How Amazon Vendors Can Prepare for an Economic Downturn

The global ecommerce landscape is shifting. Tariffs and a changing geopolitical context require manufacturers to adapt. Especially with Amazon.

Whether you’re managing a brand in the US, Asia, or Europe. The recent introduction of U.S. tariffs has already brought a great level of uncertainty to most manufacturing brands. Currency fluctuations and supply chain volatilities are once again becoming the norm.

J.P. Morgan now predicts a 60% chance of a global recession in 2025. Yet, you most likely won’t see any signs of an economic downturn reflected in your sales numbers. That’s because consumers increase their short-term spending in fear of rising prices caused by tariffs.

Protecting your 1P vendor margins is difficult enough in a stable economy. But in times of uncertainty, your teams must apply an extra layer of commercial rigour – or else lose profitability very quickly.

So today, let’s take a closer look at how Amazon 1P vendors can prepare for an economic downturn.

1. Gather your benchmark data

Before you can strengthen your business, it’s critical to know where you stand. Start by capturing the status quo of your most important KPIs – before market conditions shift further.

Tools like Stackline, Profitero, or commerceIQ can help your teams monitor real-time profitability metrics such as Average Selling Prices, Net PPM and gross margins at the ASIN level. This also allows you to pay close attention to any negativ mix effects that pose headwinds to your customer P&L.

Equally important is defining your addressable market on Amazon. Thankfully, virtual shelf analytics providers allow you to build a clear picture of your target market, whether through keyword-based monitoring or Amazon browse nodes.

Use this data to map your brand’s category share over the last 6- and 12-months. This extended lookback period helps eliminate seasonal demand fluctuations and short-term effects of consumer behavioural changes.

Once your benchmarks are in place, pressure-test your commercial plans through scenario planning. For example, have your teams define key priorities to increase market share beyond price promotions, e.g., through offsite traffic via social media campaigns.

Questions to ask yourself and your team:

Do we have visibility on our baseline profit metrics by region, channel, and hero SKUs?
Have our teams access to reliable and real-time market share data on Amazon’s virtual shelf?
Do our teams have an action plan for when market share declines, beyond price promotional activities?
Do our teams monitor product selling prices on Amazon and other e-retailers?

2. Protect margins with off-cycle negotiations

Now, I get it. If you’ve just closed your annual vendor negotiation with Amazon, chances are you don’t want to disrupt your trade by reopening discussions about cost prices and trade investments.

But the truth is: Keeping your old cost prices most likely does a disservice to your business. That’s because tariffs and other trade restrictions were not factored into your 2025 budget.

If your landed costs have increased due to import duties that put your margins under pressure, it’s vital that you factor this new reality into your Amazon cost price base.

While Vendor Managers often claim that cost prices can only be changed during the AVN, know that this is a tactic, not a rule. Don’t let it stop you from renegotiating your cost prices with Amazon mid-year.

To make it easier for your Vendor Manager to accept cost changes, consider offering a cost support agreement limited to a maximum of 60 days.

Questions to ask yourself and your team:

Are our current trade terms profitable enough to wait until the 2026 AVN?
Are there any products that we may need to discontinue without a cost price increase?
Can we divert sales to other retailers in case Amazon rejects our cost increase?

3. Rationalise your product portfolio

Next, let’s take a look at your assortment. Times of economic uncertainty can be a great opportunity to reassess your portfolio strategy with Amazon. Now is the time to prioritise high-margin, high-velocity SKUs and remove products that drag your bottom line.

You can use my AVP Matrix to segment your portfolio by net margin and Amazon’s Net PPM. Consider delisting products that Amazon aggressively price-matches and hold little strategic value for customer acquisition. The same goes for products subject to constant chargebacks, shortages, or logistical issues.

These decisions also unlock negotiation leverage. In CPG categories, Amazon often pushes for access to low ASP (“Nielsen”) selection that is widely distributed but structurally unprofitable. Consider making access to these products subject to conditions that improve your cash flow or trade investments.

Looking ahead, it is equally important to apply the learnings from your portfolio audit to new product launches. You may cancel or delay the launch of innovations with low velocity projections until market conditions stabilise.

Questions to ask yourself and your team:

Which SKUs are unprofitable once all Amazon fees and allowances are considered?
Do we have a clear framework to prioritise high-margin, high-velocity SKUs and is our budget focus aligned across sales and marketing teams?
Have we considered maintaining low ASP/Nielsen selection only if Amazon agrees to re-negotiate trade terms and deal funding?
What informs our decision to delay or cancel the launch of low-velocity innovations?

4. Expand sales growth via Amazon Business

With sales expected to slow during an economic downturn, many brand leaders turn their attention to ROAS and price promotions. But that shouldn’t stop you from going after the low-hanging fruits right in front of you.

Amazon Business can be such an opportunity. It offers a dedicated B2B platform for businesses looking to streamline their corporate purchases, offering bulk order options and industry-specific discounts.

You may not have realised that Amazon already lists your entire B2C range on Amazon Business. So if you haven’t yet tried investing in bulk order discounts or introduced your B2B-specific selection on Amazon, this could be a low-cost opportunity to boost sales.

Questions to ask yourself and your team:

What portion of our revenue currently comes from B2B buyers – and is it growing?
Have we requested to run a trial on bulk discounts for B2B customers?
Do we understand the existing customer segmentation of Amazon Business customers?
Can we introduce B2B packs, pricing, or bulk configurations to drive volume?
Are we promoting Amazon Business internally as a strategic priority?

5. Invest in portfolio differentiation strategies

With margins under constant pressure and Amazon’s price matching algorithms designed to keep consumer prices low, differentiating your assortment has never been more important.

Launching exclusive products is one of the most effective ways to reduce your exposure to pricing volatility. When paired with a distribution control strategy, it can limit the number of unwanted 3P resellers and let you invest in sales growth without dragging down account margins.

That said, developing exclusives can be expensive. But it doesn’t have to be: A simple but effective tactic is to keep your top selling end-of-life products exclusively available for Amazon. Which also helps you balance the profitability of your non-exclusive portfolio.

There are other low-effort ways to differentiate your assortment. For example, creating multipacks, bundling high-velocity SKUs, or slightly modifying pack sizes can help reduce margin pressure and escape Amazon’s similarity price matching.

Questions to ask yourself and your team:

What differentiates our product from cheaper alternatives on Amazon?
Are we investing in features, formats, or claims that justify a higher ASP?
How exposed are we to Amazon price-matching or vendor contributions on undifferentiated SKUs?
What price-pack architecture is needed to improve Net PPM with Amazon?

6. Control and reduce your operational costs

While commercial negotiations can yield structural margin improvements, most organisations will see the largest cost savings from operational efficiency improvements.

Start by working with your finance teams to understand the individual cost centres of your Amazon customer P&L and pay attention to your logistics setup. Having Amazon directly pick up goods from your warehouse (WePay) in full pallets (Acapulco) or full truck loads can significantly reduce your logistics cost footprint.

Chargebacks and shortages are another area worth your attention. These deductions don’t just hurt your bottom line – they tie up working capital and add unnecessary friction to your supply chain. Addressing their root cause and running regular audits can help identify recurring issues and reduce their impact on your margins.

And don’t forget about your packaging! Even a small reduction in pack size can often shift products into a more favourable cost tier or reclassify non-sortable products as sortable. This can significantly lower the margin pressure for both – you and Amazon.

Questions to ask yourself and your team:

Where are we incurring the highest chargebacks or shortages – and what’s driving them?
Is our order confirmation rate at least 85% and if not, how can we improve it?
Are our logistics and packaging processes optimised for Amazon’s current fulfilment priorities?
Which cost centres in our Amazon customer P&L (freight, prep, co-op) have grown without scrutiny?
Can we identify quick wins in supply chain efficiency or vendor compliance?

7. Realign organisational ownership structures

Finally, let’s discuss the most difficult part: reviewing your organisational setup with Amazon. Of all the levers available to vendors during an economic downturn, this is the hardest one to execute – but also the most impactful.

If your business still manages Amazon through local market teams, you’re likely duplicating efforts and misallocating resources across commercial, operational, and marketing functions. This leads to misaligned trade terms across markets, cross-border sales and operational friction that all eat into your margins.

Meanwhile, Amazon has moved to a Pan-European vendor management structure, in which brands have lost their local buyer and now negotiate with a Pan-EU Vendor Manager who oversees the EU10 region.

Introducing a regional EU KAM team can help manage Amazon more efficiently, despite offering a different brand selection across markets.

A unified team can negotiate more holistically, align promotional calendars across markets, and secure regional supply chain efficiencies that individual countries would struggle to access on their own.

Yes, shifting from local to regional ownership takes time. But during times of an economic downturn, the business case for a Pan-European management structure has never been stronger.

Questions to ask yourself and your team:

Are our Amazon teams still operating in local silos – and at what cost?
Could a regional (coordination) structure improve our negotiation leverage or resource allocation?
Where are we duplicating efforts across markets that could be centralised?
Do our commercial and supply teams have shared KPIs at the regional level?

Conclusion

Preparing your Amazon business for an economic downturn may feel daunting at first. But it’s also an excellent opportunity to review cost structures, prioritise your portfolio and eliminate process duplications across markets.

Need help building a resilient Amazon strategy?

If you need help to prepare your Amazon business for an economic downturn, get in touch. I offer tailored consulting services that can help future-proof your commercial and organisational strategies with the online retailer.