Overview

Amazon’s Annual Vendor Negotiations (AVNs) are high-stakes conversations that can make or break a brand’s profitability on the platform. Yet many first-party (1P) vendors mistakenly believe Amazon’s proposed terms are non-negotiable.

“Most vendors think many terms are fixed, but they’re actually strategic levers,” says Dirk Brederecke – founder of Hello Brands and a former Amazon Vendor Manager.

In a recent MerchantSpring Marketplace Masters webinar hosted by Paul Sonneveld, Dirk Brederecke pulled back the curtain on negotiating Amazon vendor terms to maximise value. This thought-leadership guide synthesises Dirk’s insider strategies into practical insights for Amazon agency professionals and brands alike.

Winning the Amazon Vendor Game comes down to preparation, strategy, and a collaborative mindset. From leveraging data to trading concessions, here’s how to negotiate smarter with Amazon – and ultimately secure terms that fuel your business growth.

Amazon Vendor negotiations often involve strategic give-and-take. By understanding which terms are flexible and aligning them with your goals, vendors can turn Amazon’s annual negotiation into a win-win opportunity.

Why Vendors Leave Money on the Table

It’s no secret that Amazon drives a hard bargain. Vendor Managers routinely send extensive asks for higher fees or cost concessions to boost Amazon’s margins. Facing this pressure, many vendors simply accept Amazon’s terms as-is, viewing them as a cost of doing business. Dirk Brederecke observed this firsthand during his eight years at Amazon leading vendor negotiations for a major category. Time and again, he saw brands “hand over a bucket of money” without seeking something in return.

The truth is almost every Amazon vendor term is negotiable. Vendors often underestimate their negotiation power and lack a clear strategy. Instead of asking “How can we meet Amazon’s demands?”, Dirk advises flipping the script: What do we want from Amazon, short- and long-term? By approaching AVNs with defined goals and an understanding of Amazon’s priorities, vendors can push back on default terms and reclaim substantial value.

“Always remember, it’s about a strategic give-and-take. It’s not a one-sided negotiation.” – Dirk Brederecke

Consider this: 69% of vendors expected their 2025 negotiations to drag on 1–3 months. Prolonged haggling often happens when vendors feel they have no leverage. In reality, Amazon Vendor Negotiations are an opportunity to craft a more balanced partnership – if you come prepared with data and a plan. Before diving into tactics, let’s review which Amazon vendor terms are on the table and ripe for negotiation.

Key Amazon Vendor Terms You Can Negotiate

Amazon’s vendor agreements include a slew of trade terms and allowances. The good news: virtually all of them have some wiggle room. Here are the key terms every 1P vendor (and agency representing vendors) should understand and be prepared to negotiate:

• Co-Op Marketing Allowance – A percentage-based accrual Amazon takes (often ~5-10%) for marketing your products on its site. This “co-op” fee is negotiable in both rate and how it’s used. Many vendors get little transparency or ROI on co-op spend, so consider pushing for a lower rate or redirecting funds into more measurable programs. (More on this under trade-offs.)
  
  
• Freight Allowance – A charge to cover Amazon’s cost of shipping your products from your warehouse. Amazon may propose a fixed percentage or per-unit fee. Brands can negotiate better freight terms by utilizing Amazon’s logistics programs or agreeing to efficiency measures. For example, Amazon might ask for an 8% inbound freight fee for a consolidation program, but you could counter with 5% if that’s the only way it’s profitable for you.
  
  
• Payment Terms – The time Amazon takes to pay you (e.g. net 30, 60, 90 days). Extended payment terms hurt your cash flow, so this is a critical term to improve. If Amazon wants other concessions, you might trade them for faster payments. Dirk notes he’s seen brands accept a slightly higher co-op fee in exchange for significantly better payment terms because cash flow mattered more to their business.
  
  
• Amazon Vendor Services (AVS) – A paid account management program (often ~3% of sales or a fixed fee) for dedicated support. AVS fees can be negotiated down, especially if the cost far exceeds the value provided. Some large vendors were paying 3% across multiple countries – amounting to $600k–$800k for essentially one Amazon contact. If that’s “way too high,” push for a lower rate or additional services, but be prepared to offer something in return.
  
  
• Damage Allowance – A percentage (commonly 5%) Amazon deducts to cover damaged or returned units. This is negotiable with data and a plan. Dirk recommends requesting Amazon’s damage/return reports and scrutinising the root causes. If you can implement packaging improvements or quality fixes to reduce damages on Amazon’s side, you have a strong case to lower this fee – say from 5% down to 3% over time.
  
  
• Subscribe & Save Funding (SnS) – Vendors often fund a discount (e.g. 5-15%) for subscribers. Amazon might propose a flat accrual (e.g. 3% of sales) to cover SnS discounts. Crunch the numbers: what percentage of your sales are via SnS, and what is the actual discount cost? If the flat 3% exceeds the real cost, negotiate it down or ask for a “flex” (variable) arrangement. You can even haggle the flat rate itself – e.g. push 3% down to 2.5%.
  
  
• Other Operational Programs – Amazon has various supply chain and operational programs (often offered as part of terms) such as PICS/Super-PICS (inventory consolidation), Full Truckload, VendorFlex, Direct Import, WePay, and more. Each comes with its own cost or discount structure. All these logistics programs are negotiable. Evaluate which programs actually benefit your business and negotiate the associated fees or requirements. For instance, if Amazon asks for an 8% fee for a Pan-EU inventory program, counter with the maximum rate at which it still “wins” for you (maybe 5%).
  
  

Every vendor’s mix of terms will differ, but the overarching principle is: every term has some degree of flexibility. Rather than taking each line item at face value, analyse its impact on your P&L and question the value you get in return. This mindset lays the foundation for a strategic negotiation, where terms aren’t just costs to minimise but tools to align with your business objectives.

Align Terms with Your Business Goals

Before you even respond to Amazon’s asks, step back and define your strategic priorities. “What is my specific goal for the next 12, 18, maybe 36 months?” Dirk challenges vendors to answer. By clarifying your business goals first, you can structure your negotiation to support those goals.

Ask yourself: Which concessions from Amazon would most help us grow? And which asks from Amazon impact us the least (or can be mitigated)? For example:

• If your aim is expanding into new regions, focus on securing better logistics terms. Dirk suggests prioritizing programs like Amazon PICS or regional support that reduce supply chain friction in target markets. You might also negotiate Volume Incentive Rebate (VIR) agreements that reward Amazon for growth on specific ASINs or countries – aligning both parties on expansion goals.
  
  
• If your priority is improving cash flow or margins, zero in on payment terms and reducing costly allowances. Perhaps you’d be willing to accept a slightly higher co-op % if Amazon agrees to net 30 day payments instead of 60+ days. Or trade a small bump in one allowance for Amazon waiving another fee that hits your bottom line harder. One brand Dirk worked with traded a higher co-op rate for much faster payments – because cash flow mattered more than a bit of extra marketing spend.
  
  
• If new product launches or branding is key, consider what Amazon can offer beyond dollars. For instance, one vendor offered Amazon exclusive rights to a new product for 3–6 months. In return, Amazon provided extra marketing placements and, critically, refrained from price-matching other retailers during that period. The vendor gained a boost in visibility and consistent pricing (protecting margins), while Amazon got a unique offering. Trade-off deals like this can directly support your go-to-market strategy.
  
  

The takeaway: know your short- and long-term goals, and rank which vendor terms help or hinder those goals. Then you can approach negotiations selectively – giving on terms that matter less to you, in order to get more of what truly advances your strategy. As Dirk sums up, vendors must stop simply finding ways to give Amazon “X” because it asked. Instead, determine what you want from Amazon and use the negotiation to achieve those outcomes.

Strategic Give-and-Take: Trading Value for Value

Successful Amazon negotiations are a balancing act. Rather than a combative stance of “we won’t pay that,” think in terms of trade-offs: What can we offer Amazon that it values, in exchange for something we value more? This collaborative mindset is key to unlocking win-win deals.

“Trading off always means giving Amazon something it values highly in exchange for something you value more.” – Dirk Brederecke

Dirk shared a few creative trade-offs from his experience to illustrate this give-and-take:

• Higher Co-Op for Better Payment – As mentioned, a brand agreed to a higher marketing co-op percentage than they’d like, but negotiated much shorter payment terms in return. The improved cash flow (faster cash conversion cycle) was worth more to them than the extra marketing fee outlay. Amazon, for its part, cares deeply about net pure profit margin (Net PPM) and cash flow, so faster payments from Amazon’s side is easier to concede than losing margin. This trade satisfied both parties’ needs.
  
  
• Exclusivity for Marketing Support – Another vendor gave Amazon a 3-month exclusivity on a new product (Amazon was the only retailer who could sell it initially). In return, Amazon boosted the product’s visibility with additional homepage and email placements. An extra benefit: no other retailers were selling that item, so Amazon didn’t have to price-match (which preserved the vendor’s margins). Here, the vendor “gave” Amazon a unique offering, and received brand exposure that might have cost far more if they tried to buy it via ads.
  
  
• Shifting Co-Op to Growth Incentives – In cases where Amazon insists on a high Automated Marketing (co-op) rate (say 8-10% of sales), vendors should ask: what are we really getting for that money? Dirk noted many vendors pay hefty co-op fees for mysterious benefits (“some placements on subcategory pages” with no clear ROI). Instead of simply slashing the co-op (Amazon rarely will cut a fee without compensation), propose redirecting those funds into a growth-oriented incentive. For example, set up a Volume Incentive Rebate (VIR): “We’ll keep an 8% spend, but it becomes a rebate if we hit X sales in France, Y in Italy, etc.” In practice, you might agree to a 8% “growth fund” that Amazon rebates if you achieve, say, €1M in Q1 and €2M in Q2 on that product set. Amazon still gets its margin if you underperform, but you get a payoff if your growth bets succeed. This turns a nebulous marketing fee into a tangible incentive for both sides.
  
  
• Co-Op for Data/Reporting – If completely cutting a term isn’t viable, at least negotiate for value-adds. Dirk recommends scrutinising co-op or MDF (Market Development Funds) spends: do you receive any report or benefit, or is it an “empty” term? If Amazon wants, say, 5-10% for co-op marketing, request detailed placement reports or periodic performance reviews as part of the deal. Often, you might get more useful data by investing in Amazon Advertising instead of opaque co-op programs. Use that as leverage: “We’re willing to pay X% in co-op, but only if it comes with A, B, C deliverables. Otherwise, we prefer to invest in Sponsored Ads where we see direct returns.” This may prompt Amazon to either concede some co-op or at least make it more accountable.
  
  

The principle across these examples is to give Amazon something it wants in a way that also advances your interests. Amazon values profitability, growth, selection, and operational excellence. If you can offer a concession aligned with those (e.g. a new product, more ads, a supply chain efficiency) that costs you less than the benefit you gain in return, it’s a smart trade.

Crucially, frame your offers so that your Amazon Vendor Manager can “sell” them internally. Remember, vendor managers have to justify any term reductions to higher-ups by showing how an alternative benefit makes up for it. Make their job easy: for instance, if you ask for 2 points off co-op, come prepared to show how a new supply chain program and a big Q4 promotions budget will offset Amazon’s margin loss by X basis points. You’re equipping the vendor manager with a story that trading one term for another still meets Amazon’s goals.

In summary, don’t approach AVN as a battle to eliminate costs – Amazon rarely simply lowers a fee without recompense. Instead, see it as a puzzle of value exchange. Know what matters most to Amazon at the time (e.g. is leadership pushing for more Subscribe & Save adoption? more supply chain efficiency? more deal events?) and use that as your bargaining chip. Trade low-priority value on your side for high-priority gains.

Data-Driven Negotiation: Speak Amazon’s Language

If there’s one thing Amazon respects in negotiations, it’s data. “Amazon responds to clear stories, and they should be backed by data. Amazon loves data,” Dirk emphasizes. To negotiate effectively, vendors (and their agency reps) must marshal the facts – and frame them in terms of Amazon’s interests.

1. Build Your Case with Numbers: Before your negotiation, analyze everything: last year’s sales, margins, fees paid, operational metrics, etc. Identify pain points and quantify them. For example, if you’re pushing to lower a damage allowance from 5% to 3%, come armed with return rates, defect analysis, and a plan (new packaging, better prep) to reduce those damages. Show Amazon the cost savings your proposal offers them – “this change will save Amazon $X in returns handling, which justifies a lower fee.” The more concrete your data, the harder it is for Amazon to dismiss your ask.
   
   
2. Prioritize What Amazon Cares About: Amazon vendor managers are measured on metrics like Net PPM (profit margin), shipped revenue growth, and operational health. Tailor your negotiation points to align with these. For instance, demonstrate how your ask to reduce co-op will enable you to invest more in Amazon Advertising (driving more sales growth), or how a better freight term will allow you to expand selection (driving more revenue for Amazon). 
   
   Even though retail and advertising are separate departments, frame your total investment holistically. “We have one budget to drive Amazon sales – if co-op is too high, it leaves less for Sponsored Ads which actually fuel growth.” While a retail Vendor Manager officially “won’t discuss advertising” since it’s another division, making them aware of your total spend trade-offs can influence the conversation. Some savvy vendors even insist that their total trade spend includes advertising, forcing Amazon to consider the bigger picture. 
   
   You might say, “We’re prepared to invest $500k in growing on Amazon. That includes $300k in advertising. If Amazon increases our retail terms beyond $200k, we simply can’t spend the rest on ads.” You’re subtly reminding them that Amazon (as a whole) benefits from your ad investment, even if the vendor manager’s KPIs don’t count it. This can create internal pressure to compromise on pure trade terms.
   
   
3. Use Chris Voss Negotiation Tactics: Dirk is a fan of former FBI negotiator Chris Voss’s techniques (from Never Split the Difference). Two in particular can be game-changers in vendor talks: mirroring and calibrated questions. For example, if your vendor manager says, “We absolutely cannot reduce your damage allowance from 5%,” calmly mirror the statement back: “It sounds like you absolutely can’t reduce the damage allowance?” – and then pause. This slight push often compels them to elaborate on why they “can’t” . 
   
   In Dirk’s case, the manager revealed they had internal targets on returns cost. That opened the door for a calibrated question: “What would need to happen for you to be comfortable lowering it?”. This question flipped the dynamic from a flat “no” to a problem-solving discussion. Suddenly, Dirk and the Amazon manager were brainstorming packaging improvements and steps to cut return rates – which led to a mutually agreed plan to gradually reduce the damage allowance to 3%. By mirroring and asking the right open-ended questions, you turn a confrontation into collaboration. The vendor manager feels heard and is prompted to work with you on a solution.

“Suddenly, instead of arguing, we were solving problems together... and in the end, we agreed on a clear step-by-step reduction plan.” – Dirk Brederecke (on using mirroring to negotiate a lower fee)

4. Leverage Operational Improvements: Another data-backed tactic is offering operational efficiencies as bargaining chips. Amazon highly values vendors who reduce waste and improve customer experience. If you can show data on improved fill rates, fewer chargebacks, faster delivery times, etc., use that as evidence when asking for better terms. For example: “Our in-stock rate improved to 98% and we adopted your Vendor Flex program, saving Amazon logistics costs. In light of that, we believe a 1% reduction in freight allowance is warranted.” This ties your negotiation request directly to Amazon’s cost savings or customer satisfaction – hard benefits that a vendor manager can appreciate. (Pro tip: Amazon has internal “expert teams” that can help vendors address issues like high return rates. Engaging those resources and then presenting the results in AVN shows you’re proactively making Amazon’s life easier, which earns goodwill.)
   
   
5. Understand the Human Element: While Amazon prides itself on data, remember there’s a person across the (virtual) table. Vendor Managers vary in experience. A junior manager might stick rigidly to the playbook out of fear of making mistakes. If you encounter a hardball negotiator who won’t budge, it might be about their comfort level, not the merits of your case. Tactfully, you can ask if others need to be involved or escalate politely by looping in higher-ups when reasonable. Also, pick your battles – focus on 2–3 big wins and don’t die on every hill. As Dirk puts it, “Don’t dilute your power. Double down where you’re strong”. If you present data confidently on your strongest points, you’re more likely to break through a vendor manager’s defenses.

By approaching the negotiation as a data-driven, consultative dialogue, you shift from adversaries to partners solving a puzzle. Cite metrics, ask thoughtful questions, and listen. Amazon’s team will realise you mean business – and that giving a little on their side could unlock greater value in the partnership. As Paul Sonneveld summarized, it’s about “not necessarily taking money off the table, but putting that money into buckets that drive your business…either to help your strategy or drive a better ROI, not just hand over a bucket of money”. Data and dialogue help you make that case convincingly.

Early Preparation: The Key to AVN Success

To truly win the Amazon vendor negotiation game, the work starts long before you sit down at the table. “Preparation is everything,” as host Paul noted – and Dirk wholeheartedly agrees. In fact, Dirk recommends beginning your AVN prep a full year in advance. Here’s how to get a step ahead:

• Start in Q1/Q2 for Next Year’s AVN: Many vendors make the mistake of scrambling in Q4 when Amazon’s annual negotiations typically occur. Dirk’s advice: “If you are negotiating right now, you might be too late… The prep begins one year ahead.” By mid-year (or at least a few quarters out), begin analyzing your performance and formulating your wish list for the next AVN cycle. Early prep also means you can address issues proactively (e.g. fix that packaging problem causing high returns) before Amazon’s asks come in.
  
  
• Analyze Every Term’s ROI: Create a detailed model of all the fees, allowances, and terms you’re currently giving Amazon, and what you get in return for each. Identify the “empty terms” – costs you pay that yield little benefit. For example, are you paying 10% in co-op but seeing no measurable lift? Is a 5% damage allowance still justified given your improved quality control? List out each term with its cost and any associated benefit or program. This analysis will spotlight which terms to target for reduction or reallocation.
  
  
• Build a 18–36 Month Plan: MerchantSpring’s experts often work with vendors to craft an 18 to 36-month forecast covering various scenarios. In practice, this could be a robust spreadsheet model projecting your sales, Amazon fees, advertising spend, cost of goods, and net margins each month for the next 1–3 years. Incorporate planned changes – e.g. “if we cut co-op by 3 points in Q1, and reinvest 2 of those in ads, what happens to sales and profit by Q4?” Having this long-term view helps you quantify the impact of negotiation outcomes. It also impresses Amazon; you can demonstrate that “with these terms, our model shows we both grow profitably; with those terms, our growth stalls.” This level of preparation signals professionalism and confidence.
  
  
• Identify Your Top 3 “Asks”: Come into the negotiation with a clear, concise agenda. Dirk suggests having three clear asks, supported by data. For example: 1) Reduce damage allowance from 5% to 3% by Q4; 2) Improve payment terms from 60 to 30 days; 3) Switch Subscribe & Save to 2% flex plan instead of 3% flat. These should directly tie to your business goals (and ideally overlap with Amazon’s priorities). Having a focused list prevents you from getting sidetracked by minor points and keeps the discussion centered on what matters most.
  
  
• Prepare Trade-Offs in Advance: For each ask, be ready with a corresponding give. What will you offer if Amazon pushes back? Perhaps you’ll increase your annual deals budget (e.g. commit $100k to Amazon marketing events) if they grant the payment term improvement – but structure it with conditions (like specific ROI or service-level agreements) so it’s mutually beneficial. Maybe you’ll join a new logistics initiative if they cut the damage allowance. Planning these exchanges ahead prevents scrambling in the heat of negotiation. Essentially, you’re scripting the “if we give X, you give Y” scenarios so you can propose them confidently.
  
  
• Document Everything: Keep a history of what you agreed to last year versus what actually happened. Did Amazon deliver that quarterly performance review you were promised in exchange for co-op? Did you fund a big promo but not see the expected lift? Use those learnings. If certain agreements weren’t fulfilled on Amazon’s end, politely bring that up – it’s fair grounds to ask for better terms or credits this time around. Also, track your operational metrics (out-of-stock rates, chargebacks, lead times) and improvements achieved. This documentation can serve as evidence when you justify asks or push back on fees.
  
  
• Educate and Align Your Team: Negotiation prep isn’t just for the Amazon-facing folks. Loop in finance (to understand cash flow needs), operations (to tackle supply chain fixes), and marketing (to plan advertising vs co-op budgets). An aligned internal team ensures when you make promises to Amazon – like improving packaging or shifting spend to ads – you can follow through. It also avoids internal roadblocks: there’s nothing worse than negotiating a great concession, only to have your CFO balk at a trade-off you offered without their buy-in.
  
  

The impact of thorough preparation cannot be overstated. Dirk shared that one of his global clients, after extensive prep with clear data and strategy, concluded their AVN in a single meeting in January. (A negotiation that had taken four months the previous year!) Both sides came prepared and knew exactly what they wanted; the result was a quick agreement on fair terms. Imagine reclaiming months of bandwidth by wrapping up negotiations in a week instead of a quarter – and then using that time to focus on growth initiatives.

Preparation breeds confidence. And confidence (paired with data) often leads to Amazon making concessions it otherwise wouldn’t. As Dirk tells his clients:

“Confidence and preparation beat reactive negotiation every time.” – Dirk Brederecke

When you walk into AVN discussions armed with analysis, a long-term plan, and well-crafted proposals, Amazon’s team will recognise a serious partner across the table – one they want to work with for mutual success.

Conclusion & Next Steps

Mastering Amazon vendor negotiations is both an art and a science. It requires the art of negotiation – understanding human psychology, asking the right questions, and crafting win-win propositions – and the science of data – digging into numbers, building models, and objectively demonstrating value. By following the strategies outlined above, Amazon vendors and the agencies that support them can transform AVNs from dreaded annual showdowns into strategic business planning sessions.

In practice, “winning the Amazon vendor game” means securing a terms package that fuels your growth and maintains Amazon’s profitability goals. It’s about finding that sweet spot where both parties feel they’ve won. With a clear strategy, thorough preparation, and a collaborative approach, you’ll be far better positioned to achieve favourable outcomes – whether that’s lowering onerous fees, gaining marketing support, or simply concluding negotiations faster so you can get back to running the business.

If you found these insights valuable, there’s much more to learn. Consider watching the full webinar recording with Dirk Brederecke for a deeper dive into Amazon vendor negotiation tactics and examples.

As an Amazon agency professional or vendor, staying informed is your competitive edge. And if you’re looking for hands-on support, get in touch with MerchantSpring – we help vendors and agencies elevate their Amazon performance, from analytics that inform AVN prep to managed services that execute your strategy.