5 minute read
Viewpoint
It’s an Amazon wrap: reflecting on 2024 and looking ahead to 2025
As we close out 2024, it’s time to reflect on the year’s challenges and look ahead to what 2025 might bring for brands on Amazon. This year has been nothing short of turbulent, especially for those leaning heavily on the Amazon Vendor (1P) model. Many brands have faced reduced purchase orders and shifting priorities from Amazon. The question now is: how can businesses not just survive but grow in this evolving landscape?
One of the biggest lessons from 2024 is that profitability remains king. Amazon’s relentless focus on margins led to significant cutbacks in purchase orders, especially for brands that weren’t hitting their profitability targets. If your business didn’t meet Amazon’s stringent profitability requirements, chances are you felt the pinch. As we head into 2025, vendors must be laser-focused on profitability metrics like Net PPM. This means regularly analysing data, identifying underperforming SKUs and making strategic decisions about which products to prioritise. If certain items are dragging down your margins, it’s time to rethink your approach—whether that’s SKU rationalisation or exploring new channel management strategies.
Adding to this complexity is Amazon’s recent push to bring employees back to the office. This shift could potentially lead to a natural reduction in vendor managers, who may not be replaced. As Amazon continues to streamline its operations, existing vendor managers will be stretched across more brands. For brands, this means that having the right expertise in-house - or leveraging external consultancy that knows how to manage the Amazon ecosystem - has never been more crucial. As Amazon’s internal support structures shrink, businesses must become more selfsufficient in navigating its ecosystem, algorithms and policies.
These internal changes from January 2025 could also align with the overstock challenges we witnessed in Q1 2024. Amazon found itself with bloated inventories in multiple categories, leading to sluggish sales and a more selective approach to issuing new purchase orders. The result? Brands were forced to address their inventory management and forced to focus on highdemand items. Moving forward, it’s clear that brands must be more agile and datadriven in managing their stock levels. Understanding Amazon’s purchasing patterns will be key to optimising inventory and maintaining profitability.
One area where investment showed strong returns this year was Amazon Advertising. As CPC (Cost Per Click) rates continue to rise, advertising on Amazon has transitioned from being a “nice-tohave” to an absolute necessity. Simply increasing ad spend isn’t the solution; brands need to strike the right balance between paid advertising and organic growth. Sponsored TV and Prime TV have become increasingly important, especially as digital TV consumption remains high post-pandemic. Smart brands are leveraging tools such as Amazon Marketing Cloud (AMC) to gain deeper insights and optimise their ad strategies, ensuring every pound spent is working towards driving visibility and sales.
Looking ahead to 2025, Amazon Vendor Negotiations (AVN) will already be well underway with Amazon continuing to push for better terms. Brands need to be prepared with a well-thought-out Amazon business plan before entering negotiations. Understanding internal costs to serve, managing profitability and aligning on joint business plans will be crucial. It’s not enough to reactively manage your Amazon relationship; proactive planning is the name of the game. This also extends to exploring new markets. Amazon’s push for Pan-EU expansion means brands can’t afford to copy-paste their strategies across regions. Each market requires a tailored approach to truly succeed.
While it’s essential to explore new strategies, mastering the basics remains a non-negotiable. Many brands found success this year by doubling down on the fundamentals: catalogue management, optimised listings, engaging content stores and building a strong foundation of customer reviews. These “brilliant basics” are often overlooked, but they are the bedrock of a successful Amazon strategy. Brands that consistently perform well on these fronts are better positioned against any Amazon changes.
As we move into 2025, there’s also the matter of promotions. Many brands feel pressured to slash prices during Amazon’s key events, but that’s not always necessary. Smart promotions which align with brand values can drive significant awareness without cutting into margins. The reality is that pay-to-play is becoming the norm, but that doesn’t have to mean sacrificing profitability. A thoughtful promotional strategy can build long-term value and customer loyalty.
Ultimately, the biggest takeaway from 2024 is the importance of diversification. If your business is still relying solely on one Amazon model, it’s time to rethink your strategy. Embracing a hybrid approach—combining both Vendor (1P) and Seller (3P) models—provides flexibility, control and resilience. This diversification can mitigate risks whilst allowing brands to pivot quickly in response to Amazon’s evolving policies. In an environment where the only constant is change, the brands that will thrive are those willing to diversify, adapt and stay one step ahead.
So, as you plan for 2025, ask yourself: Is your business truly prepared for the challenges ahead? Are you optimising for profitability, leveraging both Vendor and Seller models and investing in advertising wisely? The brands that answer “yes” to these questions will be the ones that turn the uncertainties of 2025 into opportunities.
