Vendor Summit | Winning Without Surrender

Session Transcript

Paul Sonneveld
Now, to kick off today, we're going to dive straight into negotiation strategy here. Our first speaker here is Asha Bhalsod from Etopia Consultancy. Hi Asha, great to have you here. 

Asha Bhalsod
How are you doing? 

Paul Sonneveld
Very good, very good. So for those of you who know, Asha is the founder of Etopia Consultancy and creator of the Amazon Mindset. And with over thirteen years at Amazon, Tommy UK, Melissa & Dog, Asha brings really deep marketplace insight and a practical, structured approach to negotiations. She's going to walk us through how to negotiate confidently, protect margin and maintain control through the AVN process. All right, Asha, I'm going to hand the mic to you. The stage is yours. 

Asha Bhalsod
Thank you, Paul. Appreciate it. Good morning. So this morning, I'm going to take some time to talk everyone through the dreaded AVN negotiations. I think what I find all the time is when we're going through the AVN negotiations, we somehow forget that people are human and that our vendors are human too. So we're just going to touch on a little bit about relationships, how to manage some of those relationships and then, you know, when to push back, how to push back and when and how you stay in control of those elements. 

So negotiations with Amazon doesn't mean you surrender power. I always find that when negotiations with Amazon, you're trying to find a win-win piece. Are you trying to find a win-win piece? Martin yesterday spoke heavily about, how do you negotiate terms with Amazon? And I felt it was a fantastic session because you dive deep into the drivers of the KPIs specifically that the Amazon Vendor Managers are trying to find, and how you go about talking in those kind of languages. 

One of the challenges people have almost immediately is not knowing your data. And if you do know your data and you know it very, very well, you're already starting in a very good place with managing that relationship and managing the AVN that you're entering. There is a kind of a fear that everybody seems to have around needing to say yes to everything that Amazon asks for, and a fear of if they don't say yes to all of that, Amazon are going to stop ordering, they're going to crap out your listings and the things that we know that typically happen. I want to talk about how we shift some of that power. Yes, there is the ultimate fear that Amazon will stop ordering, but I would want to start with a way that says you need to try and ascertain what your end goal is. Is it that your account, your Amazon business, is not as profitable? And if it isn't as profitable as you want it to be and your end goal is to reduce your terms, that's something that internally is your entire business needs to handhold and say, that might mean that we're going to have some pain along the way, but our business needs to be sustainable. Therefore, we need to reduce terms.

Now, you're not going to be able to immediately reduce all your terms, but you're going to have to experience some pain along the way. And that means by just owning that there's going to be some pain, you've already got an element of the power. If, for example, you're trying to redistribute your terms to make the terms more cohesive in a way that's going to drive your sellout, which is an underpinning strategy that I talk about fundamentally in the market a lot, then there shouldn't be that much pain along the way. But you need to know what programs that you want to buy into from the start. You need to have a clear thought-out strategy of what you want to do and how you need to go in to get to that before you get to the table with Amazon. Amazon Vendor Managers have limited time. And when they have limited time, they want to be able to talk with their vendor partners in a way that's almost easy for them. 

What often happens with Vendor Managers is we come to the table and ask them, well, what other programs can we be part of? We feel that our terms are too high. I would urge you all to go away and do plenty of research on the programs that are available across the category. It's as easy as, you know, putting it through Google or spending time in some of these vendor summits to educate yourself and learn what kind of category-specific terms there are and what you can be a part of. Hopefully, some of these things are also the things to drive the seller. 

Now, Amazon is a powerful retail partner for all of us, but that doesn't mean we need to put all of our eggs in that Amazon basket. We have to remember that there are alternative routes to market. And it's not something that I openly say that we have to whip out almost immediately when we're not getting what we want from the AVN negotiations or when the relationship is going sour. But it's always important to have some of these things in your back pocket. Some of these route-to-market conversations, for example, the hybrid approach, which I know is coming up in the discussion later on in the day. It could be potentially switching off lines that are not profitable. We also have to remember that Amazon wants selection. They are a selection-driven business. And therefore they don't want to lose your selection. They don't want to lose selling your products. So their power is crapping out your ASINs. Their power is stopping buying. 

So we need to flip some of that power, and we can almost say, well, we won't give you some of this selection because this selection is driving our net PPM lower. If you are aware of what those specific net PPM goals are, or these items aren't profitable for us to sell to you, Mr. Amazon. Therefore, we're going to take it away. That is regaining power. That is being in control of your total Amazon business. Now, of course, some of these conversations can be emotional. They can be challenging because the VM will not like that. So it's a fine balance on how and when you need to put your points across on what those alternatives are. I wouldn't use them as threatening mechanics. I wouldn't use them in a way to get what you want almost immediately. We talk often about how Amazon as a retailer is constantly a challenging retailer to work with, and we need to find mechanics of allowing all brands to be able to trade profitably. 

Now, we all know that Amazon want margin positive, retail-ready brands that make their category look good. I want to go back to the points I was making about data and how it's fundamentally important that you have a deep understanding of the impact you're having in your category. That data and knowledge of the impact you're having in your category will be a real game changer of how you're approaching your terms and your negotiations with Amazon and the way you're managing those relationships with Amazon.

Market share is very important to have, and it's very easy to be able to go and get data to say, what the total category is doing on Amazon, what your brands and products are growing or declining in that category are doing versus your competitors. That data to have in your back pocket and have those discussions is very important. If you can identify that you now are a category leader or a top-five category leader, that puts you in an automatic position of strength. You now know that Amazon Vendor Managers don't want to lose your selection or do not want to lose your business.

So Amazon wants now, we know that you're a category driver. We know that because the market share of data is telling us this. So we now know that Amazon wants to work with you, and we've now regained that power back again. So this again puts us in a position of strength. And we know that they're not necessarily going to say no to the things that we want to achieve to grow our business. But we have to know that data, and we're going to need to understand our competitors' landscape on Amazon too. Because whilst we may not want to give all the terms that Amazon are asking for, our competitors might be doing that and might be much more profitable for them.

So there is a risk here that Amazon will focus on our competitive products and give them further opportunities to grow in the category. And we might be on the back foot. But the power exists by knowing that data to begin with. So know your data, know your numbers. Are you asking Amazon the right questions in the forefront meetings that you're having with your VMs before terms? Are you asking about how important you are as a vendor to them? Are you talking to them about the products that are doing very well for them in the category? I would be having these kind of conversations so that you have some of these things in the back of your mind when you enter some of these negotiation conversations. 

Amazon are also looking at you as a total vendor to say, are you making their life easy? Are you using an AVS, or are you using the Vendor Manager as a person that's doing a lot of the grunt work, basic stuff that you can do through the AVS or case management things to resolve? Vendor Managers want to be strategic, and they want to have these top-level conversations. So if you're having conversations with Vendor Managers that are not deeply rooted at a broader strategy level, but you're talking about just the simple, brilliant basics along the way, they're going to have a different view of the way that you're managing your account. That is also a way that you're going to lose power. They want to work with vendors that have that top knowledge of an in-depth overview of Amazon and how to feed the algorithm on an ongoing basis. 

So we've talked about managing the relationship. We've talked about how to regain control. And now it's about understanding what your worth. So we've talked about what kind of data you have access to and how you can use some of those data points to enter some of those conversations. You need to know your worth. You need to know your net PPM in the Amazon space. And Martin touched on it yesterday, which is, what kind of net PPM data you should be looking at and not just the Amazon version, but your own profitability. And I would bring that to the table too. 

Knowing how profitable you are for Amazon. It's a very convoluted process. It's not as easy as we will say it is, but knowing a basic level of profitability and what you're taking to the category is very, very important as well. And let's take it back to internal alignment as well. It really matters that as a business, that you are driving sellout and not hyper-focused just all the time on selling. It's very easy for me to say that in this conversation, but it's quite often it's a challenging thing where we have senior members of the business constantly trying to achieve a sales target, and they're always talking about driving sell-in. 
The vendors that are the most successful about building their relationships in the Amazon ecosystem are the ones that understand that we need to drive as much sellout as possible, which fundamentally means that the sell-in will happen. Let's make sure that your internal teams are not misaligned on those goals. And when you're having those discussions with the Vendor Manager, you're doing it in a way that talks about driving the sellout in a profitable way as well. 

Now you're entering in a negotiation with Amazon. They will come to the table and probably ask for everything. And that's their job. Their job is to ask for everything. It's your job when to say no and how to say yes profitably. So how do you go about doing that? We've talked about data. We've talked about relationships. We've talked about making sure that you're a sellout business that's driving sellout all the time. We've talked about knowing the value of your products and brands on the total Amazon ecosystem. We now need to try and understand what are the Vendor Manager's goals?

The Vendor Manager has to grow their profitability in their category. If you're a category leader and you are driving profit in that category, they're going to want to earn more profit from your products. So this is where Vendor Manager's job is to come in and ask for more terms, more cost price decreases. And at this point, you need to be able to demonstrate very clearly through data that this is your P&L, this is Amazon's P&L, and this is not profitable for you either. By demonstrating this very clearly, it's almost easy for you to say no, because you're letting data do the talking, which is what fundamentally Amazon does. They lead by data, and that's what you should be doing. You should be mirroring some of that behaviour and that language that they're using. 

So they will ask for cost price decreases to regain the power again. You shouldn't be shy to say we will take these products that you're asking for cost price decreases to and we'll stop selling it on Amazon and have in your back pocket a couple of different routes to markets. And there are strategies that you can adopt. whether it's 3P strategic 3P partners, whether it's strategic distributors, whether it's your own hybrid operations, but there are other routes to market. Now, there may be some short-term pain where you will lose, a little bit of volume over a period of time, but you're regaining control of your total Amazon business by making these products unavailable to Amazon. Because Amazon Vendor Managers will not want to go back to their cat leads and talk about that selection that they're losing because they weren't able to reach a good negotiation. Know your numbers, know your numbers, know your numbers is the fundamental rule that happens here. 

Building relationships and partnerships with Amazon has to be done in a win-win way. We can't go in and say no to everything. We're going to have to say yes to some things. But we've got to try and understand and evaluate what is actually of importance for them and what's actually important for us. Once we're able to identify those things, we've got to try and find ways some win-win cohesive strategies on where there is some kind of bridge between both. You're not going to go and say yes to things that are unprofitable for you. Amazon aren't going to say yes to things that are unprofitable for them. So we're going to need to find ways of making these conversations about win-win. You're going to have to give on some certain things. That might be unique selection. It might be special products that they've wanted. It might be a little bit of a cost price discount on a certain range. It might be investing a little bit more in terms, but with the view that your overarching business on Amazon grows. 

There are buckets that Amazon are always going to want you to invest in. AVS program, PICS. Some of these I would call the brilliant basic terms. And if you're not doing some of them, I know there's sessions later on about talking about the benefits of doing it. Amazon is a pay-to-play-to-win machine, and therefore, you're going to have to invest in areas that are sometimes not logical. Sometimes you're not going to always see the return of investment that you're going to get from that. But sometimes you're going to have to invest because you're going to have to find the win-win on this. With Vendor Managers and a lot of the news that has happened this year about Amazon making a lot of staff redundant, Vendor Managers are really up against it. They have much more brands to manage. They have many more terms negotiations that they've got to do and very limited time. We've got to try and remember this because it's the human way of interacting and remembering that whilst we're going to be going in with data and all these other things, we have to try and remember that they are human at the end of the day. 

They don't necessarily have all the time and luxury of getting into the details and data I said earlier on that you know go away and have a look at the different programs that are available across multiple different categories and there's there's ample ways of being able to do that go in armed with that knowledge and make your Vendor Manager's job easy.Iif you make their life easy they're going to make your life easy. There is a kind of an old school way of treating buyers that we've all experienced in retail, which is taking them out for lunch, taking them out for a drink or a coffee. 

The thing is, Vendor Managers at Amazon don't have that luxury and time to be able to do these things. They want to work with the vendors that are driving profitability and growth in their category. You need to go away and find mechanics that is making your products and brands have a unified strategy with the Vendor Managers. Are your products and brands growing profitably for them? If they are, that relationship becomes automatically very easier to then manage. Amazon, and I don't know how well this is known, but Amazon do tier their vendors. You'll either be a tier one vendor or a tier two vendor. And we talked about another event of whether there is tier three vendors. I think there is tier three vendors. Your tier one vendors are going to be the vendors that are driving the category, top one or two.

I don't think there'll be any more than that. And then pretty much everybody else will be in the tier three, the tier two or the tier three. So if you can try and identify what tier you sit into, you then need to manage that relationship with your Vendor Manager and make it easy based on knowing that they're only going to really give a lot of time to their tier one vendors and potentially some tier twos. So my final thoughts for this morning's session. As Amazon's profit continues to be a real challenge, the AVN negotiations are going to be tough to manage. Know your numbers and have the data on hand on what you're delivering for Amazon. And don't be shy to pull out of certain programs or your selection if Amazon are not giving you what they want. Also remember that Amazon starts in-house, but be a business that is driving the sellout and not just the sellers. 

Paul Sonneveld
All right. I sense the pause there, Asha. I think that's the end of your presentation. 

Asha Bhalsod
Yes Paul. 

Paul Sonneveld
Excellent. All right. Let me give us a bit more real estate here. That is great. Thank you so much for kicking us off and giving us a bit of a different perspective on how to deal with Amazon. It's not just a rollover and give in, which is what I think many of us need to hear at times. So, just to i just want to encourage anyone if you've got questions for Asha we do have a couple of minutes at the end now to ask her anything relating to this topic. It feels like we're still getting our caffeine into our systems. It's a little quieter than it was yesterday the end of at the start of the day but not to worry.

I  will kick things off I have collected a couple of questions here so I want to just get these in front of you Asha. Let me kick off with this one. I think a lot of times brands have the perception they have no leverage. But how can we break that myth? I mean, what are some of the indicators that we can look at to give us the confidence that we actually have leverage in negotiation? And how can Vendor Managers really help surface these internally within their own organisation and get alignment around that? 

Asha Bhalsod
So I've talked about knowing your numbers and knowing your data. Look at your rankings on your products and brands on Amazon. And if you're in the best sellers, that's your biggest indicator that you've got leverage for negotiation. I'll repeat it over and over again. Amazon don't want to lose your selection. Amazon don't want to crap out your ASINs. They do it in a threatening way sometimes. Sometimes you need to regain control by doing some similar type of mirroring behavior. 

Paul Sonneveld
Cool there, and anything around do you want to add anything around just getting a limer like I can foresee situations where the Vendor Manager may be really confident but maybe the finance director doesn't have that same belief, right? I mean, as you work with your clients, how do you kind of strengthen the internal belief across those businesses to really sing off the same hymn sheet, right? 

Asha Bhalsod
Yeah, that's challenging, right? As an agency owner to try and educate my clients that it's sometimes doing nothing and just letting the situation unfold is the right thing because they're nervous. They've got goals to hit. They've got net receipts to hit. And all of a sudden, I'm saying to them, just don't do that. Just let's switch off. Let's not sell the product. I've actually been very fortunate that I have been in a business before where the terms negotiations didn't go to where we needed them to go. They wouldn't take the cost price. Amazon wouldn't take cost price increases through. And as a business, we all held hands and said, okay, we'll stop sending Amazon stock. 

Now, look, that was a drastic thing. And I would only recommend that there is internal dialogue on this if this is a real drastic problem. But this particular business had a huge chunk of their sales coming from Amazon. And those cost price increases were significant for them and they needed Amazon to accept them. So we stopped shipping stock to Amazon, and it lasted about four months. Yes, it damaged the business, but for the long-term strategy of the Amazon account and the account health, it was the right thing to do. So it's not an easy conversation to have internally. And I wouldn't, I would say that any account manager, you need to go and have those discussions with the seniors in the business to say that the risk is that Amazon will stop purchasing for a number of months. Don't forget that you've got so many different routes to markets and opportunities now where you can be strategic and go and partner with selected 3P players to sell through some of that inventory that you may have in the warehouse. 

Paul Sonneveld
Thank you. I might leave some of those questions until the end of the day where we can talk about how do you build those other paths to market so that you don't say goodbye to eighty percent of your business overnight, which I think is so critical. I want to get back to another point that you made earlier, which was around sometimes you want to create a win-win and you need to say yes to things. I think that's a given. 

But if I can ask a supplementary question on that, which is if we're going to have to say yes to things, what are the what is the menu of things that you find it much easier to say yes to versus, what are the ones that really at the bottom, you find like, you know what, if you really have to please Amazon, say yes to that, but actually don't expect any form of ROI for those things. So, you know, what are the top three things at the top? And what are the what are the bottom three things perhaps? 

Asha Bhalsod
It's once i'm sniggering a little bit because i tell all my clients this give Amazon payment days please if they want something give them the payment days. I know your finance director will hate you but moving from thirty sixty to potentially even ninety to potentially even a hundred and twenty right payment days is probably the quickest win that you could give Amazon and the quickest win you can give yourself as an account manager can I say at that level your fd might hate you for doing it but at an account manager level. 

So what are the things I would absolutely never invest in? God, there's so many programs like that that I would probably never invest in. But A+ premium, it's a very contentious one, Paul, because I don't know how everyone feels about this, but two and a half, three percent for A+ premium, What kind of rubbish is that when we know that the majority of the market gets it for free? That is probably another contentious one I'd say. 

The ones that do move the needle. Again, this is going to be a Marmite conversation. I'm going to say AVS. The more workload Vendor Managers have, the more challenging it is to get anything out of them. I do feel like you need an AVS. Now, I'm going to put like asterisks next to that as I say it, because we all know that the value in the program is almost non-existent. We know that the churn rate is significantly high. And I know you're talking a lot about AVS later in the day, so I don't want to eat into all of that. But I think it's a pay-to-play mechanism. So I would always invest in AVS. 

Paul Sonneved
We have a great session coming up later with Travis. I think where we'll, we'll go really deep. Yeah. On premium A+, actually there was some really good conversation on that yesterday with Ryan Craver for those of you. I would encourage you to check that out a big part of his point that he was making that he thought premium a plus content was fantastic for the consumer conversion telling your brand story and it gets even better if you're able to access some of it through your seller account instead of your vendor account. I don't know to what extent there are restrictions on that in Europe, but there's some interesting takeaways there for sure. 

Let me move to Jonathan's question here. Thanks for your question, Jonathan. How much pressure, Asha, do you believe that Vendor Managers are under internally from their supply chain colleagues to really remove poor, slow performance that is tying up pick slot capacity, working capital, inbound, outbound, all those, basically creating, you know, fulfillment bottlenecks, especially in Q4. I mean, it's a very, you know, are the Vendor Managers driven by the logistics colleagues or? 

Asha Bhalsod
So I will say that literally in answer to him, I don't think Vendor Managers are under pressure from their supply chain colleagues. I'll say it in a literal answer, but I have heard in recent dialogues with some old colleagues of mine at Amazon that supply chain and poor movement of stock is going to be a very specific topic that they're going to be asking for more trading terms on in the new AVN going forward next year. 

Now, this is very category specific, and I work very, we have a lot of clients in the toy category. So this is very specific to the toy category. And I don't know how relatable it is yet to the other categories. But I've heard in good faith that next year that they're going to be doing a lot of work in penalising the vendors that are consistently overstocked or have slow performers and do nothing with it. 

So think about it like from a born to run perspective on when we have to discount the stock after a certain number of weeks or take it back. Those vendors that consistently are overstocked and don't do anything about it, don't take that stock back as an example, are going to be penalised in a big way. Now, has that come from in-stock managers or supply chain colleagues for the Vendor Managers? Very likely, yes. But don't forget, ultimately, that damages the P&L for the Vendor Manager. So all in all, it's all encompassing together. 

Paul Sonneveld
Great answer. Last question from me today. I think I accidentally fleshed it up earlier. This tends to be quite a typical scenario where Amazon, the Vendor Manager, will just insist that you're a bottom quarter performer or whatever metric you are to get you to unlock some funds or performance or whatever that might be. But what do you do if you're pretty certain that actually it's not the case? You may have other benchmarks or anecdotally, you just know that your category average or your growth rate, whatever it might be, actually, you are dragging the Amazon average up. How do you face into those conversations? 

Asha Bhalsod
I think it's going to be super confrontational, Paul, because Amazon's data, they think that it's gospel. We have access to certain other data. I don't think I've got an easy answer to this other than the fact that whatever you go, you do, it's going to be confrontational. So I'd go back to some of the things I have mentioned about how to handle some of those relationships and, you know, are you profitable because your terms are higher? Are you profitable because your cost prices are lower than maybe competitive products are, as an example? So there isn't an easy answer to your challenging question at nine forty four in the morning for all Paul. 

Paul Sonneveld
Maybe we'll come back to it in the panel once we've all caffeinated a little bit more. That's great. All right. Well, Asha, thank you so much for kicking us off this morning. An excellent start. And yeah, we look forward to continue the conversation a little bit later on as part of our panel. 

Asha Bhalsod
Thank you very much, Paul. All right, everyone.