In this article, our Amazon Experts share another 4 tips to increase profit margins for Amazon Vendors.
Bigger Packs & Bundles Means Better Margins
Finding ways to increase the size, or value offering of your existing best sellers and allowing these only to be purchased through Amazon is a great way to increase your margins.
For instance, confectionary retailers are already grouping several different chocolate bars together in bulk, as an amazon exclusive, with little (if any) additional investment.
This works because your average selling price across your product range increases, whilst reducing variable costs.
Just like grouping similar products together in bulk, the same can be true of bundling complimentary products and passing the cost saving on to the consumer.
As an example, vehicle recovery products which are normally sold separately (but are all used together) have been bundled by Amazon Vendor GearAmerica, increasing the profitability of each item through lowering distribution and packaging costs, whilst simultaneously passing value onto customer.
Find Savings in Your Supply Chain
Supply chain costs can at various times, increase.
As a Vendor, this can significantly squeeze your margins if you’ve already agreed purchase prices with Amazon.
Revisiting your supply chain costs and looking for savings should be something you do regularly. Don’t be afraid to negotiate with your suppliers, be it unit prices, volume of inventory delivered and held, or payment terms. Furthermore, don’t be afraid to look elsewhere where new suppliers will work hard to win your business.
One strategy that might be employed, is consolidating your supply chain to as few suppliers as possible.
Firstly, there’s a time saving in dealing with fewer external partners. Secondly, in spending more money with a supplier, you have more leverage to negotiate costs and terms. Lastly, this also presents you with the opportunities to build in more security in having two, or a few suppliers delivering you the same services. If one struggles to fulfil your orders, you
r other partners are your contingency. In addition, you can compare costs, terms and quotes from each and negotiate each of them down further.
Get to Know Your Amazon Vendor Manager
The least malleable factor in your profitability calculation is normally Amazon themselves, but that does not mean that Amazon are completely inflexible.
Working with your Vendor manager to increase profitability and drive efficiencies on an ongoing basis is ultimately going to benefit Amazon too. Better margins can be achieved not just be negotiating pricing and terms, but also by requesting reductions in chargebacks and in the cost of promotions, offers and advertising.
It’s common for businesses to be wary of “rocking the boat”, especially when dealing with a Vendor Manager. For that reason, it’s often a good idea to consult with a Vendor Agency, who can help formulate an approach to improve margins across a number of areas.
Get in touch with Arthia today to find out more about increasing profitability.