Amazon Vendor Succes

Established European pet supplies business | Amazon Vendor

The commercial challenge

The client's Amazon business was growing strongly. But as the account grew, so did Amazon's demands.

The business was already investing upwards of 30% in Amazon commercial terms, representing hundreds of thousands of pounds each year.

Amazon's Net PPM was around 36%.

Amazon wanted 50%.

Closing that 14-point gap simply by agreeing to more backend terms would have been the easiest answer for Amazon.

It wasn't necessarily the right answer for the client.

First, understand where everybody makes money

ZEAL started by building the commercial picture on both sides of the relationship.

We analysed the client's true Amazon P&L alongside Amazon's economics — product margin, pricing, existing terms, landed costs, advertising, operations and product mix.

The analysis modelled the business at approximately 27% true net margin after terms, advertising and an estimated operating-cost allocation.

And it exposed the tension at the heart of the growth plan: the business needed to invest more to grow Amazon, while Amazon simultaneously wanted significantly more margin.

So the question wasn't:

How do we give Amazon another 14 points?

It was: How do we improve Amazon's economics without unnecessarily giving away the client's?

Deconstructing Amazon's ask

ZEAL broke the Net PPM challenge down into the individual commercial levers that actually drive it.

One stood out immediately.

The client was paying Amazon a 5% damage allowance, while actual damages and returns were running at approximately 1%.

Challenging that difference represented a significant five-figure opportunity.

Instead of accepting it as another unavoidable Amazon term, it became a negotiation point.

But terms were only one lever.

We looked at retail pricing. Invoice pricing. Promotions. Advertising. Product mix. New product development. Availability. Forecasting.

And critically, which products Amazon itself could make better money from.

Grow the products that work for both sides

The analysis revealed significant differences in Amazon economics across the portfolio.

Some of the client's largest categories were delivering comparatively weak Net PPM, while underdeveloped areas of the catalogue had much stronger economics.

One sub-brand, for example, contained products operating at 74–81% Net PPM, yet represented a relatively small part of the existing business.

ZEAL therefore made product mix part of the Vendor strategy.

Rather than trying to solve Amazon's margin problem entirely through concessions, the plan included growing products Amazon could make better money from and launching new products at 50%+ Net PPM.

That's an important distinction.

Improving Amazon's profitability doesn't automatically have to mean reducing your own.

Use investment to negotiate, not concede

The strategy also changed the role of advertising and promotions.

These weren't simply marketing budgets.

They were commercial levers.

Where additional advertising or promotional investment could drive profitable volume, improve Amazon's economics and strengthen the account, it could form part of the commercial conversation.

But investment needed something in return.

The negotiation strategy was clear: additional investment should be connected to growth, visibility or other commercial commitments from Amazon, rather than simply becoming another permanent cost of doing business.

Vendor success doesn't stop at AVN

The work also exposed why Vendor management can't be reduced to the annual negotiation.

Amazon's profitability and willingness to invest in the brand are affected by how well the account operates every week.

ZEAL identified gaps around forecasting, PO processes, pricing discrepancies and performance measurement. The business wasn't formally tracking metrics including PO confirmation rate and out-of-stock frequency against targets.

And with just 42 ASINs responsible for 80% of shipped COGS, poor availability on a relatively small number of products could materially affect the entire account.

So the Vendor strategy connected the negotiation with the operation:

better forecasting → better availability → stronger sales → stronger Amazon economics → stronger negotiating position

From reacting to Amazon to commercially managing the account

50% Net PPM was a target, not an overnight fix.

What ZEAL gave the business was a commercially modelled route for improving Amazon's economics without simply conceding more margin.

The client now understood where Amazon was making money, where it wasn't, which terms should be challenged, which products could improve the economics, where additional investment made commercial sense — and what Amazon should give in return.

That is the shift from responding to Amazon's demands to managing Amazon as a commercial account.