Amazon Vendor Negotiation Q&A - Week 10 with Bernard Bolisig

Good morning, everyone, and good afternoon if you're in Europe. I'm Andrew Hamada, back again, co-founder and CEO of Reason Automation with another final Avian Office Hours for this season. That said, Bernard and I were just talking about how we potentially extend this concept into the rest of the year for ongoing negotiation support. So stay tuned for more insights there. Joining me today is Bernard Bulisig from Upshift Marketing. You may have seen him pop in several times previously because he's been really generous with his time and helping out with our other presenters. But Bernard and I know each other very in passing from our time at Amazon when he was a vendor manager and I was still a brand specialist, not quite yet a vendor manager. And now Bernard has been helping brands on the other side of the table for quite some time. Bernard, do you want to give a quick intro, sir?

Yeah, I appreciate that, Andrew Hamada. Yes, it's funny that it's a good way to kind of describe how we knew and didn't know each other. We actually got closer after we all left Amazon. So that's, that's, that's funny to kind of reflect that. That way. But yes, thanks everyone for joining. I'm Bernard Belisig with Upshift Marketing. I was the original senior vendor manager to launch the automotive category, automotive aftermarket parts category at Amazon. I was there for about 5 years. Since leaving Amazon, I continue to advise and represent Amazon US and CA vendors and sellers primarily within automotive. But have extended and expanded coverage into other categories such as grocery, home, garden, kitchen, furniture. We've done some pet stuff in the past, but it's a little bit of everything hardlines for US and Canada. So a lot of the lessons learned and things that can go wrong in like automotive and industrial, everything that goes wrong there goes wrong in every other category. So that's how we kind of, how we approach kind of the other other GLs. I also advise other manufacturer rep agencies, other digital branding and ad agencies. And up until like last year and the year prior, we've expanded advising for private equity that happens to own several other Amazon Vendor Central and seller accounts. So it's kind of come full circle and it's a little bit of everything. But the 30-second pitch for Upshift Marketing is that if you had access to someone that used to work at Amazon that kind of touched a little bit of everything beyond retail, what would you ask them? And that's how we position ourselves.

Well then, it's a good thing we get you here for 45 minutes for free. So get your questions in now, people. Thanks, Bernard. This is literally why I get excited about this series and why I think we should all be really, really grateful for folks like Bernard participating because this literally is free consulting. De facto, you know, and a lot of the people that are participating here generously offering their time are doing so in a way that they normally charge a fee for. So thank you again. Really, really excited. And we've got some questions to get us started here. As a reminder, you can use the Q&A tool here in Zoom to ask additional questions throughout the presentation anonymously or with your name attached if you'd like. And then there's also the chat function here. One thing that I am going to do just to make it easier for people to follow along, I haven't been typing out the questions in chat, but I'm gonna start doing that because I think it's going going to be a little bit easier. All right, Bernard, let's get started. Um, we've got a whole bunch of questions submitted specifically for you that I want to start with. The first one came in, uh, a couple of days ago. It feels like our margins get eroded so much every year because of terms increases, etc., that there's no room left for PPC. How can we help Amazon understand this and be more lenient on terms increases?

Yeah, I love the question. It's kind of— we live and breathe in that question snare every day. I think it's one of the unfortunate kind of downstream effects of tariffs and other things. It's just the cost of doing business with Amazon. I think something has to give, and it's probably not going to be asking Amazon to reduce the pressure of margins as it comes to— as it hits net PPM. But I think a lot of folks are struggling with like CPC creep. So you will just have to scale back. I think that's, it's kind of a hard truth. You just have to be more efficient like with your ad spend. We have some folks, I'll give you an example. We have a top brand in an automotive category that we virtually have zero ad spend, but we're growing significantly. Just because we've kind of shifted focus and advise on investments elsewhere. If you don't have the budget in PPC, you just have to find and claw your way to find opportunities and investments in other areas of exposure, right? Figuring out what it takes to kind of expand your social media footprint, even in very minimal, find ways to have a very minimal but also presence in the promotions element. right? It's like you pay for a lot of money for CPC on Amazon within, you know, within the ads program, but it's not to say you can't make, or you can go ahead and make a coupon and have something that's 50% off. You still have the placement. It's not as impactful, but it is kind of a cheap date version of getting that placement you would've had to do otherwise in a very expensive kind of PPC scenario. In terms of kind of just addressing the cost element, Amazon is putting a lot of pressure. We've seen this in the last 2, 3 ABN cycles, not just addressing that, hey, your net PPM needs to be higher, but they're calling out and isolating specific ASINs. And it's even beyond crapping stuff out. It's suppressions, it's geographic suppressions, it's preventing folks from putting things on direct fulfillment, preventing folks from putting in network inventory. That's just the unfortunate truth. So that's kind of my general approach. I know it's not a direct answer, but if you are struggling to find budget for PPC, it just forces you to find operational excellence and other things that are not PPC promotions, just the standard good old selection content availability things. It's not to say you still can't have the conversation with Amazon vendor manager about profitability. It's always helpful to use like tools, shameless plug for you know, for a reason. But if you have these candid conversations and genuinely say that there, you know, there is no mechanism to profitability if we accommodate your ask, usually if you have those heart-to-heart conversations, you may have a vendor manager that recognizes that their standard copy and paste asks aren't applicable to your business and your company. And they may say, you know what, we realize in this category, these margins aren't going to be as favorable as another category, another subcategory, and then they may walk back. But it's important to have that dialogue, but also important to recognize that, you know, do what you can for the things within your control that are not related to finding PPC budget.

I love that realistic answer that, you know, sometimes the laws of physics say that, you know, you can't eke out more efficiency from things and that you're also not going to be able to change Amazon's perspective that margins matter and compression from tariffs impacts them just as much as it does you. And you can't expect them to let off the gas. I have a couple of follow-ups here. One is about that immediate question you just, you mentioned, or the idea you just mentioned, where if you truly feel there isn't a mechanism to profitability, that maybe you bring a lot of data and you go and have that heart-to-heart with your VM to understand if there is any opportunity for them to go away from standard copy and paste ask. My follow-up question is, is there a risk to that strategy at all?

Yes, the risk is you basically eliminate your Amazon business, at least from what you know it entirely, right? So does that mean, do you walk away from the 1P account? Maybe. But it also forces you to, to kind of do, you know, cost-benefit scenarios of what it looks like to migrate to a 3P. It also forces you to kind of evaluate other business relationships that are kind of unorthodox. You know, you can Google it, you can look it up, but the idea of 1P versus 3P, but there's also weird combinations of 2P, 3P, 4P, 5P, where you're maybe leveraging a distributor that has a Vendor Central account that, you know, as a distributor have lower requirements for net PPM and profitability, that they also do their own ads strategies. There may be a pathway to profitability using a proxy in that sense, and that proxy, whether it be a distributor that's a 1P, whether it's a distributor that's a 3P or an aggregator like the Patterns of the world, there may be a mechanism to redo your margins and selection that gets you a little bit more cash flow following those mechanisms rather than the traditional 1P. I'm not saying close your 1P account, but, you know, at a high level, Amazon unfortunately is the only game in town. But if you're creative and you build the relationships and you have access to manufacturers, distributors, there are ways to kind of circumvent the conventional means of doing business with Amazon, but finding success that way. And obviously there's TikTok too. So there's a lot of migration of— it doesn't have to be Amazon, but I think if you genuinely care about your business, it's up to ownership to figure out what's left for us if it isn't the current relationship with Amazon.

Yeah, absolutely. I've definitely heard of 2P. This is the first time I've ever heard of 5P, so that one's new for me. But yes, absolutely, that there's other pathways to profitability. Potentially if you're using a proxy, and certainly if you're running into the situation where your margins with 1P are so constrained that you can't invest in PPC, that you should absolutely be considering those other channels. One more follow-up for you. You mentioned several off-Amazon ideas to potentially drive traffic instead of PPC. And I heard you mention promotions because you get free placements just for, you know, having a discount that you're funding, external social media or other external fulfillment channels like TikTok. Are there any others that come like top of mind that you're like, oh my gosh, everybody on this call should be thinking about that?

Yeah, I know it's old school, and, and Jeff, we talked about it right before we went live here, but the idea of participation and involvement in, in trade shows, but also in industry-specific initiatives. So perfect example in the automotive category, we have SEMA, SEMA the trade show. For folks that are not familiar with it, SEMA the trade show is actually the second largest trade show in Las Vegas, just behind CES. That trade show is, I believe, data came out a few years back that that trade show is the largest single consolidation of small businesses at one time in the world. So the idea of kind of attendance is kind of a big deal. The beauty of those trade shows And Andrew, I'm pushing, you know, I'm hoping Reason gets there for the next ones. These trade shows offer small businesses, retailers, distributors. It gives you an opportunity and a platform to kind of, you know, you don't have to sponsor stuff, but just to be there. But, you know, a lot of these trade shows, even CES does it, a lot of these other trade shows like Las Vegas Market, if you're in the furniture category, they do have opportunities to call for speakers, whether if it's you want to tell your story as a retailer whether it's attending kind of their throughout the year, these kind of meetings to offer kind of just think tank stuff, right? Again, just use the example of automotive. They have these regional kind of SEMA kind of meetings to talk about the state of the business, laws, retail, general business practices that they assemble folks. And the turnout seems to be pretty significant. I mean, if it's happening in your town, you might as well go. But from an awareness and presence standpoint, if they see that, hey, here's a brand that's showing up, that's a participant in this industry, that's exposure already. In addition to that, it's probably cheaper than PPC to take out an ad in the publications that these not-for-profit organizations like SEMA kind of put out there. So it may be cheaper to spend like $1,000 on sponsoring lanyards at a trade show than trying to figure out a $10,000 ad spend for one month that may or may not convert. So that's kind of, you know, off-the-cuff stuff. That's kind of an extension of kind of social media, but it's in person. But to your question, Andrew, in terms of off-Amazon ideas, I mean, you probably have a marketing team. So make sure from a social media standpoint that you are leveraging the brand and the voice. And even if it's just a monthly monthly or some type of lifestyle in, in usage product thing, I mean, it doesn't take very much to kind of get that Facebook placement, the Instagram ad, or even just posting as a company if you have followers. You know, unfortunately with Amazon, with the brand stores and kind of those kind of stories and things going away, it's not true reason you still can't have that information, that blog, if you're an Amazon associate to still generate traffic, but also kind of push the brand for awareness. So those are kind of some things kind of off Amazon ideas that we generally see a lot of our, our partners and clients utilize. Love it.

That's really awesome. The— I've definitely experienced the power of the offline over the past few years, and even though my strategy has definitely been evolving, the industry-specific shows like SEMA, as Bernard is describing, have been a really, really interesting opportunity for us. And as interesting as they are for me as a service provider, they're way more interesting for brands. Since they're optimized for you. You can attend cheap, you get access to all of the things. People want to talk to you instead of guys like me walking around booth to booth trying to get somebody's attention and hoping that they don't yell at me.

All right. And that's okay. That's part of it.

Oh, absolutely. I definitely need an ego booster after I'm done with these trade show trips.

All right.

We had a couple of follow-up questions come through. First from Jessica Denny, any recommendations on incorporating new product offerings in our catalog and using that leverage in AVN?

Yes. So Amazon loves exclusives. I know Jessica didn't allude to being exclusive, but we find that if you just sell the idea that we're going to launch something first with Amazon, that seems to spark up some interest. When you meet with vendor managers at trade shows, you know, other than profitability, it's still the standard vendor manager playbook, still the standard CSM playbook and account manager playbook. Andrew Hamada, even when we were Andrew Hamada, right? Selection, content, availability. Those are kind of the pillars to kind of the retail relationship. And obviously the first thing is still selection. So, you know, Amazon may not necessarily care that they're going to sell a lot of a new product. They look at it from the ecosystem standpoint. How much more traffic is that product on Amazon going to generate, right? So when you kind of pitch it that way, Yes, if you kind of sell it not as an exclusive, but if you tell Amazon, we're gonna get everything set up first with you, so we have the highest weighted contribution from a content standpoint. We want to give you the opportunity to kind of see what comparable product looks like, and maybe you're going to want to do an initial buy, which is kind of rare, but it does happen. But if you pitch it that way, leveraging launching with you first goes a long way from a relationship standpoint, whether if it's one item or several, it's kind of appreciated and taken the same way. We have a vendor in a big and heavy category with a very large brand, and we've already floated the idea that we're going to get the product set up with you first. We're not saying we're giving to Amazon first, but when we kind of secure that you are our first destination for getting product information, it goes a long way. And maybe with that, if you kind of put together a launch package around that, you may be able to get free placement, other feature placement. You know, you hear on Seller Central, for example, on the 3P side, kind of these incubators and programs that kind of get product going. There are actually mechanisms like that on the 1P side. That isn't necessarily part of the vendor manager conversation, but from the marketing manager conversation if the GL has it. So that's something you may want to shop around, um, outside of Amazon buying more stuff. You could also leverage the new products launching on Amazon first just to build a relationship or just to get an email address or a contact of a marketing manager or a program manager that's working on a program that's related to that product type. So if you're in the furniture category, or if you're in weightlifting equipment, there's big and heavy stuff. If you tell the vendor manager that we're going to launch with you first, they may go get resources for someone to help you to accommodate and make sure you have a better launch plan for something that's so big and heavy or something that affects some other operational challenge. But yeah, great question, Jessica. But yes, leverage it, bring it up. It's any topic that gives them the win that doesn't cost you anything. It can't hurt to bring it up.

It's such a great answer. And the last point about access to a marketing manager, I can validate directly from my own time. You know, after my time in vendor management, I ended up leading marketing for Books, and a big incentive was to get access to our team and in particular to me, because it meant that I was engaged with thinking of ideas for how to promote your product and getting excited about it. And, you know, when I have a good idea and I'm excited about it and you come to the table and you can't quite pay for it, Maybe I find the extra budget or I just lower the price in order to make it happen because I'm really excited about it. And you certainly never get the opportunity if you aren't there in the first place. So yeah, really good call out. All right. We have another awesome follow-up here. Can you use AVN to request more clarity on in-stock spread and have Amazon commit to better shipping times on in-stock items?

Yeah. So it's an awesome negotiation topic. And I will say, even though you're using AVN as a platform for that discussion, it's It's not to say you can't have that discussion all year round. So when you start talking about like inventory mix and balance, we have several clients that are very reliant on direct fulfillment. So I think a lot of times when we, when we lump in profitability, a lot of brands don't realize that you can actually have two separate profitability discussions based on fulfillment channel. What does net PPM look like for in-network, the PO stuff? What does net PPM look like for direct fulfillment? And depending on what that looks like and depending what you're asking Amazon to potentially stock for several reasons, geography, all the other good stuff, there is a mechanism and a conversation to be had about that in-stock spread. Now, if the question was more so for geography, Yes, you can have that conversation. You can, similar to the, the outreach with the vendor manager getting to a marketing manager, you could also use that same outreach to get an in-stock manager or a supply chain manager. So not every GL has an in-stock manager, not every GL has a supply chain manager, but depending on the complexity of the product and the inbound stuff, there's usually one or the other. Outside of AVN, if you have access to that person, you can bug them all year round and saying, we're, you know, we sell a lot of this stuff because of seasonality on the West Coast, but POs are only going through these terrible East Coast DCs that aren't great at the inbound and we get a lot of shortages. You can have that conversation. You're not positioning it from what do I need to give you and what do you need to give me? You're positioning of, you know, positioning the topic as how do we improve the operations for both of us? And that's kind of when you have the conversation. So yes, AVN, you can use it as kind of the start of the olive branch to get access to that person. But the only caveat to only bringing it up during AVN, if you're asking them to correct something operationally, it's probably going to be accompanied with an ask. It's like, hey, you want a longer lead time, give us another half percent. If you want, you know, manual POs quarterly, that's time. And then, you know what, we'll cut those POs, but we're going to need that in the bulk buy. So short answer is yes, you can use AVN to request clarity on the in-stock spread. And then secondly, about the better shipping time, yes. So When you have AVNs and you have the opportunity to request from the vendor manager certain other teams to, certain teams to be in attendance, you can ask for direct fulfillment SMEs, you can ask for other supply chain SMEs, and you can build a case and to talk about, hey, our competitors, we know they're dropshipping, their lead times to customers are only 3 days. Why are ours 2 weeks? So you can present those cases and say, what do we need to improve, um, uh, the lead times for dropship? There are, uh, multiple settings on the backend, and you would have access to a supply chain manager to actually set overrides. Um, if you have a really good dropship warehouse that you know you could turn things around in the same day or in 2 days, you can ask for manual overrides for quicker ship to customer. I think Amazon calls it like click, like click to customer or whatever, like C2 something. But there are manual overrides, and if you have those conversations, you can make those asks as long as you have the data to back up that you can actually accommodate expedited shipping. But yes, use AVM to request more clarity, but operational stuff should actually be a year-round conversation and probably something you bring up at QBRs instead of just AVN.

Yeah, there's a lot there. I'll start going backwards. Don't make it a once-a-year thing, bringing it up multiple times a year. Locking it into AVN, like Bernard said, risks it becoming a part of the negotiation where anything you ask for gets a something that they ask for back. The last thing I'll add before we keep going is as a former marketing manager, I will say that of the people that you want to get into the room, the in-stock manager and the supply chain manager are the most rational and they're You know, the, the vendor manager has their KPI goals, uh, that aren't necessarily grounded in reality. Marketing manager is there to kind of help support those goals and make it easy to extract additional funding. Uh, but theoretically also to grow your business, but we all know that's kind of secondary and in-stock is there to make like supply chain work better. Um, and they're hyper-rational about it. Amazon incentivizes them to be hyper-rational about it. And it can often be the most, uh, like sane conversation that you'll have and best ally that you can have if you're a data person.

All right.

Questions still coming through. So hopefully we get a chance to even address all the ones that we've got here. Another live one coming in anonymously. Our SVS only supports one of our categories, but the accrual charges based on net receipts across all categories. Ooh, I think we got this one last time, but is this typical? If not, can they back out of it?

So the first part of the question, if you don't have full GL coverage and if that was actually agreed upon, that's just an administrative setting. I think, Andrew, we did last week or the week prior, this question came up. If you want SVS coverage, all you have to do is ask and the SVS manager just has to make the internal request and they're going to ask the other GL to approve it and it's usually a non-issue. So that's just kind of administrative. A lot of folks don't realize that, you know, if you have multiple GLs, there has to be something that, that happens on the back end to actually connect it and make it active. We've had situations in the past where our CSM was making changes and they weren't propagating, and then we realized there was that blocker because it wasn't greenlit for them to kind of even work on that account. So first part of the question, you can ask to have it expanded and activated. The second part, regardless if you get that approval or not, it's not necessarily a mechanism to back out. I mean, you can technically back out of the program for no reason, right? It's just an agreement. If it's a program that you feel like does not add value, they'll probably, you know, Amazon will probably ask you to reconsider But it's a program that you don't have to participate in, right? It's different from a co-op agreement or some other allowance where it's kind of a cost of doing business with Amazon. But as a paying participant, if you don't see value in that program, we know of other, you know, we have other clients and know several folks that have just walked off the program because they didn't see the value. So yeah, it's, and that also doesn't have to be an ABN discussion. I think it becomes an AVM discussion because of how much it costs. But I think what a lot of brands don't realize is that co-op you pay for, for a CSM actually doesn't impact net PPM. Amazon will have a conversation because they know that the key approvers and stakeholders are having that conversation about money and investment, but it actually doesn't need to be tied. To the AVN discussion. So anytime you want to back out of the program, anytime you want to join the program, that's fine to do so outside of the AVN cycle.

Got it. Quick follow-up. I don't know if it's the same person or not, but we— it is related. Amazon is asking for a huge increase in AVS terms, saying we are non-compliant. We have not seen anything great from AVS besides helping with deals, and we have issues on the back end. What would you recommend? And, you know, I just heard you say consider walking away, but Do you have anything else that you want to expand on there?

Uh, so this kind of goes back to our point, Andrew, about how, you know, AVN, it's, it's an all-year thing. So, you know, the question about the increases during the, the AVN terms, um, or is this more asking for increases in AVS?

I think it looks like AVS terms.

AVS, yeah. So that it's It's kind of like, you know, it's a position of like the drug, right? There's ABS, Spark, and get you in the door, and you get kind of hooked on kind of the services of what Amazon thinks they'll provide. It goes up every year. That's— it's no different. It's the same playbook as your contract COGS, where whatever your MDF allowance is, surprise, next year it's whatever it is plus 5%. So they're always on the ask. They're always going to reach, and that's kind of part of it. When they say that your terms are non-compliant, I think that's just a safe way for them to say they don't like it. You know, it's always going to be too low. So that's what it is. They'll always ask because unfortunately there are some vendors with margin profiles that rely on Amazon so much that they're going to give Amazon whatever they ask without any fight, right? So I think when you hear that it's not compliant, they're just saying that, hey, you know, leadership says ask for this much and are they below that? Yes. So just that alone defines your current terms as non-compliant. Unfortunately, I think, you know, the idea of an AVS and a CSM, it has degraded over time or, you know, it has evolved where you're paying for that person and they're really just a reporting mechanism and someone to kind of help you push deals through. I think, you know, previously the program was sold as strategic advice, consulting, all this other good stuff, but it's actually not that. A lot of folks, when they signed up for the program, they were under the impression that the CSM would help with P&L related stuff, but they actually don't see that. And even in the last 18 months, they've actually scaled back permissions and access to what CSMs can, can provide. So you can have that conversation. We do know of a lot of folks that have negotiated lower AVS terms. There's a lot of AVS rebranding. You know, used to be called Essentials and Signature. Now it's like Spark and Stellar and all the other good stuff. So Amazon's kind of just, you know, psychologically trying to sell you stuff and pitch you stuff. But if you're looking— if you're not satisfied with your CSM, if you're not satisfied with the program, you are more than welcome to vocalize it and see if you can use that as a point of leverage to reduce the terms. We have a lot of clients that say we don't like that we're paying, you know, half a million dollars for this person. A lot of our clients look at it as this is our highest paid employee that touches Amazon account. If you could pitch it and frame it that way, you may have a vendor manager that takes your side and say, you know what, I get it. You don't want to pay half a million bucks for the, for not so good CSM. Maybe try to counter, get it for 300K. Oh, by the way, that, you know, the savings I got you, can you put that in some MCP funding? I mean, so you can have that conversation, but that's what we typically see. There is a way to negotiate it down, but you will probably need the blessing of the vendor manager, knowing that the vendor manager will probably seek some benefit from reducing your spend on the ABS program.

Yep, 100%. Just like everything else, anything that takes money out of the retail P&L, they're going to look for it somewhere else. All right. We have one more that came in over— excuse me, before the meeting that I want to make sure we get to. We have a vendor manager that refuses to try and understand our business but is actively trying to make mass changes. It sounds like this is somebody who should know better and is informed. She's already tried with very negative consequences. Do we have any recourse?

I feel like I've worked with this vendor manager before, but it's unfortunately, it's so, I think, you know, vendor manager roles, depending on how he or she was brought into the role, you will get some bad ones. You will have some that are subject matter experts for a certain area. Maybe they don't even care and they're in for the rotation. You have some vendor managers that are placed and given the vendor manager role and they don't want to be vendor managers, right? So when you have, you know, if it's confrontational, if it's— if you have a vendor manager that's not very accommodating, they're probably not going to be in that role very long, not because that they're terrible, but because they know that it's not a role they want to stick around with. So we have some folks that have dealt with, you know, with a very poor experience in vendor managers. So there's two things. One, you just wait it out, unfortunately. Two, if they, you know, find a way, find the olive branch that kind of gets them talking to you. For, you know, try to take the emotion out of it when it gets, you know, kind of personal. And you feel like it's kind of a personal pushback on you, that really doesn't help because the ego of some vendor managers kind of override what your general intention is of kind of growing your business. So either wait it out, have a conversation, you know, outside of AVN, have coffee, get her to dinner just to figure out how he or she kind of ticks and kind of work that way. You will hear like on LinkedIn and other places that that type of vendor manager relationship is kind of prehistoric and kind of has gone away. I disagree with that. We still find opportunities that if you find these opportunities to kind of get to know the vendor manager, they may soften their tone. You know, again, Andrew, we see on LinkedIn like kind of the doom and gloom, that day of the vendor manager is gone. Again, I will disagree with that because, you know, I'm, you know, we get invited to soccer games and weddings. Still. So there are opportunities to kind of build a relationship and maybe just figure out what, you know, figure out the root cause of why, you know, why they don't want to understand the business. And that's okay if they don't want to understand the business, but if you can frame it in a way of what's important to them, if they're a cash flow SME, if they're a fulfillment SME, if they're a hazmat SME, have that conversation, find out what actually gets them interested in talking to you and kind of use that as the olive branch to kind of, you know, provide your business questions and challenges not related to your business, but related to the problem, and you might have some opportunity there. She's got a promotion too. So yeah, so I think I will say, I think it kind of relates back to the other conversation. The vendor manager isn't your sole relationship with Amazon. I will say, you know, as a former vendor manager too, we like to balance our time with how much Amazon exposure we have. You should be talking and having relationships equally with your ads AE, your ads account manager, a transportation SME, a DF SME, a marketing manager, an in-stock manager, a supply chain manager. I'm having, you know, I'm having coffee with CSM managers. Right? So those are the types of kind of conversations and kind of more holistic and balanced view of how you should go about it. This way, if you can have those wins with the non-vendor manager, those relationships you build might actually reach out to the vendor manager and kind of soften the blow in that conversation as well. So try to take a holistic, more, you know, ecosystem approach to those relationships, and hopefully the vendor manager will come around.

Really insightful and holistic answer. Thank you, Bernard. The last thing I'll add there is that your vendor manager, even if they just got promoted into the role, every Amazonian, especially in retail, especially in P&L ownership, is pretty ambitious. And they, I guarantee you that person is not looking at vendor management as the thing that they want to be doing 10 years from now. They expect this to be a step on the path. And so to Bernard's point about looping in other Amazonians, that can be an extremely powerful tool because it helps remind the person that you're dealing with that there is a broader ecosystem at play here, that those relationships outlast the current year or month or quarter, and that ultimately you are a part of that ecosystem. Your opinion is part of that ecosystem. All right. We've got Just under 10 minutes left, and I've got a couple more really interesting questions for you. One that we got offline, sharing in the chat: we've heard some brands receive flat year-over-year terms proposals with no changes.

Why?

And Amazon wants an additional 6% from us this year, the most they've ever asked for.

Yeah, so kind of like what we alluded to in the relationships, we have some folks that, you know, vendor managers have told us in the past, like, we're not gonna actually propose any terms this year. And that's okay. So there's a little, so the non-ABN is a thing. But again, a lot of that comes out of the vendor manager and you as the brand have already said that, you know, we make annual, we make year-round investments in engagement, so we don't need the ABN, right? Otherwise, all you're doing is kind of adding up all the concessions that you provided since the last ABN and you're saying we've already given you this. And in a lot of instances that will suffice, right? So yes, we have, we've had several brands with, you know, for years with no changes. We had a, we have a client up until last year, they maintained like a 5% MDF, which is insane. But it's because for whatever reason, the vendor manager, that GL or the subcategory, Amazon may have just looked at it as a growth category and they said we're content with the cash flow generation from this group of vendors, it's okay to leave them alone. So it's kind of luck of the draw for the question. Again, each, you know, there's pressures from central finance of obviously cash flow and net PPM and all that good stuff. But again, it's a lot of times it's still at the GL level of what is going to be sent out to to vendors. So yeah, so it's pretty common. Some folks will be like, no AVN. You may not even see terms show up in Vendor Central if you're not retail managed, for example. It just kind of shows up versus your category for the question. Maybe Central Finance, maybe the EGL got pressure saying that we have a certain threshold of cash flow generation and you are below that, and go ask. So it's related to a kind of just, you know, GL level versus central level kind of guidance. And again, going back to the vendor manager, are they a subject matter expert in cash flow or net PPM or profitability? And he or she may have that as a personal goal related to their employment that they have to ask. So Additional 6%, that's kind of rookie numbers. We've seen folks with, you know, maybe starting out with an 8% MDF and Amazon will ask for a 25%. We've seen that in Canada, for example. That's happened for years. But obviously you're not going to give them all that. But again, there's a little bit of a success rate for Amazon just asking like exorbitant amount. And there are some vendors, unfortunately, that accommodate it because they can afford it, or two, they realize that Amazon's their only ticket in town, so they they have to. So yes, that's, that's, that's why.

Yeah, 100%. The parallel that I end up drawing for my clients is it's like tipping culture. You know, if you, if you go some, someplace and the tipping standard is 10% and you come in and because you can afford it and you tip 40% every time, then suddenly the, the bar is gonna be 40%, uh, more often for more people. And that's exactly how it works in negotiations.

Yeah.

Um, All right, last question that we got pre-submitted. Are there certain types of investments that Amazon values more this year where we should prioritize concessions?

Investments to concessions, it's anything that contributes to net PPM. So CSAs, GMMs, which, you know, we hate it on paper, there's a place for it. But the investments and related to concessions is really just cash flow improvements. In some of the big and heavy categories, categories, it's going to be cash flow generation, so it's MDF. In some of the categories, like maybe with like home kitchen, it's going to be reducing operational costs as the root issue, and the fix for that is reducing returns. So returns getting straight back to manufacturers, damage allowances, we'll see quite a bit of that. But that's really it. It's anything that provides incrementality to cash flow. And then also depending on the GL, the ad spend comes into play. I know a lot of folks, you know, the questions come from the past. No, ad spend does not— is not taken into account in net PPM nor contribution margin. But there are some GLs that look at a CM with ads contribution margin with ads. So indirectly, that improves, that helps with the conversation of cash flow generation. It's not a P&L discussion for retail, but if Amazon sees that amount of cash flow generation related to your brand, they may take into account that that's still a positive contribution to, again, the cash flow position. So that's mainly it. Anything that improves contribution margin, whether directly or indirectly from operational improvements. I think that's, that's where it's at. It's been like that for the past couple years also.

Nice. Okay, super clear answer. And we got 2 minutes left and I saw a follow-up come through from Last Time related to the auto-renewal question that we saw last week. Is it typical for AVN-related terms to have an auto-renew agreement in Vendor Central? And how should they approach it if they hit that auto-renew date and then afterwards Amazon comes asking for increases?

Yeah, so the auto-renew is there just because of the structure of how the agreements are created. On the backend, I'm not sure if they still use it, but there's a system called SES that holds all of the contract terms and all that good stuff. So it's just a setting. An agreement can be set to auto-renew independent from Amazon potentially asking for more before or after it renews. So it's more of an administrative issue of why you see the renewal. It kind of, it's one of those things where like it goes without saying kind of thing. It's no different from when you're just, you're subscribing to Netflix or to Prime, you're subscribing to it, it's going to auto-renew. Oh, by the way, you're going to get a notification that says, you know, because of business stuff, we're increasing the price by this much. It's no different. So yeah, so the auto-renew, it's administrative, and then Amazon asking for more is completely separate from the contract settings, unfortunately.

Got it. Yep. Super clear. So just to restate it out loud, auto renewal administrative setting does not necessarily indicate that you should not expect a separate proposal from Amazon. And the underlying question, if I'm reading it here, is that you shouldn't expect to be able to say, hey, Amazon, you can't change our terms because we already looked at this auto renewed agreement. They'll say, cool, we're still going to try.

Yeah.

All right. We are at time again. This was our last AVN Office Hours session for the year. Thank you very, very much, Bernard. If you want to continue engaging with Bernard, he is available at upshiftmarketing.com. And then also I'm about to link to his LinkedIn here in chat. Let me get my chat window back up. Here you go. Bernard is based here in Seattle, so that's a big part of why he gets to chat with Amazon team members in person. And if you have any more thoughts or have more questions for him about how he leverages that to help clients, please reach out. Otherwise, look for more information from us soon about how we can revive this series and help you become negotiation experts throughout the year. Thanks very much, Andrew.

Thanks for putting the series together. Appreciate it. And thanks everyone for joining.

Thank you very much, everybody.