Amazon Vendor Q4 Updates - Opex, Finops and More

So thanks everybody for joining today. It's really, really exciting to have you here. I always enjoy having Martin to chat with. Last time I think we spoke, Martin was maybe a year ago and I still put that recording in front of my team just to learn as much as humanly possible about what it means to help brands through negotiation. While I and my team are very data focused, you know, you're very much focused on the strategy and the human element of what it means to interact with Amazon as a business and with an asset and organization of people. And I'm really excited to combine our qualitative quantitative insights today to give folks a better picture of what they can expect in 2025.

Yeah, thanks so much for having me, Andrew. And thanks everyone who's joining us today live. I know it's a very busy season, so we'll make sure that we're getting the most out of it from a value perspective so that nobody gets bored. Just maybe a couple of words about myself. My name is Martin Heubel. You used to work at Amazon for around five years, both in the home housewares department. So more accustomed to the kind of hardlines goods before I then in 2018 moved into the consumer goods space taking care of brands in the food, snacks, desserts and coffee space. And then roughly three and a half years ago I transitioned into my role as an independent consultant, now helping first party vendors better navigate their journey with Amazon and also ensuring that they get out on the other side of the spectrum when it comes to vendor negotiations a little bit better by also protecting their bottom line. And I think there's lots to talk about today, so really looking forward to dive right in.

Thanks for joining us Martin, as always. I'm really excited to get to leverage your expertise. We're going to talk about both one piece strategies as well as data inputs for 2025. But to start, we're going to have Martin dive into what he's learned about 2024 and leading into 2025 especially.

Yeah, great. And I think kicking things right off one of the kind of key principles and also the key kind of themes and trends that we very much need to be aware of is that Amazon's retail growth performance continues to normalize. Also beyond the pandemic days where we have seen these crazy growth numbers in the high double digits. I mean, of course this is not necessarily something anymore that we can or should expect. Instead we're seeing that Amazon has had also a couple of struggles. If we direct our attention to the right hand side of this Chart on the slide here, with negative growth, particularly in the second half of the year 2022 and then also the first quarter of 2023, before Amazon now returned to a path of moderating sales growth in its online store department, where we're clearly seeing that, yes, we cannot just rely on Amazon to grow our account organically anymore. We're also becoming increasingly dependent on investing into retail media, investing into qualitative content, and upping our product detail page game quite significantly in order to also gain and get to the same level of traffic as well as conversion that we are used to and have been used to pre and also during the pandemic. Overall costs are increasing as a result. And this also requires us to kind of look at the hidden cost centers, look at what is happening right now in our P and L, and what also happens beyond the obvious, to really understand how we can protect our gross margins, but of course also our net margins when we go further down the line of our P and L structure from an account perspective. Now, if our margins typically take a hit and we have to invest more, that means that on the flip side, Amazon typically has a little bit of a better deal on the other spectrum. And that's what we are seeing on the next slide. If you're just flipping one further, when we are looking at Amazon's financial performance again over the same kind of period of time over the last two years, and if you redirect your attention, particularly on this yellow or orange line chart, depending on how your screen is calibrated, you're seeing that Amazon's operating margin, or also called ebit, has significantly improved over the last two years or so, where it formed originally its bottom in the fourth quarter of 2022 at only 1.8% and now has hovered at the 11 and 10% mark over the last two consecutive quarters. Now Amazon is going to, I believe it's tomorrow, actually releasing their next earnings. And what analysts are predicting so far is that operating margins will maintain at this kind of level that we've seen also in the second quarter of 2024. So Amazon remains very much committed. And we've seen that also during Amazon's annual shareholder letter that was publicized earlier this year, that the online retailer is really focused on bringing down unit costs and the economies of scale that you can kind of get when you are leveraging your volume volume with brands. On the flip side, they're also very much focused on increasing their own efficiencies and their fulfillment networks are not only during negotiations, but also through just kind of an improved operating efficiency, they're really doubling down on improving their bottom line. That is of course also their margins. And suppliers face a new reality when we are looking at this because not only does Amazon prioritize its own bottom line over the growth, particularly in the last few years, but it also requires us to invest more and more into kind of cost centers that are really becoming a higher and higher cost center that we have to manage, particularly when we look at the total cost of doing business with the online retailer.

Martin, not to put the spot, when do you feel like the last time you saw Amazon's operating margins this high?

Yeah, I get the question a lot. I don't remember it to be as high because I think especially under Bezos, the investment focus was much more a priority for anyone who's long enough in this space. I mean, everyone will remember that the first couple of shareholder letters of Amazon pointed to the fact that Amazon is very much in investment mode and wants to yield the return of those investments much later down the road, but not immediately. Also before the pandemic, I mean, Amazon hovered around 4 to 6 percentage points in operating margin, depending on also which kind of business unit really performed well at that time. Keep in mind, advertising and also AWS were a lot smaller back then. Which are the key profit centers for Amazon today? But of course, I mean we are also seeing now that the focus, as well as the pressure for Amazon to right size, the dilutiveness of the retail business that Amazon has had in the past is becoming more and more a priority to eradicate going forward. And we are seeing that. I don't have it here with me today, but if you're actually looking at the retail operating performance, you will see that typically it has broken even for the last three consecutive quarters. So it's no longer true that Amazon requires its advertising or its AWS cloud computing business to just cross fund all of the dilutiveness or the losses that retail incurs. In fact, retail stands on its own feet right now and this is partially driven by, of course, we all know it, the increase in third party selling fees. On the flip side, we're also seeing that vendors are increasingly battling not only during vendor negotiations to protect their own profit margin, but also during what Amazon increasingly focuses on and calls always on negotiations during the year and outside of these vendor negotiation timelines where Amazon has become quite focused on suppressing the buy box, closing the buy box just to kind of nudge vendors to unlock additional budget that was maybe and often wasn't originally planned for the upcoming budget for 2024.

And then as you, you know, just to ask you to predict the future, do you expect Amazon to increase investment to drive that operating margin back down to historical levels? And if so, where do you see them kind of concentrating that?

Yeah, I think let's, let's take it one slide further because I think here we will dive into the answer partially at least. And if you're just bringing this kind of chart to life, you'll see that Amazon typically is very binary. So they're either very much focused on sales growth or on profitability. And when we are looking at the historic kind of curve, then particularly around 2020, 2021, and if you're just skipping through the individual animations that will come up, then we'll have the full chart available. We saw that Amazon was very much focused on growth during the pandemic. I mean, this is probably not necessarily a surprise because the online retailer really wanted to capitalize on the sudden influx of offline traffic that swept into their online storefront. But with the end of the pandemic, we also saw the return to a profitability focus. Right. And we're seeing that negotiations have become more difficult. Sometimes Amazon even rejects cost increases or also communicates a clear listing preference of higher ASP items. So items that are priced over US$10 or 10 British pounds or €10, depending on where you are in the world, and often doesn't even list products that do not meet their net PPM targets that they have communicated with you. And that is the dire new reality. And I think the kind of key change that we're going to see, particularly from Amazon retail is driven by a different landscape when it comes to competitors and initial signs, particularly when you look at Asian based competition. So the likes of TikTok, shop, Timo and Shein have already moved Amazon towards reducing its third party selling fees in certain categories such as fashion or apparel, as a direct response to at least wanting to protect its market share or category share at least, and not losing it further in the discount department towards those new and emerging rivals. Another response that we're going to see potentially from as early as November this year is Amazon's announcement of launching a new Temu like discount store on its website as an additional storefront to its established 1P and 3P storefront. And we will have to see how that obviously plays out. But we're seeing certainly that Amazon cannot ignore these changes, right? They cannot kind of focus on profitability forever across all business divisions. But of course, especially under CEO Andy Jesse who is much more focused on operational efficiencies. They will try to exploit more and more the opportunities that particularly the exploitation of artificial intelligence has to offer. Reducing full time employee numbers and also maintaining them at a very tight level instead of just kind of increasing them covering more and more vendors, which we've also seen in the latest round of termination notices, which I'm sure we will come to speak about a little bit later today.

Yeah, absolutely. And I think that you, myself, anybody who's been in this space for more than, you know, five or 10 years knows that if you zoom this, this chart out to the past 20 years or so that it basically looks like a sine wave. It goes back and forth between sales focus and profit focus every two to three years in an almost predictable way. And so I very much agree that Amazon's Future initiatives in 2025 are returning to a growth focus. We've been hearing that from a lot of our data customers and analytics customers as their focus has shifted a little bit away from things that are eking out basis points of profitability back towards. Towards how do we get smarter about deploying things like retail, media promotions, etc, to return ourselves to a growth state?

Yeah, absolutely. And I think, right, I mean it's a publicly traded company, so of course they'll have to kind of always run this fine balance between sales as well as profitability. Growth 2025, from the early indications that we are hearing from vendor managers in certain departments, but certainly in the US as well as in European regions, is that they're targeting like growth anywhere between 10 to 20%. So significantly different compared to what Amazon has communicated to brands in the past, where kind of a zero growth year was completely acceptable if Amazon was able to kind of gain relevance in terms of additional profitability and additional investments in return. So this is I think certainly good news for brands, but also requires once again, right, I mean that vendors are looking at where can they actually save costs, where can they recoup investment to then also fuel this flywheel that Amazon has so famously established? Because of course growth will come at a cost. Vendor managers will not just kind of open the floodgates and say, okay, great, now let's grow by 20% and we'll give you also some money back and vendors will have to earn that. It's very difficultly, but it's certainly realistic. If you have of your ducks in a row and you also understand what are the cost centers where you're bleeding in your P and L and where do you have opportunities to Also use automation, use offshoring, and more importantly, or most importantly, almost use the right data points to kind of review that on a consistent basis. Now, when we're looking at this profitability focus, four key realities come to life. And I think everyone who is a vendor and is active in this vendor space knows what we are talking about. The first one is automation and offshoring. When Amazon sees that there is a task that is being touched with one or through one of their kind of employees twice per week, that is a task by definition that Amazon wants to automate. And if you cannot automate it for whatever technical constraints, then it usually is the kind of ambition to offshore this task or this process through a standard operating procedure. Two teams in Eastern Europe or India where the full time employee costs are and labor costs are much lower. This goes hand in hand with the reduction in headcount that we have seen, particularly among corporate employees. Is estimated that right now 15% less, probably even a little bit more offender managers have to manage a similar or even a higher number of vendors. And that of course also means that we face less and less support in our day to day business with the online retailer on getting asins unblocked, but also getting certain financial issues resolved when it comes to penalty charges, when it comes to shortages and all of these elements where really there's a process misalignment that we need to fix and where we also need to kind of keep our eyes on in order to not lose out on profitability going forward. The third point, and I think this is what we've seen in the last negotiations, is then a backwards integration focus from Amazon where they really want to kind of reduce the number of steps in the joint supply chain and rather backward integrate to pick up the goods directly in the port in China or also from directly your warehouse or even manufacturing plant if you are selling to them domestically. So these are new initiatives that Amazon is focusing on now in the upcoming vendor negotiation, particularly here in Europe, but also in the US Because Amazon knows that there are some joint cost savings to be accessed, which brands are usually quite happy to share. So really creates also a mutual win win scenario. But once again this also means that you'll need to have a very thorough understanding of where do the cost saving opportunities lie? Where can you really kind of drive cost savings among your variable handling and shipping costs and across the joint value and supply chain. And I think the last point, which is probably the most painful one for all of the vendors today in today's webinar, is what we've seen over the last eight to ten months or so, sometimes a little bit longer. Even where Amazon has significantly reduced its own weeks of inventory. So inventory coverage really in an attempt to optimize its own storage fees, storage costs, but also handling fees to the end shopper and moves more and more towards adjust in time ordering, where they're basically saying only when we see the demand signals will we really purchase these items. Otherwise, of course, there are opportunities to, for example, raise a bond to run order, but it will cost additional resources and also of course, more investment from a budget perspective to kind of get that inventory into Amazon. Now on the one hand, this is good news because it means, especially in light of the current constraints in Amazon's fulfillment center network, that there's still room for growth in the future. And we're seeing that Amazon still gets to the point where they are constrained from a capacity perspective. But it also means that Amazon is really relentlessly enforcing this efficiency focus as we've discussed a little bit earlier. And this really goes to show that this new reality forms the reality of 2025 budgeting and forecasting from a brand's perspective. And we also need to kind of keep that reality in mind because Amazon is very unlikely just because they are now focusing more again towards growth to open the floodgates and to just let brands stock up on goods without necessarily seeing the same demand signals from the consumer end.

It's a great point that just because they're returning to that growth focus doesn't mean that the barns are going to get any larger, that FC expansion plans are going to change necessarily and that any plans that they do execute are going to happen in a tight time frame. We're seeing a lot of similar signals on the 3P side. I know that this webinar is really focused on 1P, but anybody who's dipped a toe into the third party side and monitoring that universe understands that Amazon is making similar complex investments in optimizing the entire throughput of the supply chain and it's putting sellers as well on their toes. So I would expect this to impact everybody across the board going into 2025.

Agreed. And I think one key element that we shouldn't forget, Amazon is very much focused on sellout. Well, why is in the end, Amazon is just a marketplace. We always mistaken it for a typical bricks and mortar retailer and try to kind of shovel the same kind of strategies down Amazon's throat. And this is certainly not working here. You need to offer your selection with a good customer experience to drive growth and then to also access these kinds of economies of scale, which also makes it so difficult for a lot of brands to kind of feed the flywheel, because Amazon consistently requires additional investments and outsources a lot of the levers for growth, but also for the operational efficiency on their side to them. Right. We have tools within Vendor Central to assess how high our shortages are. We have tools to identify process defects that lead to shortages, chargebacks or price variances. And that can be derived from simple catalog issues that we need to proactively engage in in order to ensure that we are not running a cost center that basically diminishes all of the profits that we have so hard earned in our last vendor negotiation. And I think keeping in mind that sell in from Amazon is really informed by the sellout that Amazon delivers and that we also drive to Amazon, whether it's through off site traffic, whether it is through on site advertising campaigns, is I think keen and very important to kind of keep in mind. And if we go one step further, if you're looking at what is important for Amazon when they are fueling this flywheel, then one key point comes to mind, which is customer experience. And here we are seeing a distinct difference from Amazon on how they are focusing on bringing that to life. In the past, this was all about pricing, this was all about having the broadest selection available. But the online retailer has also realized that yes, we need the category critical selection from brands. And then all of the long tail can be also utilized and also accessed through, for example, third party sellers. So it's not necessarily mandatory to have them all available via Vendor Central. You're going one step further. We're seeing that Amazon focuses a lot on speed. If you're just looking at the key statistics that Amazon has shared this year a little bit earlier, that over 2 billion items are shipped the same day or the next day each quarter. Over 300 million items are currently offered with free prime shipping. And 60% of orders in US cities that come with prime also arrive on the same or next day. Now why would we care? Well, because if we are first party vendors to Amazon, that also means that Amazon expects us to focus on the same level of process compliance and operational excellence in order to serve end shoppers with this kind of speed when it comes to delivery. And if we are having detrimental confirmation rates from our purchasing orders or if you are not keeping our products available, then of course that kind of decelerates or reverses almost this flywheel that Amazon tries to build in 2024 and 2025 and where we also need to realize that our job becomes increasingly not only to sell products and to drive demand, but also to meet the kind of key demands that Amazon has from an operational setup point of view. And of course that is correlated a with additional investments, but also with an opportunity in our vendor negotiations to kind of claw back certain investments if they're accessing certain cost saving opportunities that Amazon just asks for, but we should certainly not just hand out for free, right? Good example is if you're changing your business from a domestic ordering to a direct import ordering, Amazon just wants the best net net landed cost price. I mean, don't make a mistake, right? Amazon is saving a lot of money here because they all of a sudden can kind of consolidate your orders onto a ship or onto freight in general from the port of China and inbound it at their discretion into the United States or also into Europe. And that comes of course at significant cost savings for them as well, which you can participate in, but where you shouldn't give Amazon a 00 or net net neutral business case in the first place because again, it's a cost saving that should really materialize in both P and ls. And then the last slide, I think this just kind of nicely illustrates why this is such a focus from Amazon. The same and next day spending. And here there's a very interesting report from the Consumer Intelligence Research Partners that came out earlier this year which strongly highlights that there's a significant correlation between annual spending at Amazon and shipping speed. And when we are looking at this chart, we're seeing that those members that typically are prime members and receive a product the same on next day or on a two day delivery notice spend significantly more compared to those shoppers that get products only within three to five days or where also an order takes longer than five days to arrive at the doorstep of the end customer. Which really also brings this point home that it's not only Amazon's intrinsic motivation to ensure that products are available at a fast shipping speed, but it should also be our own motivation to improve our operations, to improve our supply chain and to monitor the availability of products from both ends, whether we are a seller or whether we are a vendor who utilizes Amazon's fulfillment center network in order to be able to meet not only these demands, but also this reality where shoppers tend to spend more the faster a product is becoming available and the faster they can also get a product in the first place. I think it brings home this point that we live in a world where instant gratification is still a priority. And whether we ourselves mirror this or not, I think the data here speaks clearly for itself and shows in which trend and which direction this trend is certainly emerging to.

Yeah, that's really well put, Martin. I really liked your, how did you phrase it earlier? Sell out drives sell in and it's five words but it summarizes the entire mental model for how a brand can think about investment and priority. And even when we think about this slide here of how shipping speed is driving everything, it to me it reads as a general mental model shift of allowing the customer to delay decision making as late as possible by onboarding a larger and more broad selection to faster shipping speeds. It means that customers no longer need to be making purchases in advance for a larger and larger demand set. And it allows Amazon to occupy more of that last minute mind share. And accordingly, I think a lot of brands need to think about how their own operations can adapt accordingly. How can you push out as many decisions as far out as possible to be as last minute as possible related to your sell in business?

Yeah, absolutely. And I think this is still a mental shift that a lot of brands, especially established manufacturing brands, struggle with because they're used to this kind of model where you're selling. Okay, I negotiate my trading terms now with Amazon and I expect that they are ordering just more. Of course I support with a little bit of onsite merchandising campaigns, display banners and some advertising, but I expect Amazon to order 10% more every month. Particularly if you're talking about a certain baseline that has been growing over the past few years. And I think here is just where reality hits vendors most that have relied on these past trajectories to inform their future forecasts with Amazon and also their future budgeting. Because what we are seeing now is that yes, sellout is kind of stable and still grows in a more maturing way in the single digits. So we're seeing typically growth rates as we've seen before in its online store, between 5 and 9%. But the sell in behaves completely differently and that is not being driven by pure or softer shopper demand, but it is driven by Amazon's focus on operational excellence and operational efficiencies. Now the good News is in 2025 this new baseline will have finished to materialize and we will see that in 2025. On this new baseline that was established this year, increase in sellout growth will equivalently almost increase sell in. But I think this year was certainly transformational for a lot of brands who had to Kind of shift their thinking and realize that Amazon is very much willing to give up sales, sales growth from a net sales perspective if it is for their own good when it comes to profitability. And I think there's a lot to learn from that by ruthlessly prioritizing your own bottom line.

Well put. We're starting to get some good questions coming in and I want to address some while we're right on this topic. Someone asked, is this a chicken or egg scenario? As in how much of what we're seeing on this slide is driven by customer preference or faster delivery versus top sellers just tending to have greater operational excellence, better distribution and their inventory being available for delivery?

Yeah, great question. I mean, look, it will be a mix of both. As far as I'm aware, this kind of research didn't duck as deep. They were basically just looking at, okay, what is the correlation between products that are really like available to end shoppers with same one day delivery or also two day delivery? And what is the kind of typical shopper profile of those? Yeah, what is the typical shopper profile that is correlating to these kinds of shipping speeds? It raises a fair point, right? I mean, especially if you're selling a lot of long tail products through a 3P seller account that doesn't use Prime Fulfillment or Prime eligible Fulfillment, you'll typically see that oftentimes it's also not a product that may be category critical and thereby your overall spending from a customer profile perspective may not be as dependent on Amazon as some power users who are prime members and also want everything instantaneously. But it just also goes to show that the opportunity for manufacturing brands who are utilizing the 1Pmodel and who are able to improve the availability of products who consistently win the buy box and reduce also the kind of retail partners or resellers that are trying to kind of win the buy box away from them. If you are maintaining and controlling your distribution, you also have a much higher chance of just kind of tapping into those shoppers that have a profile that relies more on spending on a recurring basis. And if you pair that then, for example, in consumer goods categories with initiatives such as subscribe and Save, you almost get an additional kind of growth boost because there's a high likelihood that these customers are not only purchasing once from you, but due to the prime eligibility, will also purchase from you on a repeat basis through the subscribe and Save program.

Yep, makes a lot of sense. One more I want to tackle right now. Is Amazon able to provide insights into average shipping speed? Sure, they Are.

You can certainly ask your AVS or also vendor manager what is the kind of percentage of fast track eligible items? Right. So they have the metrics available to tell you, okay, which products were available for same or next day delivery or met at least prime eligibility criteria. And potentially you've had some kind of challenges. Now, if you're a vendor, typically all of your products will be available per default unless you're utilizing certain supply chain programs like a direct fulfillment or vendor flex, which is not set up to kind of have prime eligible shipping speeds for all areas that you are serving. So in the United States this is usually done by postcode. In Europe you would also have constraints depending on the markets that vendor flex is available. So there may be some kind of constraints. But if you are in doubt, yes, Amazon can certainly give you performance insights around those shipping eligibility criteria on asen as well as vendor code level.

That's exactly what we see as well. Martin, we haven't gotten into the data section of this talk yet, but unfortunately from our perspective, we haven't yet seen any programmatic data sources that make that available easily for vendors. It's something that you do have to request, but it is available in great detail if you can make that request and they respond to it positively. All right, one last one before we shift gears here. Is operating expense or OPEX affecting the buy box? And do you have any data or numbers to measure good versus bad opex?

So operational excellence? Yes and no. Right. So for sellers, you'll be aware, of course, there are hundreds of KPIs that factor in whether you can win the buy box in the first place. Right. What increases the chance, given that we are very much focused here on vendor central operational excellence factors in in terms of the reliability of availability of products to a certain extent. So of course, if a product is not available, then you'll effectively not be able to. Yeah, I don't want to use the term win the buy box, but Amazon will not have the product available to offer your offer from Amazon in the buy box. Winning the buy box is measured through a different KPI. And here we are really touched just talking about the price competitiveness and price rivalry that we're seeing in the buy box. So this is why I'm making this strict separation here. So yes, from an availability standpoint, the buy box is directly affected by operational excellence, which is also why you should be monitoring it closely next to out of stock. I give you another example. Shortages can kind of be a little bit of a critical issue, which may derive Also from catalog errors. So Amazon thinks in your case pack there are five units, but in fact it's only three. So Amazon thinks they are ordering sufficiently in order to meet the end shopper demand. But if it then turns out that they only receive fewer items because of a catalog error, then again it will reduce your availability and thereby also impact your ability to have the buy box up and available before a third party seller may have to kind of fill in the gaps. Because Amazon runs out of stock.

Yep, exactly. To give a specific example, from the customer experience side, everybody who shopped on Amazon has seen different availability messages on a product. Whether that's buy now and get it within the next two to four hours, if you place the order immediately on the positive side, all the way to buy now and then it ships in one to two weeks. A lot of that messaging is directly influenced by your past operational performance, your vendor lead time, et cetera. And so in a very discreet way, improving your OPEX improves the customer message, which in turn is going to impact your overall sales and growth trajectory. Well, thank you Martin. We've got a few more questions, but I want to keep going just to be conscious of time. For those who don't already know me, I'm Andrew, co founder and CEO of Reason Automation. We provide Amazon data architecture for enterprise brands and agencies. Whether that's data pipelines or actual analytics templates and reporting. We're focused a lot on executive level reporting, helping brands manage their business the same way that we did internally at Amazon on through WBR and MBR style decks as well as financial analytics to manage things like shortages, P and L et cetera. We have a very large stable of enterprise brands that are trusting us and to manage their very complex multinational data requirements. And especially if they have a lot of stakeholders across different groups within the organization that normally operate in silos, we're helping them bridge those things together. And our team, like me, is mostly ex Amazon. We bring a combined 25 years of former Amazon vendor management, as well as software engineering and product management experience to the table. That's why we're chatting with you today. And so when we think about how Amazon's data strategy has evolved over the past year, fun fact. Tomorrow is the SP API's two year anniversary, so happy birthday SP API. It's hard to believe that three years ago there was not a programmatic source of vendor data available at all from Amazon. You were doing anything from scraping to RPA to manual downloads, to setting up offshore teams of virtual assistants. And since then, Amazon's pace of release and investment in the SP API has only increased. It's actually rapidly accelerated. In its first full year, Amazon released about 21 to 22 new things in the SP API, new features or updated features and capabilities. And year to date so far in 2024, that's up 235% to almost 67 so far this year. And that's across the spectrum of things like financial operations, new listing types, etc. But also just improving the visibility and usability of this data through better schemas, et cetera. And this increase in data capabilities is of course going to require greater unified investment across every business unit that requires the data. In typical Amazon fashion, they're not just releasing these things and making it as easy as humanly possible for brands to take advantage of them. It's happening piecemeal through the two pizza Team model, meaning that a lot of times these releases happen independently of each other and are going to take a lot of dedicated effort from you and your partners to understand and integrate collectively. The big ones that we as a data provider have seen. First and foremost is Data Kiosk. This is a super exciting development that launched in the middle of this year and just hit general availability. For those who don't know, Data Kiosk is Amazon's future replacement for the Reports API. They've already started migrating reporting for things like retail analytics and some of the seller data to this new system, and they're aggressively expanding the data sets that are offered through this, expecting everything from the Reports API to have migrated over in 2025. Take that with a grain of salt. Since Amazon's pace of release, even though it has increased a lot, the actual dates that they actually deliver on are still a little bit up in the air. And so we're hoping that this actually occurs. But if it takes into 2026, I won't be super surprised. The main exciting feature of this is that for the first time ever, Amazon is going to make custom schemas more accessible to brands. Meaning that instead of making downloading individual retail analytics reports, for example, grabbing sales, inventory, net, ppm, et cetera, separately, you'll be able to custom design a schema that includes all of those elements together and produce one unified fact table that'll make it a lot easier for your teams and your internal data infrastructure to combine that, use it alongside other data sources for your omnichannel reporting and to make just the data consumption a lot easier and more efficient. This is something really, really important for brands to get ahead of Because I expect that as data kiosk capabilities expand, the reports API's capabilities will start to die off and that investment in the actual Reports API itself will start to decrease. We're already seeing this on the seller side, where new capabilities are all launching in data kiosk rather than the Reports API. So check with your own internal teams. If you're already pulling data directly from the ap, make sure that this is on their radar. And if you're working through a partner, make sure your partners have a roadmap for how and when they're going to be migrating over from data kiosk if they haven't already started. Second major update for vendors is that geographic sales data for the US Is finally returning. Those of you who have been selling on Amazon for a while may remember the geographic sales report that was available for the US Market until the retail analytics relaunch. Now that data is finally returning via API and it's expanding to include not just the US but also Europe and Canada as well. And this is really exciting, but also potentially a big infrastructural investment moment because geographic data can explode the size of the data that you work with by multiple orders of magnitude. Today, for example, if you download retail analytics sales, you're going to get data by product, by by day, by distributor view, distributor view by program at the lowest granularity. And so you can imagine expanding that to add a separate data row for every single zip code that Amazon offers, and that's potentially increasing the data volume by 40,000 times. That makes it frankly unusable for most people. And so a lot of providers like Reason Automation are thinking very strategically about how to offer this to brands at a high level. We're trying to determine what is the right frequency and what is the right level of granularity that folks need for this data. And do brands need it for every single product in their portfolio or do they care mostly about, you know, the Pareto 80% that's driving the majority of their sales? Our suspicion is that most brands, just like amc, are using this data to inform their analyses once or twice a year, but that they don't need to see geographic sales and deep granularity by zip code every single week. Because it's frankly not going to shift very much unless you are from week to week, unless you've actually launched some kind of new sales strategy or advertising strategy. That said, this comes as a nice and welcome addition as Amazon's advertising capabilities and geotargeting capabilities expand and the custom audience creation capabilities expand. Now they're getting some parity on the actual customer sales side. Third up, Search Query performance has been one of the hottest data sets for sellers since it launched, and vendor brands have sort of sat on the side wondering when, oh when will we finally get access to that same data. Hybrid brands have been enjoying the parody, but for a lot of the major brands that only have vendor accounts, they've been completely locked out of this. For those who aren't aware, Search Query performance is a much more detailed version of the top search terms report that you are used to seeing in ran analytics. But instead of being an undifferentiated list of the 1.8 million top terms and performance that could be filtered by brand etc. With index search volumes, Search query performance provides you with the actual search volumes as well as product level sales and product level terms specific to your brand as well as to your competitors brands. This makes it an incredible source of information that sellers have been using to optimize their PPC performance for about a year now, and that is finally coming online for vendors hopefully in this quarter, but if not this quarter, then sometime in 2025. Another big exciting feature that folks need to start prepping for is Notifications API finally expanding to include vendors as well. You're starting to notice a theme here which is that Amazon historically has prioritized sellers for a lot of these new cutting edge data releases, but that's starting to catch up on the vendor side and hopefully this means they're going to start launching things with parity in the future. The Notifications API historically has been used by sellers for everything from seeing price changes as well as things like buy box changes. If you aren't aware, that means that sellers have been able to actually monitor things like featured offer changes, price changes, etc. Dynamically where vendors are still relying on third party scrapers of the public website. This is theoretically coming again in the next couple of quarters for vendors. We're already starting to see some things like content notification changes and report completion API changes launching here, but we're looking forward to seeing a lot of that coming in 2025.

I don't want to stop you in your tracks, but there's also a question from the audience around with all of these changes. I mean, what about real time sales for multiple agents versus just one ASIN at a time? Is there any change that is expected in this direction?

Absolutely, yes. Great question and one that I probably should have thrown up here. So thank you Kim for for asking that one. Amazon's Real time Sales data is becoming quite a bit more accessible already through the Notifications API actually. So previously this data was only available either through vendor central UI loading one asin at a time kind of painfully, or you needed to onboard to the advertising API to get real time sales that way. And the data was really hard to work with because it came through in an almost notification style and it was hard to reconcile against the data that you see through the selling Partner API. Now Amazon has released in beta some new capabilities for real time sales, traffic and inventory for vendors through the Notifications API that allows you to receive sales notifications not quite in real time, but once per hour and then separately is finally allowing partners like Reason to store that and create a historical data table for you if that's something that you need. It still doesn't jive very nicely with real time sales, but that those capabilities are finally online in beta now and should be in general release, if not already, then in the next couple of months. Up next, and in a slightly different direction. You know we've been talking a lot about vendor remittance and shortages, etc. And anybody who's been operating in that space knows it's been so complex that the easiest solution for brands for a long time has been to outsource it to third party companies who promise to take care of everything for you end to end, including identifying opportunities, submitting the disputes, etc. Usually for a hefty commission. A couple years ago that commission was averaging around 30 to 35% and now, thanks to increased competition, it's starting to get closer to 10 to 15 to 20. But we're still seeing a lot of brands push to bring that in house, and Amazon's new revised invoice data model is making that easier than ever by simplifying the way that they transmit that data. For example, in the past you had to really do a lot of work to understand how Amazon was modifying your original invoice numbers to do things like shortage claims, shortage claim reimbursements, price claims, price claim reimbursements, et cetera, through multiple derivative invoice numbers. And so if you've ever been in that data, you're used to seeing your invoice number appended with five SCRs and a couple PCs, et cetera, making it really difficult to tell the complete story and understand at scale and over time what your opportunities to improve not only reimbursements, but the actual inputs to those things. Now, Amazon simplified that data model, making it a lot easier for partners to help you with this but also for you to bring it in house. And then last but not least, AMC expansion has been a big one for Amazon because of course their retail media growth, to Martin's point, has been driving a lot of the profitability growth that they've seen over the past few quarters. And the biggest thing that we've seen is that AMC is making it even easier to get at things like granular customer acquisition costs and customer lifetime value metrics that allow you to start thinking about your advertising spend in a very granular way through a financial disciplined model. As a startup myself, we're very used to thinking about every marketing, sales and investment decision through the lens of a CAC CLTV ratio. And now that same mental model can be applied for vendors who are thinking about it through financial optimization and thinking about things like promotion and advertising investments across multiple channels. How can you do that intelligently and defensively instead of just continuously handing Amazon more money? The combination of new AMC data, new invoice data, et cetera, as well as the evolving data kiosk and custom data schemas are going to make this easier and easier for brands over time. So what does that mean for you? 2025 is the year of the P and L. It means that finally you're going to be able to understand what should be a really basic and easy to answer question. Things like how much money did this ASIN actually make for us net of all of our investments, trade terms, disputes, et cetera in a given time frame. That's been incredibly difficult for brands to answer because Amazon has gated that data, stored it in really difficult to use structures, and while I would never say that that was on purpose, it certainly was value accretive to Amazon to make it harder for you to identify errors and make that recoup. And now as you can see, it's possible to start to understand your Amazon total business performance through a typical financial lens of credits and debits broken out through all of different investment and expense categories over time. And although I don't have it broken out here in this particular screenshot, you can even get down to granularity for things like your co op investments and marketing investments. What were those? Was it, you know, a combination of SVs and AVs? Was it through promotions and what kinds of promotions, etc. And again, finally, finally down to that product level so that you don't have to think about this just at a total business level. You can think about it per sku, but also start to aggregate that by product line collection, etc. To make slightly more strategic decisions and to equip a greater number of team members internally with the data that they need in order to make those decisions for themselves, rather than having all of that funneled through a finance team that's frankly probably overloaded already. That said, despite all the rah rah I just did in Amazon's favor, a lot of unaddressed challenges from Amazon are still present. And if any of these things resonate with you, I or rather, I'm sure that a lot of them do resonate with you. If you're anything like our clients Data accuracy is still a challenge as well as timeliness. You know, Amazon is still doing a lot of things like restating historical data in new and unpredictable ways. For example, if you participate in programs like Prime Wardrobe, et cetera, you may notice that Amazon really likes to restate historical sales data. As things like wardrobe orders get returned versus purchased, it causes things like discrepancies between the order dates and the revenue recognition dates, et cetera. Vendor Central still is lagging on analytics Anybody who attended Amazon Accelerate this year knows that Amazon released some new custom reporting capabilities. But of course it's just for sellers. Nothing yet for vendors, and I expect it to take another year and a half to two years before there's parity for vendors. Everything Amazon does is still an asin, and so there's still a big translation barrier for experts in this space to turn that into something that's usable for their broader team, who often don't speak ASIN at all. They think of things in terms of their own SKUs product numbers or friendlier descriptors. Retail analytics is still lagging, the performance is still improving, and certainly we're not looking at 72 hours like we used to be for large catalogs before data is available. But your stakeholders and your data team still need last week's data ASAP on Monday, and it's still coming in very late on Monday, all the way into Tuesday. Support from Amazon is still a little rough. To Martin's earlier point, anytime that Amazon finds something that can recurs more than once, they try to offload that away from their expensive 1P teams to offshore teams or automation. And that's exactly the opposite of what most brands want and expect. Amazon will continue to make human interaction available for a cost, but those costs keep going up, and the quality of those interactions seems to continuously sort of fall a little bit year over year as they try to automate more and more compared to the days when Martin and I were there and things Like a brand specialist or an SVS was 100% dedicated to your brand's business. You know, everybody in your organization needs Amazon data. The breadth of availability of Amazon data means that more and more folks can take advantage of it, but the ways that they consume that are still different. And so brands need more and more to find a unified data strategy. Turnkey platforms that promise all in one access tend to be not enough for a lot of teams. Or a lot of teams are finding that it only accomplishes 50 to 75% of what they need. And they're looking more and more at how do they bring that data directly into their own omnichannel, reporting, erps, et cetera. Brands are noticing that they want a lot more historical data than Amazon makes easily accessible through their ui, particularly when it comes to financial operations. A lot of data for things like invoices, purchase orders and remittances available all the way back through five years of history. But it can be a little bit challenging to get at through Amazon's ui. Brands are recognizing that because of the constantly evolving profile of how this data works, that they need to get more control of this data directly through their own tools and software, rather than relying on Amazon to do that for them through these rapidly aging dashboards. And of course, they're looking to do all of this through a predictable cost model, instead of paying five to ten different SaaS companies a bunch of different fees that can fluctuate depending on the size of the catalog, percentages of revenue or ad spend, et cetera. And of course, if you're technical, you know that Amazon's API performance is at once nice, but also weirdly inconsistent compared to what you might be used to from other technology companies. And that means that managing Amazon data directly through these APIs and all of this wonderful growing data sets means an increasing investment in your own data capabilities and engineering capabilities internally to manage that inconsistency. Things like Amazon publishing data late, but also Amazon's API responses being hard to understand. Like, it'll say, great, we delivered this, your API call was successful and the resulting payload will be empty. Well, thanks, Amazon. What does that mean exactly? That doesn't help me explain to my CEO why Amazon data isn't there in time for me to make my report this week. And so that's really it when we think about where Amazon has come and gone from the past year. Thank you very, very much for taking the time to speak with us today. I did not finish my slide in time to put up my own contact information here. But if you have questions for Martin, please do email him@helloonsulters.com if you have questions for me or the Reason Automation Data Team, you can reach us at sales or supportasonautomation.com or reply to the email that you'll receive after this that summarizes everything that you've seen here. It'll include a recording of the webina as well as a copy of all the slides. If there are any last questions, please do feel free to jump drop those into the Q and A in the chat and we'll answer them in the last five minutes that we got here live.

We have one question coming through which states where and how can I get the product level profit analysis at ASIN level?

This is a great question and so let me answer that one for you right away. There are two ways. One is through the actual vendor Central ui. Significantly overhauled financial dashboards and financial operations tools allow you to zero in on profit analyses, shortage claim analyses, et cetera much more simply than you used to be able to. And so for example, you can now filter a lot of the invoicing reports, co op reports, etc. And find those by ASIN that allows you to get at that data much more simply and quickly. That said, they are still not assembling that for you in a easy to use ui, so there's still quite a bit of transformation and work that needs to happen on your side. It means that you also need to think about some things and make some assumptions around how you want to create your own profitability data model. As we've tried to help our clients do this at Reason Automation, the key questions that come up a lot the first and most common one is how do we think about co op that's built on the distributor level versus financial activities that happen on the customer level? And when should we recognize those things? That's a really really good question. Our recommendation as you take a PO centric model and do everything based on the order date and then work backwards from there by planting a flag in the ground and working off of the PO date that allows you to at least get a start with the distributor view and all of the easier to aggregate data and then allows you to then take separately all of the customer sellout information which tends to have a much more discreet date because things like customer promotions get billed when a customer shipment occurs and then you can apply those things backwards. However you need to flexibly. On the data side, partners like Reason Automation are helping a lot of brands extract that at scale and We've been starting to help brands create actual dashboards. Visualizing that it involves a lot of decoding of the actual payments data as well as the paid invoices data from Amazon, because that's the point where you get the granularity from Amazon on what all the deductions were for down to that co op level. It does mean that you do need to do that profit analysis on a little bit of a trailing basis because as you all know, it can often take Amazon a little time to make payments against your invoices, depending on what your terms look like. And that means that a complete P and L picture might take as long as three to four months post the actual invoice date for you to get all the information, especially the advertising spend together.

Yeah, love that. And then we have one other question that goes into the details on how can you quantify the PDP content enhancements for a finance team? I think very, very keen to also get your thoughts on this, Andrew, how you can kind of programmatically go about it. I think I would always kind of look at the kind of key KPIs that are hidden in plain sight and then the ones that are not so obvious. I think the more ones that are obvious are of course search visibility. So what's your best selling rankings before and after Traffic and conversion rates of course. Also great kind of KPIs to measure because they let you quantify how much was the product performing well, how well was the product performing before the change, as well as after this change. Amazon also gives you a B tests with which you can run these tests yourself or you can of course use third party tools to kind of help you and aid you doing that. I think one of the kind of lesser known or often overlooked KPIs that I would look at that can delight your finance team are things like, like return rates. So shopper returns, have they gone up or have they gone down following the change of your PDP content? Because of course, I mean if a shopper gets a different color of a product or if certain questions aren't answered on the product detail page, you may have a higher customer return rate. But if you get that down well, effectively you'll also be in a position to negotiate a lower damage allowance that Amazon typically asks you for because they have to bear the burden of also covering the cost for this customer return in the first place. So I hope this helps get started. I'm sure there are many more other KPIs, but yeah, considering our time, I hope this is a good starting point.

Yeah, I think that's exactly it, Martin. The only thing I'd add to that is that this starts and ends with your ability to perform a pre and post analysis, which means you need to know exactly when your content changes went live, and it helps to make those changes go live for a larger swath of your catalog at once so that you actually get a larger volume of pre and post data. For that reason, it makes a lot of sense to coordinate a large catalog wide or category wide update across all of your detail pages at once so that you get a really strong pre and post signal across all the KPIs that Martin mentioned. We're unfortunately out of time today. Thanks very much everybody for joining us and we will be making the recording as well as the deck available as soon as possible. So look for that email from us within the next couple of days. U.S. martin, thank you so much for joining me in what is, I think late in your evening there, but we appreciate you as always and I hope that everybody who attended today got as much value from this as I did.

Thanks everyone for joining. Thanks Andrew. Speak soon.

Take care everyone.