Changing the narrative of AVNs to an opportunity for positive outcomes (featuring Stratably)

For many years, AVNs have been a dreaded yet required piece of doing business with Amazon for vendors - but this blog post in partnership with the study produced by Stratably and Consulterce aims to to change your perspective on AVNs, provide insights as to what we’ve seen from the last round and how the process has evolved over time, and provide recommendations for approaching AVNs for 2025.

You can read Stratably’s most recent AVN report here.

Why AVNs matter 

AVNs, or Amazon Vendor Negotiations, are annual meetings where brands negotiate with Amazon on how much they are going to be paying Amazon to continue doing business with them - meaning these negotiations are exclusive to 1P vendors.

AVNs provide brands with the opportunity to look at performance on a yearly basis - has the brand overpaid on anything from last year’s agreement? Or are there any programs that would be strategic investments to be involved in for the next year? Because AVNs are on an annual basis and can often take months to finish fully - it’s important that brands are fully prepared for these negotiations so that they can come in with an agenda that aims to accomplish their growth goals and solve their business needs.

What Stratably observed from the last round of AVNs

Stratably and Consulterce surveyed over 250 brands on results from this past round of AVNs, and the key themes can be broken out as such - intensity, trade terms, and margins. Overall, negotiations were stressful and challenging as Amazon has grown to be a higher-stakes retailer for most brands, but at the same time - the needle has moved in favor of the results that many brands have been pushing for, and not all negotiations have to end unfavorably. 

Intensity

Stratably defines intensity in negotiations as how challenging the process felt, the level at which Amazon pushed, and an overall temperature check of how negotiations felt compared to years past.

15% of brands surveyed described negotiations as straightforward or collaborative, while 72% of brands described negotiations as challenging and/or stressful - but take note that that percentage is similar to years past. Amazon knows that it is an incredibly valuable customer for a brand, and Amazon is likely to push hard for what is favorable to them.

On average, AVNs last about 3.5 months, and can be longer or shorter, which means that brands not only have to prep significantly in advance but will also have to continue to be agile in pulling data and insights to bring back to the table based on how negotiations proceed.

Trade terms

Trade terms can include anything related to marketing accruals or co-ops depending on the terminology that a brand uses - and these consist of damages, freight allowances, AVS, Vine, premium content abilities, and beyond - all of which require a delicate balance of what a brand is willing to pay to Amazon and not run dry while also trying to invest in potential opportunities that do reap rewards.

Stratably’s research has indicated that the average brand today pays somewhere in the mid-to-upper teens in overall trade terms and that after this last cycle of AVNs, those trade terms increased on average about 50 to 100 basis points, or half of a percent to one percentage point. This can vary by category, though, and year after year Amazon often finds itself successful in negotiating higher trade terms out of brands.

Even if trade term increases are small, they still add up year over year and many brands are feeling the squeeze. There isn’t usually an infinite pool of funds for brands to pay Amazon with, and this means that brands are increasingly reaching their limits of what they’re willing to pay in trade terms. 

Stratably’s research showed that 9% of brands did successfully actually decrease trade terms, but that can be attributed to large brands reaching growth maturity and Amazon realizing that increased trade terms might need to be sought after for faster-growing brands of different sizes. We tend to focus on how AVNs have changed for brands over time, but Amazon has also learned to seek parity in trade terms as brands are strategic partners to Amazon and vice versa.

Margins

Brands have historically thought of Amazon as a margin-decretive channel, but, Stratably’s research has shown that this isn’t necessarily the case for many brands. This is a fact that often needs to be shared  with the C-suite as they often believe strong margins are unachievable, especially if they are overseeing a business that has not been set up and operated correctly.

Stratably’s research has found that for many brands, Amazon is a competitive retailer when it comes to margins and Amazon continues to outperform when it comes to its growth - and brands should use this positive momentum to continue to invest in their Amazon businesses while coming into their AVNs strong.

What this means

AVNs will likely always be stressful for brands and will require months and months of prep, but, they don’t have to be full of doom and gloom when correctly and strategically prepared for - and doing this requires collaboration between ecomm leads for a business, agency partners, and a common understanding all the way up to the C-suite.

“I think counterintuitively, AVNs are a good thing. They're stressful, they're unpleasant, they can be confusing. But if you're leading Amazon for your brand, it's a great way to shine in your organization by skillfully negotiating with Amazon to get to a great outcome for your business and an acceptable outcome for Amazon.” - Russ Dieringer, Stratably

How to prepare for the next round of AVNs

Timing & time commitment

Brands should anticipate their teams spending around 4 months on the AVN process as the key to achieving successful outcomes is the preparation phase of negotiations. Ideally, brands should start analyzing their account and planning scenarios well ahead of Q4 and shouldn’t wait for Amazon’s invite to kickstart the negotiations. We like to think of profitability management as an ongoing and always-on activity - not something to begin just ahead of AVN. The negotiation process itself typically involves 4 phases: Preparation, Negotiation, Escalation, and Conclusion. 

Brands should take the opportunity to arrange ‘Top to Top’ meetings with Amazon Directors and Category Leaders. These meetings can be a prerequisite for entering into annual negotiations and be used to define high-level ways of working, outlining your brand’s strategy, and agreeing on mutual priorities to set the scene prior to the beginning of the AVN process. 

Negotiation strategies

When it comes to negotiation, it is important that brands make investments that are conditional and tied to tangible returns. For example, bulk buys in return for cost support or moving base investments into volume incentive rebates. Brands should aim to optimize investments for ROI by targeting growth-oriented initiatives like VINE and Premium A+ and understanding in detail the value of each investment. Cost price negotiations with Amazon can be tougher, so brands need to back exceptions with data and demonstrate or model shifts in RRP. Understanding your Amazon profitability on an item level is also key to making targeted investments at the product level to combat profitability issues; avoiding blanket investments and solving for non-issues.

If brands encounter roadblocks, leveraging senior relationships within Amazon and escalating via top-to-top meetings can be effective. Brands should aim to finalize the terms in writing and include clearly defined KPIs, agreeing on regular (quarterly) review periods and resisting pressure to agree to timelines that accommodate an Amazon-imposed schedule. Brands need to also ensure all resources and programs are in place from Day 1 of the contract period.

After the negotiations, brands should conduct a post-mortem with relevant teams to document key learnings for the next cycle, including contingency plans for Amazon disincentives. It’s important to always anchor yourself using your calculated ZOPA as the basis and to be the first to table your 'ask' in full. Offers should be made contingent on specific conditions with precise numbers to enhance credibility.

Partnering with an agency

Navigating Amazon's complex negotiation landscape can be challenging. Partnering with an agency that takes an always-on approach to profitability management can make a significant difference. Brands can leverage their agency partners expertise for P&L analysis, advertising efficiency, supply-chain improvements, and high-margin assortment. At Flywheel we ensure that we support our clients to align their AVN discussions with a brand's wider business objectives, ensuring a less attritional AVN cycle.

Preparing for Amazon Vendor Negotiations requires meticulous planning and strategic execution. By partnering with our agency, you can leverage our expertise to navigate the complexities of AVNs and achieve mutually profitable outcomes. Contact us today to learn how we can support your brand in the next round of negotiations.

‍