Exploring Amazon Vendor Services: Is it worth the Investment?

Paul Sonneveld
Hi everyone, and welcome to today's episode of Marketplace Masters, where we strive to go deeper into the challenges that vendors face to lift e-commerce and marketplace performance via really practical actions and insights. I'm your host, Paul Sonneveld, and today we're going to discuss Amazon Vendor Services or AVS and explore if this offering is right for your business as a vendor. Now, to help us do this, I've invited Asha again to join us today. She's a frequent guest to our podcast to share her expertise and perspectives. 

Before we get into it, let me just introduce her to you. Asha is the founder of Etopia Consultancy, a results-driven Amazon strategy consultancy, offering e-commerce expertise to global brands. Now, she has actually worked at Amazon and now she manages the marketplace from the other side of the table. Now and due to this distinct position, she has the ability to strategically navigate Amazon for consumer brands. She loves dissecting Amazon as a sales and marketing platform. Whilst highlighting what that truly means for a business. Thank you so much for being on the show again today. 

Asha Bhalsod
Thank you Paul. Always, I love chatting with you. 

Paul Sonneveld
So, today we're talking about Amazon Vendor Services. And for those of us that may be wondering, what is Amazon Vendor Services? Maybe you can just give us a really brief description just to set the context before we dive into the detail.

Asha Bhalsod
So Amazon say AVS as a service. It's a privileged and customized service. And what it is, is a person in the Amazon business looking after your brand and working for your brand. And it's a paid for service. A little bit of an expensive paid service, but they can work for your brand, advocate for your brand, and do root cause analysis for some of the challenges that you've got.

Paul Sonneveld
So, that sounds very, very interesting, particularly in the context of, hey, you mean to say there's actually someone inside Amazon that can help me? It sounds too good to be true, and we'll get into that. We'll unpack all of that. But the first thing I wanted to do was just put up the results of a poll that I run on LinkedIn this week. I'm going to try and see if I can add it to our stream here.

There it is. Actually, this was asked specifically in the Amazon Vendor group on LinkedIn really asking the question, Do you use it? Do you use Amazon Vendor Services if you are a vendor? And then with a little bit of a side question there, which is, what do you think of it? So everything ranging from, yes, I'm super satisfied with the ROI. There is a cost involved. We'll get into that right down to, you know, I've never heard of it, I've never used it as a vendor. So as you can see, the results are very distributed. 

And there're certainly, I saw lots of responses that were very strong about, yes, it's absolutely working for me. Yes, it's expensive, but I'm getting my money's worth. Right up until, never doing it, never recommend, it's a waste of precious dollars that should be invested elsewhere. And as you can see everything in between. So I was going to ask you Asha, like, what do you make of this? Why do you think there's such a variety of responses here? 

Asha Bhalsod
Yeah, so AVS used to be called SVS. So, we just want to get that out in the open because this program has changed names and we now, you know, the AVS service we call the person that is managing your brand, a Brand Specialist. So, they'll have the job title as a Brand Specialist. So, there has been an evolution of this program and you know, I've worked with this program for the last 14 years of my career. So, I feel like I know this program very well. It is Marmite, but Amazon is Marmite, so let's just also put that out there that it is, interesting. Everyone has an opinion on this now.

It is a privileged invite-only service. So, if we've got vendors that haven't even heard of it or have not used it, it might be because they've not been invited to use it. And what typically happens is at terms negotiations with your vendor manager, if you have a vendor manager, and that's also probably another root cause and issue with some of the challenges that come with the AVS program as well is you get invited if you'd like to partake in the AVS program.

Now if I think about the evolution of the service, they sold it as one person, responsible for advocating your brand and supporting the growth aspirations for your brand. And now it has evolved. It is, you know, a combined effort, a team effort for lots of various different aspects of the business. And it could be, you know, update and progress. On, on joint goals and joint deformed goals. 

Can I also say it's a dedicated service team. You have access to a live chat. There is much vendor requests are done in a much more fast-tracked time system. At the moment, you know, you case management is the bane of many Amazon account managers live. You know, case management still exists, but you can then almost escalate the case to your AVS and fast-track that. And there are then, of course, proactive tasks that the AVs can do. Now, lots of businesses may have not heard about it. I just want to reiterate, it is something that a vendor manager would advocate at terms negotiations and you'd be invited into it.

Paul Sonneveld
So just let's talk a little bit more about the scope of service. You know, AVS, so we're talking about a range of services. If so, what are they? Or are we talking about a person who's sort of your internal assistant that lives within an Amazon office? What is the scope we're talking about here?

Asha Bhalsod
So, the scope I would say actually starts at the very beginning of the relationship and when I was sold the AVS program, I understood the challenges that I had, and it's also understanding about Amazon and the journey Amazon are in, in terms of their life cycle and we hear about profitability challenges that Amazon have got.

We talk about, we hear about the redundancies, and there is a reality to some of this, which is Amazon vendor managers are getting more and more limited. Therefore, they have to also the ones that do exist, they have multiple amounts of brands to manage and therefore there is only so much work that they are going to do on your brand. And an AVS is able to help support the vendor manager with your brand. 

So at first, you know, from day dot, you need to create a joint business plan and or a vendor improvement plan, which is what an AVS does actually create. And they are understanding the challenges that you've got in your business. And so therefore they are signing you up to pillars of service. And actually, on an AVS presentation, if you ever sold the AVS program, they talk about these pillars of service and you sign up to what you think are the challenges that you've got or where you want to grow your business. 

And some of these pillars of service are things like selection, traffic, availability, conversion, business advice, deals and promotions is another one. And you decide what are the right pillars of service that you want your AVS to focus on. And a way kind of the AVs goes to create a vendor improvement plan to then make sure that your strategy and your goals are being executed against the pillars of service as well. 

Paul Sonneveld
And just in terms of this plan, is that something that the AVS presents back to you and you get to sign off on and provide input in or is it more of a one-way type? 

Asha Bhalsod
No. The AVS should go away and create a vendor improvement plan based on the pillars of service that you have selected. It is also your responsibility to talk about your business, talk about your brand, talk about strategy, talk about the aspirations and your three-year goal plans with Amazon, and you would want your AVS to almost be like a member of your own team. But it sat in the Amazon, in the world, universe. I was going to say office, but who sits in an office these days? 

So it sat in the Amazon universe and advocating and so therefore, they will be present in exclusive deal event meetings, and they can champion if they know that you as a brand want to participate in deals because that's one of your pillars of service. So, they can advocate for your brand to be included in some of these exclusive events. That's an example of where it can work really, really well.

Paul Sonneveld
Yeah, I'd love to just understand some of the context a little bit more. Yeah. So you're talking about these pillars of service, let's say, I'm picking the, I think there was one around traffic and conversion. And I'm agreeing with my AVS. This is an area of focus, really want to improve our performance in this area. What would a typical plan sort of look like around that particular pillar? And on what actions is Amazon taking to deliver on that plan?

Asha Bhalsod
So if we start everything has to start with data. So, one of the other things that you should get if you're not getting the AVS, is weekly business reports. Now, some of the AVS might say, oh look, it's all available on Vendor Central, but you can quite specify that, that this is something that you would like as part of your Improvement plan. 

And it could be product visibility you might need support with, so they can help you with that. It could be analyzing traffic channels and like do some real developmental action plans against that. It could be, you might have a new product, a new brand that you're releasing. The AVS can have a plan ready for that. It might be promotions ordering, it might be overstock as a thing. There's so many aspects of it.

Paul Sonneveld
Yeah. This all sounds very appealing to me. I can just imagine picking up the phone to this AVS person or the person that's facing the AVS program, for you as a vendor and taking up all of their time, right? Is this a dedicated resource, like a hundred percent dedicated to us as a vendor? Is it shared? How is their time and how's the resource that sits behind them, like balanced between vendors?

Asha Bhalsod
So this is what I would say, probably the biggest criticism about the AVS program. That and the cost of it. The answer to that, to your question, quite specifically Paul, is are they dedicated to your account? No. They will have multiple accounts to manage. Now, that is somewhat unfair when you think about the cost of the service. How is this person managing? Sometimes five, sometimes six different brands. 

Look, I don't know the answer to how many brands they have, but you know, I have heard that some brand specialists have over five or six, but then say of those five or six that they have, what is the level of service that these brands have signed up to? Because actually you can sign up to s full AVs, which are all six pillars of service or you can sign up to half AVS, which is, I think it's three, might be four pillars of service. 

And can I say this? The information I'm sharing is dependent category by category. And, you know what I'm saying today on the 28th of June, 2023 might be made redundant on the 29th of June, 2023 because Amazon changes so much. So they are not solely looking after your account. So let's just remind ourselves that the AVs program that you buy into it might be one person, but it is a wealth of different services. Like, for example, a live chat. However, that resource that is, is the face of the AVs program will have multiple brands.

The next question I can almost hear you asking me is, have they managed when they've got so many brands? The truth is, it's challenging. However, if you have got weekly calls in with the AVS, you have a task tracker and you're and you are tracking the work that you've asked them to do, you've got some deadlines against what you need to be done when you need it done. And you have a good relationship and they understand your business. They understand your goals, they understand your products, and they understand the strategy behind it. And AVS could be super powerful. And there are so many ways that you can measure the success and the return of investment of your AVS through that.

Paul Sonneveld
So on one hand it's you're dealing with this scarce resource, manage the resource actively, and don't wait for them to manage you. So, things like weekly meetings, again, I don't hear this in the context of Amazon vendor-focused podcast that I do on a weekly basis, weekly meetings, that cadence is expected and delivered on Amazon's behalf.

Asha Bhalsod
Yeah. The challenge is Paul, if you know, the people that are listing and that have got many years of trading experience with Amazon will relate to this, which is there was a space when they sold the program, and they almost told you that this is what you should be doing. Now they sell the program and don't tell you these things. So, I understand why there is a lot of negativity surrounding the program and the cost of it. When you think, you’re think you're paying for one person in Amazon to manage your brand and then you realize actually they're managing five and they're not getting to what you are asking them to get to. So, I can fully appreciate some of the negativity that comes from it.

I will say though, you have to be managing the AVs like you're managing a staff member. And you have to be challenging them, giving them KPIs and benchmarking. And if you're not satisfied, escalate it also. Because it is a cost and you are paying for it. But then there are other ways and mechanics of measuring success. So I have clients that have had an ongoing catalogue and operational challenges. And with the ongoing challenges of vendor managers not being able to invest more time into individual brands, I advocated for them to invest in AVS. And the cost of investing in maybe, as I said, would be super worthwhile because I think you'd be able to do root cause analysis into finding out, how to resolve some of the ongoing operational challenges.

Now, the cost of hiring the AVS resulted in a full catalogue cleanup. The client receiving multiple purchase orders for items that they've not been able to receive for a long time, and for some of the chargebacks to be admitted and actually, taken away. So not only were they able to break even, but they were able to deliver double-digit growth on their brand by just using an AVS.

Paul Sonneveld
How much should our budget pay for or how much does it cost? Cause we're talking about cost and we're talking about payback. And just in case the answer is actually, it all depends on the category in the country and all of that, and the negotiation. But if I, as a vendor, thinking about budgeting for next year and the cost of this, what should I be thinking about order of magnitude? Half an AVS versus a full AVS. 

Asha Bhalsod
Yeah.  So, if you're going to try, so let's, actually, let's address the cost question. The cost is very subjective based on the terms negotiations that you've got going on, and how profitable your business is as well, but approximately, 3% is kind of the average of the cost of an AVS historically and this is again where the people that have been trading with Amazon for a long time will know about this. The typical cost of an AVS used to be 150,000 pounds. Now they've moved away from a flat fee to a percentage and that does have a floor. So, you know, there is a minimum spend on the AVS program.

When you're thinking about whether you should invest in AVS. I take it back to also profitability, Net PPM, which we unearthed in a previous podcast with one another. But if you are investing in one of your terms as, I don't know, volume incentive rebate, VIR, which I'm not a massive fan or an advocate of. And that is, I don't know, a 3% term, you could move that term over to the AVs program and get more return for investing in an AVS versus a volume incentive rebate. As an example.

So it's about the way you have your terms are set up and the perception of the way your terms are set up. Because you could move from one pot to another to invest in AVS. And I challenge people's terms when sometimes I'm given this and I say, well, why don't you invest in AVS? And a lot of business managers will say to me, oh, I've had really negative things about it.

But the other side of it is, well, why give Amazon just 3% in marketing, which you don't even know where it's going, but you could give it in an AVS program where you can measure return investment, you can drive more if the service is managed correctly. So the answer to your question is rough and up about 3%, but, I have heard it go up as high as 8%. So it does depend on category Profitability, Net PPM, and all the things that we've historically spoken about. Does that answer your question, Paul?

Paul Sonneveld
It does. No, no, it's, that's really great. And I imagine, all the apparel vendors are looking at this going 3% sure. No problem. Right? Whereas all the electronics vendors going, oh my goodness, 3%, where is that going to come from? I do like your point around it doesn't have to be 3% on top right? You may want to look at your trading term structure and say, there's other investments that I'm making that actually I'm not getting a return on, or I've got no visibility at all, and maybe this is a better way. 

Asha Bhalsod
And it's a negotiation and that's why it's called trading terms negotiations. It's Amazon expecting you, and we probably need Martin here, right, to talk about trading terms part of AVS, which it all links up together with. As well as Net PPM does and profitability. But look, I'm not advocating that the AVS program is the best thing. It has its strength and weaknesses.

Paul Sonneveld
Yeah, no, of course. And I'd love to get into that in a second but before we do, is there a threshold then? So, if it's a percentage. If put my devil's advocate, I'm putting Amazon's head on, I'm going right, I could sort of try and get all these extra terms up here, but to deliver some of these things, I've agreed with a vendor actually there's a fixed cost involved in terms of a physical person, whereas other parts of the service, that are part of the terms might be more profitable for Amazon. So is there maybe not a documented, but have you, is there any experience in your mind around vendors being knocked back, not being asked or being declined in terms of the participation in AVS? 

Asha Bhalsod
Yeah, I have got experience of that and maybe it's because the brand is not big enough to warrant an AVS. And you have to be a little bit truthful about it, which is sometimes, or they just don't have the correct selection of products or brand that they can see the conversion and glance views on as well. So I have got experience with that. Look, I don't think that this is an investment for small businesses. This is for the medium to mature-sized Amazon businesses that need help and support to drive more incrementality. That's the way I see it. 

Paul Sonneveld
Yeah, no, that makes sense. So let me get back to our survey results. Just to sort of pause again on that. I want to talk about probably these two bars. So, I think, clearly, there's some vendors that haven't had experience of the program, maybe that, you know, and we've spoken about that and the participants up here. But then there's this section here that at some point, they’ve had experience of it.

They didn't see the ROI and therefore they've either left the program or they're thinking about leaving the program. Which then begs the question well. Let's assume that they are sort of that medium to large enterprise-type vendor that you spoke about, in other words in, at least on paper, it's a good fit. What are some of the things they can think about implement or do to actually improve the ROI, of AVS? What works? 

Asha Bhalsod
So, I understand why businesses sometimes don't see the ROI and can I say Amazon don't help themselves because sometimes there are poor brand specialists that are on an account and what typically does happen is that they recruit new people to become brand specialists for your brand once you've decided that you want to sign up to it. 

Cause they have to go and find these bodies to manage which it sometimes means they find somebody outside of Amazon coming into Amazon that needs to learn Amazon, needs to learn the tools, needs to understand systems, understand the reporting dynamics, and then they need to understand your brand and they need to learn about the strategy of your brand. So sometimes, six months into the program before this person can really start adding value. So I can understand the frustrations and why some people don't see the ROI. 

I have for all my clients and for all my years of experience in managing Amazon for previous brands have always said that if I'm going to sign up for the AVS, and if I'm going to sign a contract, I need somebody from within Amazon that already exists as a brand specialist and isn't brand new into this role to take on my brand. And so I would advocate. Now, look, it's a big ask and you're not always going to get it. I would say that's probably one of the biggest culprits to why lots of people don't see an ROI. The second biggest culprit of why people don't see an ROI is the effective management of your AVS. So that you know you have to look at yourself and the way you're managing.

Firstly, have you sat down with your AVS and presented your business to them? Do they understand the brands, the products, pricing, promotions, advertising, and strategy? Have you presented a 101 Amazon strategy to them? If you haven't, however, is the AVS to know what are the priorities and what to work on, and that's probably where the relationship is somewhat reactive.

But if you want your AVs to be in a proactive way of working, you have to be able to demonstrate the strategy and the goals and the KPIs. Linked to that, I would always have a task tracker. And like I mentioned before, I would be constantly providing feedback to say, these are the priorities and let's have a review in four weeks' time, six weeks' time on the priorities that you're working on. And have they moved the needle? As well as going back to the pillars of service and we talk about, I don't know if you signed up to selection as a pillar of service, you are able to measure and say, okay, on day dot of working with the AVS, Amazon, you are only ordering 60% of my catalogue. And we have a problem with 40%. 

In two months’ time, are you now ordering 90% of my catalogue and can I see my net receipts increase? Can I see my sellout increase? Well, these are all measures of success. And so, your return on investment shouldn't just focus on how many times you've spoken to them. It should be about other leaders of what value have they also added. 

Paul Sonneveld
Yeah. And correct me if I'm wrong, but you are able to set these specific measures and obviously, they're all measurable, they're all available. These can be part of the plan that you review on a weekly, monthly basis, hold each other to account and the like.

Asha Bhalsod
Yeah, absolutely. And I understand that you know why people would have voted to say that they are not receiving an ROI. Amazon probably hasn't told them that this is how to manage the service. So sometimes you are pushed into a service, this service, quite particularly, and not know how to manage it effectively. 

Paul Sonneveld
Yeah, makes sense. Now, let me talk about the downside scenario here. Let's say we were involved in screening, the AVS person. We've been given someone with training wheels on. The training wheels never seem to come off in the bad sense of the word. What are my options here? I mean, what's the duration of the AVS contract or the service around that? And how do I escalate if I'm not satisfied with the AVS performance?

Asha Bhalsod
So, the contract minimum term is 12 months. And I would always request to Amazon to put in a clause in the contract to say that the agreement doesn't auto-renew without a feedback session at the end of the 12 months. Now if after, I'd give the AVS minimum three months, before we start deciding on whether this is working for you or not. 

At three months, if you feel you are not satisfied, the AVS, the brand specialist does have a team lead, so I would request a meeting with the team lead where you can provide feedback. Be truthful, and have facts. Have a task tracker in front of you to say, you know, what have you asked for? What have you not got? And be truthful about it. And also be honest about, were you or was your business also a blocker in some of the challenges that the AVs has had? Because that's another thing that does happen. You don't realize that some of your own challenges are within your own internal organization. So, provide the feedback to the team lead and if you're truly not satisfied over a period of time, ask to change the brand specialist. 

There's also a bit of a common joke, which is if a brand specialist is really, really good, they will stay as a brand specialist for 18 months before they get moved into a vendor manager role. Look, there is a bit of a reality to this too, which is if they're good, of course, why would they not advance in their career? So, I wouldn't be upset by that. It's just me. It is frustrating because what can happen is you have a very good brand specialist working on your account and then they get promoted and then you have another brand specialist and you feel like you're starting all over again with them learning about your products and brands and issues again. So, there is no magic answer to that as well. 

Paul Sonneveld
Thank you. Alright, we are past the half an hour mark. We have a few questions that I want to get into before we wrap things up. I've got another couple of my own as well, but let me just go to our audience here on LinkedIn. And for those of you who are tuning in live, feel free to pop any further questions, in the commentary box on LinkedIn and then we'll bring him, we'll surface him here. Let me start with a question from Gabriel. He's actually got two, but let's start with his first one. Is it really easier to implement assuming cost price increases if you have AVS? 

Asha Bhalsod
I feel like we could do a whole podcast on CPIs.

Paul Sonneveld
Yes. 

Asha Bhalsod
But very quickly, Gabriel. I wouldn't say it's easier. I would say you have somebody able to do the analytics and just have a bit of a human touch to the process. Otherwise, what would happen is you'd upload it into Vendor Central. And if Ventral Central isn't able to see the margin almost being the same, a cost price increase in the retail price, they would almost reject the cost price increase.

However, an AVs, you might be able to get them to track and analyze market pricing, and it might also be able to be linked with a bigger investment coming information and deals elsewhere. So I wouldn't say it's easier, but I would say it just allows you to have a human person analyzing it better for you.

Paul Sonneveld
Thanks to your question, Gabrielle and thank you, Asha. One from Mark here. I guess just relaying some of his experiences. We've had instances where we have been forced into 6%. I'm assuming that's the terms for AVS, in some cases that has resulted in switching revenue out onto the seller side. Surely that 6% is better spent on Advertising. You know, perhaps a leading question there but your reaction.

Asha Bhalsod
Mark, you've got a hybrid strategy clearly. I don't have the answer to that because there is going to be some level of cannibalisation. But I would actually say, what is your hybrid strategy set up correctly where your vendor and seller have different products. And therefore, if you are then going to invest 6% in AVS, that is going to cannibalise your seller. So should you, is it better spent on advertising? The answer is what is the overall strategy of the business? Is it to move the business more to the vendor? Is it to move the business more to the seller? And if it's to move more in vendor, then AVS will be able to support and aid and fix some of those challenges. If it's moved towards more seller, then yes, go and invest in 6% in Advertising. 

Paul Sonneveld
Great question there, Mark, and thank you Asha for, responding to that. Okay, last question from me. Maybe a very pragmatic question. For those of us that still have a vendor manager. So we now have a vendor manager and, an AVS person. How do they engage, and interact with you as a vendor? How does that relationship work? Is there a hierarchy there, there are different teams. What does that look like? 

Asha Bhalsod
So, an AVS will also have multiple brands across multiple categories. Now, if the AVS is good and you're advocating it, they should go and speak to the vendor manager and the vendor manager should understand what's going on with the brand specialist and vice versa, the vendor manager doesn't have time to work on your brand. And so, therefore, some of the admin need tasks and some of the reporting they might ask the AVS to look at. From a high hierarchy perspective, the vendor manager, I believe, is probably a level above a brand specialist. However, the vendor manager is not responsible for the brand specialist. A brand specialist has a team lead and that's the point of escalation.

Paul Sonneveld
Thank you for clarifying that. That's very useful. Okay, we are out of time. So let's wrap it up there. Thank you so much, Asha. I think these sorts of topics as we saw from the survey results, there is a fair amount of polarization out there when it comes to views and approaches. I really appreciate your perspective and just drawing us back to yes, it's expensive. But there is a way to get an ROI, and a lot of that will depend on the type of person, that you're allocated, but even that you can influence in some degree. But it is also about how hard you work at this as a vendor. How much time you are investing in terms of educating the person, building a plan, holding to account, and being proactive in managing that resource. So thank you for providing that, that really balanced perspective, and sharing tips, along the way too. I always ask this for anyone who wants to get in touch with you and explore some of these questions a little bit further. What's the best way to get hold of you?

Asha Bhalsod
Directly? You can email me on asha@etopiaconsultancy.com.

Paul Sonneveld
I think I still have your email here. There we go. Just bring it up the screen. Let people to write that down if they need to. Excellent. Great. Well thank you so much for being on the show, Asha. I really appreciate it. You've already given me an idea for our next one, which is definitely going to be around cost price increases I think. But, always a pleasure. Always great to have you on the show and I look forward to the next one. 

Asha Bhalsod
Thank you very much, Paul. 

Paul Sonneveld
Take care. 

Asha Bhalsod
Bye. 

Paul Sonneveld
Thank you. Bye. Okay, everyone, thank you so much for tuning in today. I hope you enjoyed that session around Amazon Vendor Services. If you do use this service right now, I hope you walked away with a couple of kind of practical things that you can do to improve the return that you get out of the money invested there. Thank you so much for tuning in, and I look forward to seeing you in our next episode. Until then, take care.