“Amazon is a platform. It is not your partner,” said Andrea Leigh in her opening remarks during the Amazon & Me workshop Tuesday at the Internet Retailer Conference & Exhibition in Chicago.
That’s the key thing to keep in mind when a brand manufacturer goes to negotiate, or renegotiate, their selling terms with the top online retailer in the United States.
Leigh is a consultant who works with brands on their long-term business strategies, and she spent 10 years at Amazon.com Inc. hiring and training the employees with whom brands negotiate terms.
She provided useful tips to help brands prepare for negotiation. Amazon, No. 1 in the Internet Retailer 2017 Top 1000, won’t proactively share much data with brands ahead of the negotiation, so brands need to do their homework and know how to ask the questions that will give them the information that will give them an edge in negotiations.
“They are going to come with a lot of data,” she said, referring to Amazon. “You will need to come with a lot of data.”
Amazon will put out a really big ask at the opening of the negotiation, she said, and “now that you are shocked, you start negotiating down.”
Amazon trains its employees that manage brand relationships to pressure those companies to close quickly and with as minimal contact as possible, she said. Often, negotiations are over email. If necessary, there may be one or two conference calls. If no agreement is reached, the negotiation will escalate to a more senior negotiator. Leigh advised not to feel pressured to close a deal right away.
It’s up to the brand to figure out whether it’s a profit maker or profit drainer for Amazon, and Leigh offered a series of questions for brands to ask of Amazon to better glean where their product or products fall along the spectrum. These include:
- How big is my business relative to the category?
- How does my profit compare to my category peers?
- What are my peers doing better than me?
Getting answers to these and other questions will help a brand identify where it has an advantage it can use to negotiate better terms, Leigh said.
“Know your point of leverage,” she said.
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