I had an interesting experience with Amazon recently, and I figured I’d share it here. I know a lot of semi-professional resellers in the point & miles community use Amazon’s marketplace and fulfillment tools to facilitate sales, but I don’t know how many actually deal with Amazon directly. From experience dealing with Amazon in many capacities, I have noticed that there’s a hierarchy of shittiness in how Amazon deals with you – as a retail customer, you get the best possible customer service. As a 3rd-party seller and/or fulfillment customer, you’re still technically a customer of Amazon’s, but they care much less about you, and the service is often non-responsive and unhelpful. As a vendor, Amazon pays you money, which means they treat you with utter contempt.
I have dealt with all kinds of retailers in my professional life, and while some are known for being tough or difficult, I have never encountered an entity that treats their business partners with the same mix of contempt, arrogance, and dismissiveness as Amazon. It would be impressive if it wasn’t so irritating – and as Amazon is well aware, they generate such a huge chunk of business for their vendors that it’s hard not to acquiesce to whatever ridiculous bullshit they try to pull.
I recently got a reminder of this when they sent over 2017-2018 terms for one of the companies I work for. (This wasn’t part of my main gig – this was an offshoot company that sold a completely different line of products and had a separate sales organization that I managed.) For a number of reasons, we had decided to close the company this year, so I didn’t plan to keep the Amazon business going past June, regardless of how the terms negotiation shook out. That gave me the opportunity to negotiate with Amazon from a position of giving no fucks whatsoever, and it honestly was really instructive.
The terms they sent over were beyond onerous – they asked for around 27% off the wholesale price, which was already 55% off of retail. The additional 27% was a mixture of freight and defective allowances, marketing co-op fees, and early payment discounts. Unlike most companies that ask for 30-day payment terms, Amazon wants 90-day terms, and they want a discount for paying earlier than 90 days. I get how capitalism works, so I’m not complaining per se, though I do think it’s shitty how Amazon puts the screws to small businesses. Sure they’re within their rights to do it, but if things keep going like this, in ten years there will only be a handful of companies left that are big enough to go toe-to-toe with Amazon, and innovative products made by small companies will be a thing of the past.
In the past, I would have been trepidatious about pushing back on these terms, but with imminent closure on the horizon, I told them exactly what I thought. Readers of this blog can probably imagine the emails I sent to them – I’m particularly proud of telling them that any company stupid enough to accept their terms would go out of business anyway, so I didn’t care if they stopped buying from us. I also told them that I was so incensed that they’d ask for 27% in markdowns that I wanted them to close our vendor account on principle. It was pretty fun, I have to admit.
Anyway, as is the normal course with Amazon, we played the game where they respond with a form letter, I respond by copying and pasting my initial response, they respond with a form letter, copy-paste, form letter, etc. Bigger brands have actual buyers based in the US to talk to, but small companies usually just deal with people from the accounting department based overseas. However, after a bunch of back-and-forth, I got my first concession: free Amazon Vine enrollment and A+ content for five products. That’s actually pretty good, and if I had been writing on behalf of a going concern, I probably would have taken it. Vine and A+ are expensive and probably would have helped generate more sales – at the very least, at that point I could consider the additional markdowns as a marketing expense. However, I told them to pound sand, and oh my god was it satisfying.
The same back-and-forth volley happened with this email, and then I didn’t hear anything for a while. They threatened a few times to stop ordering products if I didn’t sign the terms, but POs kept rolling in on schedule, so I think those were hollow threats. Finally, a new person emailed me a revised terms agreement that cut the markdowns in half and got rid of the early payment discount. Again I told them to blow, and again they threatened to stop ordering, though they haven’t stopped issuing POs. That’s where thing stand now.
If you run a small business who has been on the receiving end of Amazon’s heavy-handed tactics, try resisting – you may be surprised at how flexible they can be. Assuming I accepted the revised terms and continued selling to them for another year, the concessions would have saved me thousands. Clearly, this is only one case in one department, so don’t go and fire off a flurry of F-bombs and then come back here wanting my head on a platter because you lost a huge chunk of your sales. However, their MO in these negotiations is always just to bombard you with the same thing over and over again, and if you refuse to budge, there’s a good chance they’ll blink first.
Anyone else have a similar experience? Any horror stories dealing with Amazon as a seller or a vendor? I’m always interested in what others have to say, since I spend so much time dealing with Amazon in various ways. It’s crazy how much mindshare they take up in terms of sales, marketing, and operations, but they aren’t going anywhere, so I’m resigned to it by now.
Thanks for the informative post.
What a great write-up! Do you have any recent updates?
The company in question closed down, but I still get emails from their merchandising team telling me to lower the retail prices so they can start placing orders again. That’s another risk factor — even after you agree on pricing and sign their onerous terms, they still may hammer you over the price and refuse to order products unless you give them a better deal.