Selling to Amazon as a Vendor can look like an attractive model. Amazon places bulk purchase orders, you sell your products wholesale and Amazon takes responsibility for selling those products to the end customer.
But being an Amazon Vendor comes with its own challenges.
Margins can quickly become squeezed, chargebacks can eat into profitability, you have limited control over retail pricing and getting issues resolved through Vendor Support can be frustrating and time-consuming.
Having spent years working with Amazon Vendors, both during my time at Amazon and now through eCommerce Nurse, there are four challenges we see coming up again and again.
The good news is that while you can't eliminate every Amazon Vendor problem, there are steps you can take to manage them more effectively.
1. Margin Pressure and Amazon Vendor Negotiations
Margin pressure is one of the biggest challenges facing Amazon Vendors.
Amazon will regularly review the profitability of its Vendor relationships and may ask for improvements to your trading terms. This could mean reducing your cost prices, increasing allowances or making other commercial concessions.
The mistake is looking only at the overall profitability of your Amazon Vendor account.
How to manage Amazon Vendor margin pressure
Before agreeing to changes, analyse your profitability at SKU level.
You may discover that the problem isn't your entire product range. One SKU could account for a significant percentage of your sales while delivering very little margin to Amazon, bringing down the overall profitability of your account.
Understanding the performance of individual products gives you a much clearer picture before entering Vendor negotiations.
Know:
- Which products are driving the most sales
- Which products are profitable
- Which products are negatively affecting the overall account
- Where you actually have room to negotiate
Don't automatically accept that an account-wide margin problem requires an account-wide solution.
2. Chargebacks and Shortages Eating Into Profitability
Chargebacks can become a significant and sometimes overlooked cost for Amazon Vendors.
Amazon has strict requirements around areas such as shipping and Advanced Shipment Notifications (ASNs). When those requirements aren't met, Vendors can face chargebacks and fines.
Individually, they may not always look significant. But over time, they can add up to tens or even hundreds of thousands.
That's money that could be invested in advertising, content or other activities that actually help grow your Amazon business.
How to reduce Amazon Vendor chargebacks
Don't treat chargebacks as an unavoidable cost of doing business with Amazon.
Review them every month and look for patterns.
If the same chargeback keeps appearing, understand what is causing it and whether something within your operation can be changed to prevent it happening again.
You should also challenge Amazon when you believe a chargeback is incorrect and try to reclaim the money where appropriate.
For businesses dealing with a large volume of claims, specialist software or external support may also help. The important thing is that chargebacks are actively managed rather than simply accepted.
3. Lack of Control Over Amazon Pricing
Pricing is a major frustration for many Amazon Vendors.
When you operate through Vendor Central, Amazon is buying your products and acting as the retailer. That means you don't control the final retail price.
Amazon may also price match your products against other retailers.
This can become particularly problematic when another retailer runs a promotion. Amazon may reduce its price to match and then potentially approach you for price protection.
How to manage Amazon Vendor pricing challenges
You can't completely control Amazon's retail pricing, but you can think carefully about your wider distribution and promotional strategy.
If your products are available through a large number of retailers, you increase the possibility of one retailer heavily discounting them, which can then have a knock-on effect on Amazon.
Be selective about distribution and understand what is happening to your pricing outside Amazon.
When planning promotions with other retailers, also consider the potential impact on your Amazon business.
You may not control Amazon's price, but you can be much more strategic about the factors influencing it.
4. The Amazon Vendor Support Black Hole
Then there's Vendor Support.
Template responses, cases being passed around and lengthy back and forth can make resolving even relatively straightforward issues incredibly time-consuming.
Unfortunately, there isn't a perfect solution. Support issues are part of managing an Amazon Vendor account.
How to manage Amazon Vendor Support more effectively
The first decision is whether you have the right people and resources internally to manage these issues or whether it makes more sense to outsource some of that work.
Keep a record of:
- The issue
- The support case and case ID
- The responses received
- How the issue was eventually resolved
That last point is particularly important.
If the same problem happens six months later, you don't want your team starting from scratch. Build an internal knowledge base of previous issues and their resolutions.
AI can also help organise this information, making it easier for your team to search previous cases and identify how similar problems were fixed.
If you have access to a Vendor Manager or Amazon Vendor Services (AVS), keep your case IDs so unresolved issues can be escalated internally where appropriate.
Stop Firefighting and Start Focusing on Growth
These four Amazon Vendor challenges might look very different, but they have something important in common.
They consume time, money and resource.
If your team is constantly dealing with chargebacks, pricing problems, Vendor Support cases and negotiations, it becomes difficult to focus on the bigger picture.
You may never eliminate every issue associated with Vendor Central. The aim should be to create processes that help you identify recurring problems, resolve them more efficiently and prevent them from repeatedly distracting your team.
Sometimes that means improving internal processes. Sometimes it means having the right people in the right roles. And sometimes outsourcing particular areas makes more commercial sense.
The ultimate goal isn't simply to manage Amazon better.
It's to spend less time firefighting and more time growing your Amazon business.
Need Help With Amazon Vendor Central?
If you're struggling with Amazon Vendor challenges, there are two ways we can help.
Work with eCommerce Nurse
We support Amazon Vendors with Vendor negotiations, Vendor Support, pricing and distribution strategy, account management and more.
Join Vendor Society
Our global community for Amazon Vendors brings Vendors together to share experiences, best practices and solutions to the challenges of working with Amazon.
