fear that Amazon will turn around and say, well, you can't open 3P. So effectively, they have the right as a brand to have a 1P and a 3P account. In Europe, it's a little bit easier so brands can freely decide whether they want to sell via 1P or 3P.

If you are moving over to the US things are very different because Amazon applies what it's called the standards for brands policy for brands selling on its marketplace and it applies primarily to manufacturing brands. Meaning that if you are the manufacturing brand also set up as such a brand registry Amazon can technically forbid you as a brand to move from 1P to 3P And they will also, in a lot of situations, enforce this. So they will actually suppress your seller account and also suppress your 3P in the well, the 3P offer in the buy box which, really can cause a lot of headaches for brands. Because if you're putting so much work and effort into ramping up your FBA inventory and then Amazon suppresses your entire 3P account because they're saying we already have a direct relationship with this manufacturer via 1P, well, then the hybrid approach is not really an option for a lot of brands in the US. In Europe, it is because Amazon, due to a very complex legal system across different countries, is not being seen as, yeah, enforcing this rule.

And I think they are not going to change that in the near to midterm future. That's great to know because that's definitely been something that's come up in the past, and it really just sort of highlights how different it is when you're talking about different countries, when we're talking about a vendor working and operating within Europe versus the US. Different different rules apply. You then sort of mentioned about it's quite shocking that about Amazon then diverting traffic away from listings into other listings because you as a brand, you're working so hard to get that traffic to your listings and, you know, through your advertising, just by growing your account on your sales. And for that then to be out of your hands effectively is quite scary, really, that Amazon can, can control that.

Yeah. Absolutely. And I think I mean, brands manufacturing brands see a variety of disincentives sometimes being applied on their account. I mean, the most brutal is, of course, if Amazon stops ordering, because that effectively really kind of then puts the brand on the spot. And it depends on how many weeks of cover Amazon has in terms of inventory, so how many weeks of demand of the customer Amazon is able to carry.

And once that stock is depleted, it really becomes an issue for the brand because, of course, as soon as Amazon is out of stock, it takes a while for also the vendor to restock Amazon. And even if you find a negotiation solution in the end, it takes 1 or 2 weeks up until you are fully available again and can serve customer demand. While in the meanwhile, your rankings are tanking and you're, of course, out of stock to the end shopper on Amazon, which is a nightmare especially if you have very active peers in your category who are looking to capitalize on those moments. So it can really kind of hurt your market share and your market segment share, as well as your category visibility on certain keywords with Amazon which is why you want to avoid those situations. Now the softer disincentives such as we alluded to earlier, such as traffic redirection or also the temporary suppression of the buy box, is mostly a warning signal from your vendor manager to highlight to you, okay.

We need to find a solution here. We cannot just be in the state where we are not finding any kind of agreement and where the negotiation is running past its original deadlines, and we are not necessarily going anywhere to define a path to green, so to say, as Amazon would say. And I think here, it's really important for brands to, of course, understand that those mechanisms go both ways. Right? I mean, Amazon can apply those, but I always recommend to brands to also have a very concise plan on how to react to those punitive measures and to create these plans and to get agreement with senior leadership teams upfront so that whenever you're in a situation where it's gridlocked, you're ready to go and you can also apply those measures from your side, of the negotiation effectively and without big, approval queues.

Yeah. That's great. And I love that in terms of being prepared. Being able to see the signals to start with that, you know, there's the flags highlighting that you need to change your strategy or and being prepared that there's gonna come a point where you're gonna have to implement certain defensive strategies. And, Rob, I mean, so we talk about going from 3P to 1P more from a temporary side.

So if a brand does that I know you work with many brands and that, have moved over from 3P to 1P. How best should they manage that, especially when we're talking about it from a temporary perspective when it comes to things such as inventory management? Yeah. It's an excellent point that Martin makes around the sort of getting those strategies in place ahead of time as well. I think one of the best ways to manage that is actually to get set up, get the planning in stage, get everything done way before you need to implement this strategy.

One of the key things to look at is even down to things like profitability. I say even down to profitability. It really is one of the core things to look at. So you want to be ready to move at a moment's notice with either vendor or seller. And if you've got those strategies in place, you have things agreed upfront ahead of time, you know that you can make the switch, remain profitable, and keep all of your products in stock at Amazon to kind of avoid that out of stock situation, essentially.

But it really is something that needs doing upfront planning. You need to be running that third party account successfully in the meantime so that you're ready to switch to it, on a greater scale if you need to with specific products. And you raise a good point there being prepared because you've experienced this with a number of brands. Opening a seller account is not necessarily the quickest of processes. There's the verification and everything, So it shouldn't be an afterthought.

Because then there will be that part, right, where there's a period of time when you're trying to get that account verified. And I guess it's also that ensuring that you have the right inventory and getting that into Amazon. There's often a delay there. Right? Yeah.

Absolutely. Maintaining consistent supply of SKUs to Amazon, avoiding stockouts, obviously, you know, super crucial, seem obvious, but really it is about protecting that relationship with Amazon as well, maintaining your visibility. With vendors and sellers that we work with, we I mean, it's known generally that Amazon's forecasting is lacking. Most vendors report that it isn't really true to what they're seeing. So we work with vendors to manage the inventory with them and also forecast so that they can place their production orders internally with their manufacturing teams on time to have stock available for Amazon vendor, Amazon vendor orders or for FBA FBM inventory at all times as well.

So we're forecasting sort of even ahead of what Amazon are telling you to forecast for. We're actually forecasting to make sure that you have production orders in place in time so that when the orders are coming through, you can be responding quickly. So taking into account all of those metrics available at Amazon, some of them you need, aggregated data essentially to kind of get the conversion rates and things like that. There's lots to take into consideration there to make sure that you have stock available at all times. And I guess it's finding that balance.

Right? If you've decided that 3P is gonna be your temporary solution, that it's figuring out when is that point where the 1P stock will run out Yes. And when is that point where you need to switch over to FBA and timing that right so you don't have any disruption Absolutely. In sales. Yeah.

And it's a really good point there is price parity. You need to make sure that you're not competing with vendor, for the buy box, but you need to be ready to react quickly, when you do need FBA stock available or, FBM stock if necessary, or even use drop shipping through Amazon if it's simply an inventory issue with, Vendor Central. But if it's more than that, then you might consider switching across to FBA or FBM. So those listening to strategy 1 very much that it's really I think the key highlight here is just being proactive, seeing the signs, and being able to move quickly. And so that means being ready.

So when you do need to turn on 3P, the accounts there and it's ready and it's just managing your stock to switch that over in the most, non disruptive way as possible. Strategy 2, leveraging subscribe and save to maintain ongoing sales. This is an interesting strategy. Martin, you're right to elaborate a bit more. Yeah, it's probably my favorite one out of the 3 because it's one that is very hidden and that not many have on their radar when it comes to investing into subscribe and save.

Because in a lot of conversations with brands, I often hear the question, okay, should we even invest into subscribe and save? Is it a good benchmark for us to invest into retention elevating sales or shall we rather invest into impulsive driven sales events such as Prime Day, Black Friday or Cyber Monday? And the answer is, of course, it depends on your wider strategy. And if you're just a brand starting out and you want to kind of create a lot of brand awareness, then impulsive sales events are usually the better option to go with. But if you are maturing in your vendor life cycle with Amazon, there comes a point where you potentially want to shift strategies a little bit, particularly if you have seen over the last few years that negotiations have become a little bit more tendentious for Well, yeah, full of tension.

Critically, a lot of brands are not aware that Amazon will prioritize subscribe and save sales during times of gridlock negotiations. So even if Amazon or you yourself are blocking sales or are stopping to get orders from Amazon, the online retailer will typically try to kind of fulfill orders of subscribe and save for end shoppers. Why? Because Amazon honors the customer experience it has established and the associated customer trust, that it really wants to kind of protect with shoppers in all of its categories. Whether this is grocery, whether this is beauty, whether this is health and personal care or any other CPG category really.

So if you're in the FMCG space and you're already investing into Subscribe and Save and you know that your next vendor negotiation is going to be a little bit tougher than usual well then it's probably a good idea to upfront your investments, around Q3/Q4 and to also sideline a lot of budget in order to kind of increase your subscribe and save sales share. And rather than to invest only into significant price promotions doing key and big sales events, you rather want to potentially fund coupons or Subscribe and Save vouchers to really kind of increase your Subscribe and Save customer base. Because once again, if you are then in a gridlock negotiation situation and Amazon may terminate your orders on your account, they will typically still send purchasing orders to fulfill and to keep enough inventory to fulfill S and S orders. And that's usually a strategy that I do not see today at least. Brands exploit a lot, partially because they may not be aware of it.

But, it is kind of a key strategy to kind of at least have a baseline of revenue that also ensures that you can forecast accurately during times where things may not go the way that you expected or where you already understand that you will go into a kind of friction full vendor negotiation. It's interesting you say customer experience and and knowing being from ex-Amazonians, we know always it's sort of that customer experience is embedded in everything you do. It's slightly contradictive though, isn't it? Because I get the customer experience for subscribe and save. You want to honour that.

But the fact that they could end up no longer having stock, that's not gonna necessarily be great for the customer. And then they're effectively prioritizing the terms negotiation over the customer experience at the same time. Yeah. It's a balancing act for sure for both sides. Right?

Also for the vendor if they decide to kind of have a trade stop because Amazon does not accept their cost price increase, for example. So I think it's a fine line. And vendor managers typically try to avoid a situation where Amazon completely runs out of stock, but they want to clearly signal to the vendor that there is a little bit of a point being reached where they want to find a solution and where they have to conclude the negotiations as well. In many cases you will also see that towards the end of Q4 Amazon is ramping up its inventory quite a lot by placing more purchasing order volumes than they would actually need in order to fulfill customer demand and to also ensure that they maintain the same weeks of cover in terms of inventory. So there's usually a little bit of a bulk order that is happening towards the end of Q4 so that when Amazon is terminating orders, let's say by the end of January or by the end of February, they still have enough inventory to go for at least 6 to 8 weeks.

So while you may see your average weeks of coverage of 3 to 5 weeks right now in most European countries and most categories, it's very likely that Amazon will carry double of that, towards the Q1 of 2025. Which again, right, puts you in a position to also decide do you want to fulfill this entire purchasing order demand that Amazon places onto your account towards the end of Q4 or whether you're potentially risking to reduce your purchasing order confirmation rates in order to ensure that Amazon has not too much room for putting these trading stops onto your account because they're not holding as much inventory as they would like to during the Q1 of the year. Interesting. That's a good point because there's 2 ways in which you can look at that. There's not wanting to reduce what Amazon orders for you because you don't want sales to be impacted.

But at the same time, by reducing the stock creates more acceleration from Amazon to work with you in terms of more willing to negotiate and potentially, have more concessions on the table as well. Sounds like it can be quite brutal in terms of those negotiations. In the end, it's a commercial negotiation. Right? Yeah.

And, brands always ask me for the kind of key levers that they can pull in order to also get ahead and get a head start in the negotiation. There's no magic bullet, right, as we all know in the Amazon space. But it's the accumulation of tactics and also, strategies that brands really need to deploy. And the latter that we've discussed, so by reducing the confirmation rates of purchasing orders towards the end of Q4 really means that you need to have a very aligned leadership team because typically the pressure is quite high to reach year end targets. And if you have to explain to your leadership team that you're down confirming purchasing orders even though you have the inventory on hand, that usually raises questions to everyone who's a little bit more involved in the kind of day to day operations, from a leadership perspective.

So make sure that you educate your leadership teams and make sure that you also outline your reasoning and reflect it accurately in your forecasting models. Because, of course, you want to recapture these lost volumes by the end of your vendor negotiation. And that should also then be baked in into your discussions with Amazon and with vendor managers. And a good example of that could be to overly invest into a spring sale event which is typically happening after or during the end of Q1, which then really helps you to kind of, yeah, ramp up your sales velocity again. It just really highlights how important it is to be proactive and not reactive and to be thinking about these strategies ahead of time, not only to implement them to to get everybody's buy-in from the leadership team because it's not that you're gonna go ahead and do it on your own necessarily.

You need to be fully aligned. And talking about that with subscribe and save, and I do love that one because, you know, Amazon prioritizing subscribe and save customers. You obviously need to get those subscribe and save customers. 1st time shoppers, Rob, is there anything that you want to to share in terms of how brands can be enticing those first time shoppers that are more likely to sign up to subscribe and save? Yeah.

Absolutely. But, first, I just wanted to touch on a point that Martin made there around the inventory levels because I've mentioned it before. But if you're completely on top of your forecasting, then you can actually forecast ahead of Amazon and keep ahead of Amazon on that point and make sure that you're not overstocking into Q4. So it's really key to be on top of that, to make sure you can kind of manage that negotiation if you like. But absolutely, subscribe and save, a key, activation, really, for any products which are selling through quickly.

So fast moving products, and those high sell through rate products, which consumers are coming back for time and time again. Probably goes without saying, but those are typically the types of products that you can activate. Higher value ticket items may not necessarily be the sort of products which you can apply subscribe and save to. So just be aware, be aware of that.

Obviously, keeping ahead of all of your profitability means that you know how much of a discount, how deep you can go with subscribe and save. Offering a more significant discount on first subscription to attract first time shoppers. So that's a key thing, obviously. But you do need to team that with being aware of what your other discount strategies are.

You want to make sure that your subscribe and save discount is the most attractive discount for your shoppers and that you're aware of that with the other coupons that you offer. So for instance, if you have, exclusive offers for consumers who've perhaps viewed your product detail page, or exclusive offers for consumers who have perhaps purchased first time but not come back for a second purchase yet. So with those exclusive offers, you want to offer a discount specifically to those consumers, but make sure, again, that that's not higher than your Subscribe and Save discounts so that you would effectively upsell them to Subscribe and Save if possible. It's a good point because I often go and I look at subscribe and save and then you think, hang on, actually, it's more expensive right now for me to select subscribe and save than it is for me to go and sign up to the promotion. Do you have that ability to flex and to go into that detail for subscribe and save and everything on Vendor?

Yeah. Absolutely. There are different coupons / voucher options available depending on what you're looking to implement as well. So getting into the detail of that, being aware of what's available, something that we manage with with clients as well in terms of setting up that promotional strategy, keeping them aware of all of the promotional options available to them, what the discount levels you can go to with each of those, and just managing those directly with them to make sure that we aren't overlapping, that you aren't stacking coupons without meaning to, etcetera. So it's just being super aware of all of the different strategies you can implement and make sure that that complements the tactics that Martin is talking about as well.

Definitely. And is there anything I know we're gonna be coming on to this, a bit shortly in terms of strategy, but, new to brand and focusing on that aspect for shoppers. Absolutely. I was I'm sure we'll be talking about sort of the ad side of things as well. So, but with new to brand, absolutely, you need to be focusing heavily on new to brand shoppers, with the ad strategy specifically, but also with the subscribe and save offers, etcetera.

So you're effectively creating a bit of a funnel of shoppers. Built, you know, building on that with your ad strategy to sort of channel consumers down the right path in terms of whether they should go with a one off coupon or subscribe and save depending on what your product type is as well. There's a lot to think about, isn't there? I mean, we're talking about being proactive. We're talking about thinking about your defensive strategies, but not only that, you've got to think about your inventory management strategy there, your forecasting.

And also, as you said, your promotional strategy and your pricing strategy, all of that comes to play. And it's all, there's so much to consider as well. So let's move on to, strategy 3, accelerating ad spend to ramp up sales demand. That's, let's talk more about that one. I find that quite an interesting, interesting strategy, in terms of almost comes back to what we were talking about in terms of almost trying to manage how much Amazon orders from you as a vendor?

Yeah. It integrates directly into this point actually because let's again think that we are in a let's take the example of us being in a vendor negotiation situation with the online retailer. And let's also picture that we are in the Q1 or at the end of Q1 and we still haven't achieved the right result with them. Now, if you implemented the previously discussed strategy we basically kept the inventory with Amazon fairly moderate. So just so enough that Amazon can fulfill customer demand but not overly, stock so that Amazon can kind of go without a purchasing order and basically not having to reorder from us for 6 to 8 weeks.

Well, if you are arriving at a very gridlock negotiation situation and Amazon is stopping the trade with us formally and says we are not going to reorder products from you, well, Amazon has not too much time to actually enforce this ordering pause because they would run out of stock and they would not be able to fulfill the end shopper demand. Amazon, as we discussed earlier, really cares deeply about the customer experience because the chances are that if a shopper looks for your products, especially if you're a large multinational brand and it's not available on Amazon or it's only available through 3rd party sellers who cannot often, cover the kind of massive sales amounts and sales volumes that you usually push through as a vendor with, the online retailer, well then Amazon has to come back to the negotiation table fairly quickly. But let's assume you have actually a lot of inventory with Amazon, and thereby Amazon could go for 6 to 8 weeks without having to forward the negotiation. Well, then you're in a little bit of a tricky conversation and situation where you potentially want to do the counterintuitive thing of accelerating your ad spend and accelerating your media spend.

Why is it counterintuitive? Well, most brands and most vendors who find themselves in a gridlock negotiation situation, they stop their ad spend entirely. Because they say why should we invest into a retail channel and to a retail customer if we do not have a finalized joint business plan together with them. We do not see the partnership and mutually oriented approach of developing our business. So let's pause our media spend to add a little bit more pressure on the media side of things to create this cross organizational friction between retail and advertising teams.

And that may work but oftentimes this does not necessarily resolve the negotiation conflict on its own. And if you want to kind of deploy your media spend as a defensive strategy during those gridlock negotiations, my recommendation often is to actually accelerate it. Because if you accelerate media spend, well, Amazon is not reordering from you. You're depleting Amazon's inventory which means that your vendor manager is eventually being forced to return to the negotiation table much faster and much quicker than they would otherwise have to. And that, of course, forces their hands in the negotiation, so to say.

And while this is counterintuitive and, again, requires the alignment of your leadership teams, it's highly effective but a still underutilized tactic or strategy that you may want to explore. Yeah. It's it's, yeah. There's two sides to that, isn't there? As you say, it's, as brands, the immediate thing would be to cut and stop ad spend altogether.

Why invest in a partner that's not willing to negotiate with you? But at the same time, there's different strategies that you need to implement to almost be able to get that negotiation to work for you as a business. And in terms of that accelerating ad spend, Rob, what do brands need to be considering if they are gonna take on that strategy? 1st and foremost, the ad spend needs to be in place already so that you can accelerate. So you it's rarely sort of it's rarely successful to quickly accelerate ad spend and see that take effect immediately.

You'll want an efficient and profitable ad campaign in place already throughout the year, something you're working on off season, you know, working hard on off season to make sure that you have an ad campaign which you can ramp up. There is available space to go into. You have the right keywords and search terms within those campaigns. You're going after your competitors already. You have brand defense campaigns in place as well, and you and you make sure that that spend is already in place so that when you get into this situation, you can quickly increase your ad spend ahead of when you really need to increase it because it slowly ramps up once you do increase ad spend.

You might not necessarily introduce an extra £50,000 one day and just spend it the next. You know, it's a case of slowly ramping that spend up, to meet the budget that you've set, as well. You make a good point because we've had that in the past where brands change their ad spend almost on a monthly basis. And it's quite it's, easier said than done if you're all of a sudden you're ramping up your ads and then you've got to drop them and you've got to ramp them up. And sometimes it takes time to ramp up that ad spend.

I know when we've been in had to increase ad spend significantly, it's like, oh, you're not spending it or it's like you're trying to, but it has to get that momentum. So as you say, already having those ads and focusing on them, already and having that momentum and then and I guess the sign off, right, for ad spend because it takes time to get that sign off. So being able to know how much I guess a number of brands are already working with agencies that are managing their ads. Those agencies being ready and knowing how much that they can play with to turn on and off and knowing which products to focus on, I guess, as well. Yeah.

Absolutely. You've got to be agile with ad spend. I mean, it's one I think a lot of what we've covered off today really comes back to sort of setting things up for scalability in the in the outs at the outset. I think once you've done that, all of the rest of what we've talked about today becomes much much simpler. But if you've already set up your 3rd party seller account, you'll so that you can complement your 1P account, and you have a clear, you know, real clarity on your profitability, not just for 1P but also for 3P.

So you know how much ad spend you can attribute to products. You're in a position where you can move quickly between platforms, move quickly with increasing ad spend, and you have clarity on exactly what your output will be if you introduce an increase in ad spend. So when you're going to, you know, higher management, etcetera, and you need sign off, you already have the figures in front of you. So it's really key to sort of get real clarity on that. And we work with vendors and sellers to sort of help them get that clarity.

For some, it's sort of confusing, a bit of a minefield, if you like, of, fees, etcetera. So just helping them understand that fee structure so that they can build, essentially their profitability metrics and figure out what they can actually invest in advertising going forward and remain profitable even in a situation like we're talking about where we're ramping up ad spend to increase sell through rate to help with vendor negotiations. Once you've settled all of the ground work up for that, it's much, much easier going forward. Yeah. And I think it also really kind of highlights as you as I mentioned, Rob, that you need to kind of really have a granular understanding of your profitability before you go into the negotiation, not at account level, but really at SKU or ASIN level, as as well as to find your trigger points in a negotiation.

So you can't just go in and say okay let's see what Amazon proposes to us. No. You need to have a proactive plan and you need to also plan ahead, and have your leadership team really on-site as we discussed. Right? So that they are giving you the green light well ahead before the situation arises.

And when you actually then find yourself in these difficult discussions and, you're reaching certain timelines, milestones, or your vendor manager is activating certain punitive measures on your account, you're ready to go. And you're not just reacting but you already have a proactive plan in place that you are simply going to activate. And I think that makes really the difference between a brand that thrives on Amazon, on vendor in particular, and those who understand how to kind of also use their commercial leverage that they have in the category and those who often complain and are also feeling quite anxious about the vendor negotiation cycle that is yet in front of us. And I think really kind of getting together with your Amazon team, planning ahead and also involving your senior leadership team very early onwards, educating them about how Amazon works and why difficult vendor negotiations are normal and not the exception and that you need to have tactics and strategies in place to kind of anticipate them and work around them. This is really key.

And I think this is where we need to work towards too also as an industry. And I hope that those three defensive sales strategies are also making sense for brands to at least evaluate. You don't have to implement them all, but at least pick and select the ones that you feel most comfortable with and where you also feel that your organization is in a place to exploit them, at the best possible time. 100%. It puts you in a much stronger position.

And even if you're not necessarily having to apply them, knowing that you've got them in your back pocket allows you to effectively not fall into a trap where you can see too early in terms of negotiations. So definitely some great strategies there amongst many more. So thank you, Martin and Rob, for joining me today in talking about defensive strategies and how 1P vendors should be managing those strategies to avoid any situation that may impact sales during vendor negotiations and how to remain profitable. So I'm just gonna recap actually for our audience in terms of those strategies. So strategy 1 is using a 1P, 3P hybrid model to stay competitive and protect your sales and maintain your ranking.

Strategy 2, leveraging subscribe and save to maintain ongoing sales. Strategy 3, accelerating ad spend to ramp up sales demand. So thank you everyone for listening. Thank you again, Rob and Martin, and everyone listening. If you need anything, any support from either of us, Martin, where should they, how should they reach out to you?

The easiest way is typically through LinkedIn or my website, consulterce.com. Fantastic. Fantastic. So consulterce.com. The details will be in the description on our YouTube channel.

And Rob? They can contact us at eCommerce Nurse for support with either vendor or seller accounts or to discuss any of the strategies that we talked about today in a bit more detail. Great. Thank you. Thank you, everyone.