Last week I wrote about why supplement brands are bleeding margin on Amazon Vendor Central.
Today I want to go deeper — into the negotiation itself.
Because if you run a multi-brand portfolio on Amazon 1P, your Annual Vendor Negotiation isn't just a procurement conversation. It's the single event that determines whether Amazon treats your brands as strategic partners or replaceable commodity suppliers for the next 12 months.
And most companies are walking into it unprepared.
The New AVN Reality
Here's what's changed.
Amazon used to care about selection. Get more products on the platform, grow the catalog, worry about margin later. During COVID, they cared about availability — just keep it in stock.
Since 2022, the priority has been one thing: profitability.
Amazon's Vendor Managers are now laser-focused on Net PPM — Net Pure Profit Margin. I'll break down exactly what that means and why it's misleading in a moment. But first, the context.
According to Stratably's benchmarking of 262 1P vendors, 55% received cost-decrease requests during their most recent AVN cycle, with most asks clustering in the mid single-digit range. Amazon isn't asking politely. They're showing up with your Net PPM by ASIN, comparing it to category averages, and demanding you close the gap.
And here's the part that catches vendors off guard: Amazon now calls it "AON" internally — Always On Negotiations. The annual conversation isn't a standalone event anymore. It's the culmination of how you've shown up all year. Your operational metrics, chargeback rates, fill rates, and pricing discipline are being evaluated constantly. By the time you sit down at the AVN table, Amazon already has a story about you.
The question is whether you have a better one.
What a Multi-Brand 1P Portfolio Actually Looks Like on Amazon
Let me paint a picture that should resonate if you manage brands across multiple categories.
Consider a company like Edgewell Personal Care — the $2.2 billion parent of Schick, Banana Boat, Hawaiian Tropic, Bulldog, Jack Black, Cremo, Billie, Wet Ones, and Edge. They sold their feminine care portfolio (Playtex, Stayfree, Carefree, o.b.) to Essity in late 2025 for $340 million, so the current focus is three segments: Wet Shave, Sun & Skin Care, and Grooming.
Now imagine what their Amazon AVN looks like.
You've got Banana Boat — a consumable sun care brand with seasonal demand spikes, high Subscribe & Save potential, and a history of recalls that affected consumer trust. The units move, but the margins are tight because Amazon knows exactly how price-sensitive sun care shoppers are.
You've got Schick — a mature shaving brand competing head-to-head with Gillette (P&G) and Harry's, where Amazon controls the Buy Box pricing and any margin concession shows up immediately in your P&L. Schick Hydro Silk went viral on TikTok, which means Amazon now sees increased leverage — you need the platform more than ever.
You've got Jack Black and Bulldog — premium men's skincare at very different price points, where Amazon's category team is evaluating your Net PPM against brands like Kiehl's, Brickell, and dozens of DTC-native competitors who are all running 3P with full pricing control.
You've got Billie — acquired for $310 million in 2021, built as a DTC subscription brand, now being integrated into Amazon's wholesale model. The tension between Billie's DTC DNA and Amazon 1P economics is real.
And then there's Cremo — a masstige grooming play competing in a category flooded with private label.
Each of these brands has a different margin profile, a different competitive set, a different demand curve, and a different strategic role in the portfolio. But Amazon assigns one Vendor Manager (maybe two) and expects a consolidated commercial proposal.
This is where most multi-brand companies get it wrong.
Net PPM: The Metric Everyone Talks About but Few Actually Understand
Before we get into the mistakes, let's talk about the number Amazon uses to judge you — because most vendors accept it without questioning the inputs.
Net PPM = (Shipped Revenue – Shipped COGS + Vendor Terms – Sales Discounts) / Shipped Revenue
That's the percentage Amazon earns on your products after cost of goods, your trade terms (co-op, accruals, freight allowances), and customer-facing discounts (coupons, Lightning Deals, Subscribe & Save).
Here's what Net PPM does NOT include: Amazon Advertising revenue, fulfillment costs, return handling, chargebacks, and storage fees.
Think about that for a moment.
Advertising is a massive profit center for Amazon. If your brands spend $2 million annually on Sponsored Products, Sponsored Brands, and DSP — that's revenue flowing directly to Amazon's advertising P&L. But your Vendor Manager gets zero credit for it in your Net PPM.
Chargebacks are income to Amazon — they charge vendors for packaging violations, ASN compliance failures, and delivery window misses. Those flow into Amazon's pocket but don't appear in the Net PPM your VM shows you.
Fulfillment costs — the expense of picking, packing, and shipping your products from FC to customer — are real costs Amazon bears. But they're also excluded from Net PPM.
So Net PPM isn't "net profit" at all. It's a procurement margin — a deliberately narrow lens that isolates what Amazon's retail buying team earns on the wholesale transaction. It gives the Vendor Manager a clean metric to negotiate from while conveniently ignoring the full picture of what your brands contribute to Amazon's total economics.
This matters because it creates a structural asymmetry. Your VM can say "your Net PPM is below category average" while completely ignoring that your brands drive millions in advertising revenue, carry a below-average return rate, and ship with best-in-class compliance. You're generating value across three or four Amazon P&L lines, but the negotiation happens on only one.
The Estimated Contra-COGS Problem
It gets worse. Amazon calculates your Net PPM in Retail Analytics using estimated contra-COGS — their assumption of how much your trade terms (co-op agreements, accruals, promotional investments) reduce their cost of goods. But those estimates don't always match what Amazon actually deducted from your payments.
If you sell across multiple categories — like a company with brands in shaving, sun care, and grooming — a single ASIN might get incorrectly associated with co-op accruals from a different category. You're paying more than you should, and the Net PPM Amazon shows you is inflated relative to reality.
The fix: pull your actual payment remittances and reconstruct real Net PPM from the ground truth of what Amazon actually deducted. The gap between Amazon's estimated contra-COGS and your actual deductions is your first negotiating lever — and it's often significant.
The Metric Amazon Doesn't Show You: Contribution Margin
Net PPM is what the buying team cares about. Contribution Margin (CM) is what Amazon's finance team actually uses to determine if carrying your product is worth it.
CM includes everything in Net PPM plus fulfillment costs, return processing, storage, and delivery expenses. A product can have a healthy 30% Net PPM but a negative Contribution Margin if it's bulky, heavy, frequently returned, or operationally expensive to ship.
Here's the problem: vendors can't see their own Contribution Margin. Amazon doesn't share fulfillment costs, return handling expenses, or storage fees at the vendor level. You can only work with estimates.
But here's the opportunity: you can influence Contribution Margin through operational excellence — and use that as your counter-argument when the VM asks for more trade terms.
Reduce your chargeback rate by improving ASN compliance and packaging? That's a CM improvement.
Optimize case pack sizes to reduce per-unit handling costs at the FC? CM improvement.
Hit delivery windows consistently, reducing shortage claims? CM improvement.
Improve your packaging to reduce damage rates and returns? CM improvement.
Each of these saves Amazon real money on the operational side of their P&L — even if Net PPM stays flat. And that's exactly the reframe you need at the negotiation table.
"You're asking for 200 additional basis points in trade terms. In the last 12 months, we reduced our chargeback rate by 30%, improved fill rate to 96%, and cut damage-related returns by 15%. That's a Contribution Margin improvement worth more than what you're asking for — and we didn't charge you for it. Let's talk about what we need in return."
That's a conversation most Vendor Managers aren't prepared for. And it changes the entire dynamic.
The Five AVN Mistakes That Cost Multi-Brand Vendors Millions
1. Negotiating brand-by-brand instead of portfolio-by-portfolio
Amazon loves it when you negotiate each brand in isolation. It lets them extract maximum concessions from your weaker brands without giving you credit for the strength of your portfolio.
The better play: come in with a consolidated portfolio story. Your high-margin premium brands (Jack Black, Bulldog) subsidize the category leadership your volume brands (Banana Boat, Schick) provide. Amazon gets first-mover allocation on new launches, exclusive bundles, and Subscribe & Save expansion — but only if the total terms work for both sides.
Trade across brands, not within them.
2. Accepting Amazon's Net PPM narrative without challenging the inputs
I've covered this in detail above, but it bears repeating as a tactical mistake. Most vendors see the Net PPM number in Retail Analytics and treat it as gospel. It's not. It's an estimate built on assumptions that may not match your actual deductions.
Reconstruct your real Net PPM from payment remittances. Quantify your advertising spend as Amazon revenue you're generating. Calculate your operational improvements as Contribution Margin gains. Present the full picture — not just the procurement margin Amazon wants to discuss.
3. Ignoring logistics as a negotiation lever
Most vendors treat freight allowance as a fixed cost of doing business. But your inbound supply chain efficiency directly impacts Amazon's Contribution Margin — and that's a lever most companies don't pull.
For a multi-brand company shipping across categories, the logistics optimization opportunities are significant. Optimizing case pack configurations to reduce per-unit handling. Improving pallet density for full truckload shipments. Pre-positioning seasonal inventory (like sun care before summer) through Amazon Warehousing & Distribution (AWD) to reduce Amazon's internal transfer costs. Improving Advanced Shipment Notification (ASN) accuracy to reduce chargebacks.
Each of these reduces Amazon's cost to serve your products. Quantify that reduction and bring it to the AVN table. It's the most underutilized negotiation lever in the 1P vendor playbook.
4. Having no exit strategy
Amazon's most powerful negotiating tool is your dependence on them. If Amazon represents 15% of your U.S. revenue — which is common for companies at the $2 billion+ level where e-commerce is mid-teens of total sales — they know you can't walk away.
But can you shift SKUs?
This is where the 1P/3P hybrid model becomes strategically critical. Not every SKU belongs on Vendor Central. Your hero products with strong brand search demand and healthy margins? Keep them 1P — Amazon needs them for selection, and you benefit from the trust signals of "Ships from and sold by Amazon."
But your long-tail SKUs with sub-15% Net PPM? Your seasonal variants that create operational complexity? Your new launches that need pricing control? Those might perform better on Seller Central, where you set the price, control the inventory, and keep the margin.
Having this mapped out before the AVN gives you genuine leverage. "We've modeled a hybrid scenario where we migrate X SKUs to 3P. The result is a smaller but more profitable 1P relationship for both of us. Here's the data."
That sentence changes the entire tone of the negotiation.
5. Treating AVN as a once-a-year event
Amazon's shift to Always On Negotiations means your daily execution is your negotiation preparation. Every chargeback you prevent, every ProcOOS improvement, every successful Subscribe & Save enrollment, every new product launch that hits its targets — these build the case you'll present at the next AVN.
The best 1P vendors I've seen run a quarterly internal review that maps directly to Amazon's KPI framework: Shipped COGS growth, Net PPM trend, Lost Buy Box %, ProcOOS %, and chargeback rate. By the time the AVN kicks off in Q4, the story is already written.
The Trade Terms Playbook
For those who haven't been deep in the 1P world, here's what's actually on the table during an AVN — and what's negotiable:
Base Accruals / Co-op (Marketing Allowance): This is the percentage you pay Amazon for the privilege of being listed. Amazon frames it as marketing support — they use the funds for on-site and off-site product placements and retargeting. It directly improves their Net PPM. This is negotiable — but you need to demonstrate what you're getting for the investment. Ask for placement data, traffic attribution, and incremental sales lift. If they can't prove ROI, it's a discount disguised as marketing.
Subscribe & Save Funding: Amazon increasingly requires consumer goods brands to participate. The customer gets 10-15% off the first purchase and 15-20% off recurring orders. You fund a portion. The negotiation isn't whether to participate — it's how much you fund vs. Amazon, and whether your S&S terms escalate with volume.
Freight Allowance: What you pay Amazon to use their logistics network (programs like PICS, Direct Import, Direct Fulfillment, Full Truck Load ordering). This is where your operational optimization creates the most leverage. If you can demonstrate that your supply chain improvements have reduced Amazon's inbound processing costs, you have a data-backed case for reducing — not increasing — this fee.
Damage Allowance: Amazon charges you for handling damaged and returned products. The data behind this fee is rarely transparent. Push for category-level benchmarking and trend reporting. If your damage rates are below category average, this number should go down, not up.
Volume Incentive Rebates (VIR): Tiered rebates that Amazon earns based on volume thresholds. Amazon loves to set aggressive targets and collect accruals against them throughout the year. If the target isn't met, you get a refund — but Amazon has already optimized their free cash flow on your money for months.
Payment Terms: Standard is 2% Net 60 — Amazon gets a 2% discount if they pay before the end of the second month following the invoice. Amazon has been pushing toward Net 90. Every 30 days of extended payment terms is cash you're lending Amazon interest-free. Model the working capital impact and negotiate accordingly.
Amazon Vendor Services (AVS): You pay for a dedicated Amazon contact to help with operational issues, product launches, and catalog management. If you don't invest, you risk being moved to "mass vendor management" — Amazon's Vendor Success Programme — with minimal support. The cost is real, but so is losing access to a human who can resolve operational issues before they become chargebacks.
The Negotiation Framework
Understanding ZOPA (Zone of Possible Agreement)
Every negotiation has a zone where both parties can find common ground. When Amazon presents their first ask — say, a 6% increase in total trade terms — that's their anchor. It sits in your Zone of No Agreement (ZONA). Your counter-proposal — say, a 1% reduction — sits in theirs.
The ZOPA is the area between those anchors where a deal can actually happen. Maybe that's a 2% increase bundled with Amazon co-funding Subscribe & Save, providing guaranteed placements, and absorbing more freight costs. A deal both sides can live with.
The tactical takeaway: always anchor your counter-offer as far below your target as Amazon's ask is above it. If you want to land at a 2% increase, don't open at 1.5%. Open at a decrease. Give yourself room to "concede" toward your actual target.
The 90-Day Preparation Framework
If I were walking into an AVN for a multi-brand CPG portfolio, here's how I'd structure it:
90 days before AVN (August): Pull 12 months of actual payment remittances. Reconstruct real Net PPM by brand, by ASIN — don't rely on Amazon's estimated contra-COGS. Compare to Retail Analytics estimates and identify every gap. Run a SKU-level profitability analysis — which ASINs are CRaP (Can't Realize a Profit) for Amazon? Which are stars? Build a portfolio heat map. Quantify your total advertising spend as revenue you're generating for Amazon's ads business.
60 days before (September): Model three scenarios — ideal, realistic, worst case. For each, map the specific trade term levers you'll move. Build the hybrid 1P/3P migration model for your bottom-quartile SKUs. Quantify every operational improvement — chargeback reductions, fill rate gains, packaging optimization, inbound compliance scores. Align internally with finance, supply chain, and brand teams. Set red lines.
30 days before (October): Prepare your counter-proposal framework. Build the Contribution Margin story — show Amazon that your operational investments have delivered margin improvement beyond what's visible in Net PPM. Package the data in Amazon's language: Shipped COGS, Net PPM trend, ProcOOS, Lost Buy Box. Position your brands as category drivers, not commodity suppliers.
During AVN (November-January): Lead with data. Respond to Amazon's first proposal within 5-10 business days — they expect speed. Never accept the first anchor. Use the ZOPA framework. Trade across brands, not within them. Escalate strategically — save your senior leaders for later rounds. If Amazon introduces disincentives (suspending Buy Box, pausing POs), stay calm — these are typically short-term pressure tactics, not permanent actions.
Post-AVN (Ongoing): Track compliance against agreed terms. Run quarterly reviews against Amazon's KPI framework. Document every win and operational improvement. Remember — it's AON now. Next year's negotiation starts the day this one ends.
Why This Matters Right Now
Amazon's contribution to total CPG e-commerce continues to grow. For companies like Edgewell — where e-commerce was mid-teens of total sales in 2023 and is scaling through brands like Billie, Cremo, and Bulldog — the Amazon channel is becoming too large to manage with last year's playbook.
The 2026 AVN cycle is being shaped by tariff uncertainty, currency headwinds, and Amazon's continued push for profitability. Edgewell's own recent earnings reflect this pressure — organic sales slightly negative domestically, with growth coming internationally and through brand acquisitions. That means every basis point of Amazon margin matters more than it did two years ago.
Vendors who show up with data, a clear portfolio strategy, the ability to challenge Amazon's inputs, and the credibility to discuss hybrid models will negotiate from a position of strength.
Everyone else will accept Amazon's first proposal and wonder why their margins keep shrinking.
Dan Matejsek is the founder of RavingFans.ai and creator of PerfectASIN. 27 years of e-commerce experience. $572M in career online revenue. He currently consults with Amazon brands on listing optimization, advertising strategy, and AI-powered growth.
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