Both becoming an Amazon Vendor and an Amazon Seller involve entirely distinct processes. When you become an Amazon vendor, you sell your products to Amazon, which then takes ownership of your products and is responsible for managing your inventory. Between Vendor Central and Seller Central, the entity that sells your goods is a significant difference. Selling to Amazon customers directly is possible with Seller Central, while on Vendor, you are selling your products to Amazon.
Since Vendor Central utilizes wholesale pricing, Amazon typically charges a vendor 4% to 10% to cover slotting and marketing expenses.
The Vendor Central program is more expensive even if there are no related items or monthly fees. Amazon subtracts the marketing cost, remittance fee, prepayment fee, and packing fee. The additional costs listed below should be considered when you aspire to be an Amazon vendor.
Additional expenses to consider are:
- Cost of shipping the inventory to Amazon’s fulfillment facilities
- International return shipping cost
- International shipping cost
- Customer support cost
- Taxes & duties
- Translation cost for listing
- Amazon CoOp Fee
What is a CoOP Agreement – Vendor Agreement?
CoOp, also known as Contra CoGS, can help to promote your products to raise brand awareness and increase traffic to your products. CoOp can also be charged to cover inbound freight costs of shipping your products to our warehouses, and costs of damaged or defective returns of your products.
CoOp agreements
The CoOp program includes agreements for a variety of your business functions.
There are different types of agreements:
CoOp, Damage, and Freight allowances
Accrued against net receipts into our fulfillment centers on a monthly basis; the accumulated balance for the entire month is billed based on the schedule listed in the agreement terms.
- The typical damage allowance terms are usually 1% to 2% of net receipts, or the overall cost to Amazon. So if Amazon buys $100 worth of products, it will deduct $1 to $2 on average to cover damages.
- Vendors will pay the total accumulated balance of MDF/COOP to Amazon monthly. Payment will be deducted from your Amazon Payment.
Promotional allowance (SPA)/FLEX agreements
- Promotional allowances are based on orders placed during the promotion period that were not canceled.
- The total of these reductions (the “Promotional Allowance”) applies to any Product orders that customers place with us during the Promotion Period (and do not cancel).
- You will pay Amazon the total cumulative balance of the Promotional Allowance on a schedule we set after the Promotion Period End Date.
- The per-unit funding for the promotional product(s) sold during the campaign is your responsibility. If 100 units are sold during the campaign, for instance, and you have agreed to a funding level of $5 per unit (tax excluded), your expense will be $500. If no units are sold, there are no additional fees.
- Price Protection agreements
Protects against a reduced value of the units currently on hand and in transit. According to the policy, if a vendor lowers the price of one of their products on Amazon, Amazon will immediately apply the reduced cost price to any open purchase orders, goods in transit, and stock that is currently on hand.
Other Costs that you will need to consider
- S&S
Vendor will pay the COOP to Amazon within 15 days after receiving an invoice sent by Amazon.
Once a funding agreement is signed, all the products in your catalog that ship to Amazon fulfillment centers will be evaluated weekly based on a variety of criteria, including repeat purchase relevancy and operational metrics. Once products are enrolled in the program, the Subscribe & Save feature will be enabled on the product detail page.
- Vendor-Funded Sales Discount
You will be responsible for all promotions and price discounts offered to your buyers. There are loads of discounts you can offer a customer, from coupons to pricing promotions to lightning deals; this discount will be founded by you as a Vendor.
Chargebacks
What are Amazon Vendor Chargeback fees?
This is known as a vendor chargeback when Amazon charges you a fee for failing to meet its requirements for packaging, fulfillment, shipping, etc.. They might cause Amazon to reject your merchandise, return or discard it, or even stop future shipments to the Amazon fulfillment center if they go unresolved.
Below are the most frequent chargebacks that vendors encounter:
ASN accuracy: If the ASN is not sent after the package has reached the Amazon fulfillment facility. Chargebacks would be 2% of the product’s cost if your compliance rate were 95%.
- How did Amazon decide on the chargeback amount?
If your compliance rate was between 70% and 95%, the chargeback amount is 4% of the product’s cost for that period. If your compliance rate is lower than 70%, the chargeback amount is 6% of the product’s cost.
Carton Content Accuracy: To avoid this chargeback, ensure your box doesn’t contain any unexpected products that were incorrectly packed and sent to us. This will guarantee that the objects virtually assigned to the box (in your ASN) and the ones present inside match up exactly.
- How did Amazon decide on the chargeback amount?
The fee for this chargeback is $2.60 per defect unit. If an ASN indicates that ten units of an item should be in a box, but the received box contains just four accurate units and four units of a different item, the discrepancy is calculated as 10. This is because we are still missing six units of the expected ten, which is added to the number of unexpected units (4); therefore, the defect count is 6 + 4 = 10. You would receive chargebacks for both the shortages and overages as a result.
- No carton/package content label:
You did not map the SSCC/AMZNCC label information in the ASN at the case/carton pack hierarchy level in the ASN. If you are using GTIN-14, you did not map the GTIN-14 barcode number at the external item hierarchy level in the ASN. If you are an EDI vendor, you did not provide SSCC barcode numbers at the carton level hierarchy in EDI856 under the MAN*GM section in the ASN. This defect could lead to shortages and delays of invoice payments.
- How did Amazon decide on the chargeback amount?
The Chargeback fee is calculated based on trailing one week of labeling non-compliance (defect rate) performance. The defect rate is calculated as the ratio of carton volume with NO valid labels to the total weekly carton volume received. A summary of the No CCL chargeback tiered structure is as follows: Tier Defect rate Auto-receive rate Chargeback per carton 1 >= 90% <= 10% $15/carton 2 65%–89% 11–35% $10/carton 3 < 65% 35%+ $5/carton.
Overweight Carton
An overweight carton chargeback occurs when you send a box to an Amazon fulfillment center that contains more than one sellable unit and weighs over 50.0 lb.
The amount for this chargeback is $25 per box (carton).
PO on-time accuracy
You will need to comply with the shipping window amazon has set up for your order to be shipped to Amazon. Our on-time performance requirements are 90%, and we charge 3% of the product cost based on your performance which was 0.02 (defect rate).
Product preparation:
Charges are calculated based on the number of performed prep touches that match current prep instructions. Currently, chargebacks are only applied to eight prep activities: bagging, boxing, bubble wrapping, opaque covering, removing hanger, set creation, suffocation warning stickering, and asin stickering.
To view who is responsible for the charged prep instructions, go to Vendor Central > Reports > Operational Performance, filter by prep issues, and export the csv. Amazon-owned prep items will receive chargebacks in exchange for providing the required prep. Vendor-owned prep items can receive chargebacks if there is a lack of prep or issues with current prep methods.
- Amazon Advertising
How does advertising compare to the rest of my marketing expenses?
You may scale your Amazon sales and business by using self-service ads. You can decide what is best for your business since you have control over how much money you invest. You can alter your daily spending plan at any time.
You can change the campaign’s other components whenever you please. To increase or decrease the scope of your reach, add or remove keywords, stop or shorten the duration of campaigns, and vary your keyword match types.
In conclusion, understanding the Amazon vendor agreement and fees is crucial for any business looking to become a vendor on Amazon. While the Vendor Central program offers the advantage of wholesale pricing, there are additional costs to consider such as shipping, taxes, translation, and various CoOp agreements. With the complexity of the fees and requirements, it is important to carefully review and comprehend the agreement in order to avoid any unexpected costs and penalties.
Please do not hesitate to contact the BellaVix Team if you have any further inquiries or would like our assistance while you navigate Amazon.
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