Welcome to The Ecommerce Braintrust podcast, brought to you by Julie Spear, Head of Retail Marketplace Services, and Jordan Ripley, Director of Retail Operations.

Today, we're excited to welcome back a familiar voice on the show—operations expert Armin Alispahic. Armin is here to bring us up to speed on a recent phenomenon in the Vendor space — the availability of true channel P&L analysis.

We'll explore why this trend is only showing up now and what it means for how brands assess their business with Amazon.

KEY TAKEAWAYS

In this episode, Julie, Jordan, and Armin discuss:

Understanding Vendor Profitability on Amazon:

• Two main metrics: Net PPM (Net Pure Profit Margin) and Internal Brand P&L.

• The hidden third factor—Amazon's internal costs (fulfillment, packaging, and shipping expenses).

Why Profitability Analysis Is Becoming Crucial:

• Amazon is tightening vendor margins, requiring brands to have a clear view of their own and Amazon's profitability.

• Increase in CRaP (Can't Realize a Profit) items, making it essential to assess profitability at the SKU level.

Technology Driving P&L Insights for Vendors:

• Amazon's 2023 API improvements have enabled better data access for vendor P&L analysis.

• New tools now provide automated, SKU-level profitability reports.

Key Factors That Influence Vendor Profitability:

• Fixed Costs: Vendor terms (co-op, damage allowances, freight).

• Variable Costs: Chargebacks, shortages, advertising, and promotional spend.

• Operational Efficiency: Packaging, fulfillment optimization, and inventory management.

How Brands Can Leverage P&L Insights:

• Smarter Assortment Decisions: Identifying SKUs that drive profitability vs. those that hurt margins.

• Optimizing Advertising Spend: Allocating budget toward high-margin products rather than just high-volume ones.

• Better Negotiations with Amazon: Using data to drive conversations in annual vendor negotiations (AVNs).

• Cross-Team Collaboration: Breaking down silos between marketing, finance, and operations.