Amazon imposes Co-op deductions on vendors in various forms. This chart provides the ability to examine the size and relative contribution of various co-op deduction types over time.
Metric Breakdown
Accruals
Accruals are typically negotiated upfront and are structured as a percentage of net receipts. In case there has not been any negotiation between Amazon and the vendor, Amazon imposes provisional co-op rates. These fees are supposed to cover the cost of operations.
Some of the major accrual buckets are:
Base Accrual
These are also called Market Development Funds (MDF) or Base Accrual Fee, and they are typically around 10% but vary between 5 - 22%. This allowance helps fund Amazon’s operations, marketing initiatives, and programs to drive sales.
Typical examples of where this money usually goes are ; automated emails to promote products, improved site browsing (e.g., frequently bought together), 1-click ordering, off-Amazon marketing, and catalog improvements.
MDF fees are not result-based.
Freight Allowance
Freight allowance refers to the cost of getting the vendor’s products from the vendor’s warehouse to Amazon’s fulfillment centers. It typically ranges from 2 - 5%. When Amazon covers the shipping, the vendor funds this cost in the form of an allowance.
Damage Allowance
Amazon prefers to handle damages and dispose them rather than sending them back to the vendor. To cover the cost of handling the returns and disposal, Amazon charges the vendor a damage allowance. It typically ranges from 2 - 5%. Vendors can also choose not to agree to a damage allowance and instead fund the cost of returning the item back to their warehouse.
Strategic Vendor Services
Some major brands typically pay additional allowances to receive 1:1 support from Amazon.
Vendor-Funded Discounts
Brands pay Amazon for various programs and promotional activities such as coupons, Subscribe n Save or Prime Day deals. These fees are typically based on sell-through and paid-out after events.
Straight Payments
Straight payments are fixed amounts the brand pays to Amazon for merchandising activities like enrolment in Amazon Vine (which allows vendors to ship free samples of their products to verified reviewers in exchange for a guaranteed review). Or, perhaps Amazon creates a landing page for sports products, and a brand wants to be featured on it – they’d make a straight payment to Amazon for featuring on that page.
Other
The vendor gives Amazon additional discounts for purchasing in bulk or for making early payments.
Volume Incentive
It is primarily related to discounts received when Amazon hits certain product volumes.
Payment Terms Incentive
Amazon always pushes for the longest payment terms and the vendor will want the shortest payment terms. Payment terms typically range from 30-90 days, with the average being around 60 days. To incentivize Amazon to agree to shorter payment terms, the vendor can offer an early payment discount.
This discount usually ranges from 1 - 3%.
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