Why is it important for your Amazon brand to negotiate favourable terms with manufacturers?
As brands selling on Amazon continue to face fierce competition, it becomes increasingly important to secure favorable terms with their manufacturers. Negotiating advantageous terms can not only increase profit margins but also have a significant impact on working capital. In this article, we will examine the reasons why brands selling on Amazon should negotiate favorable terms with their manufacturers.
Firstly, favorable terms can lead to cost savings. Negotiating lower prices for goods can help brands reduce costs and increase profits. In addition, securing longer payment terms can help brands manage their cash flow by delaying payments to their manufacturers. This can be particularly beneficial for brands that have seasonal sales patterns, as it allows them to hold onto their cash for longer and invest it in other areas of the business.
Secondly, negotiating favourable terms can improve relationships with manufacturers. When brands and manufacturers work together, they can achieve mutually beneficial outcomes. By negotiating favorable terms, brands can demonstrate their commitment to the relationship, which can lead to increased cooperation and better communication between the two parties.
Thirdly, securing favorable terms can help brands to manage their inventory levels. By negotiating shorter lead times for orders, brands can reduce the amount of inventory they need to hold in stock. This can free up working capital that can be invested in other areas of the business, such as marketing and advertising.
Fourthly, securing favorable terms can help brands to compete on Amazon. Amazon aggregators have become a popular way for brands to sell on the platform. By negotiating favourable terms with their manufacturers, brands can ensure that they are able to offer competitive prices and still make a profit. This can help them to stand out from other sellers on the platform and increase their sales.
In conclusion, negotiating favorable terms with manufacturers can have a significant impact on the success of brands selling on Amazon. By reducing costs, improving relationships, managing inventory levels, and competing effectively, brands can increase their profitability and build a sustainable business.
Flummox is a brand acceleration house specialized in acquiring locally proven Amazon-native brands and expanding their reach by opening distribution across Europe on Amazon and other online marketplaces. Reach out if you’re interested in learning more!
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