Sales on Amazon
Vendor Central Contracts: How to Read and Successfully Negotiate them
21 Jul 2025
Collaboration with Amazon Vendor Central
Working with Amazon Vendor Central can open the door to enormous sales opportunities. However, signing contracts requires attention and a thorough understanding of their content. Oversights can result in unfavourable terms or additional costs that will decrease your profits.
In this article:
We will examine the key aspects of contracts with Vendor Central and provide tips on how to effectively negotiate them to achieve favourable terms for collaboration.
Why is it important to read contracts carefully?
Contracts with Vendor Central govern a wide range of activities – from product promotions to return policies and warehousing.
Key elements to pay attention to:
Fees associated with account activities, such as commissions or marketing fees.
Duration dates and automatic renewal of contracts.
Clauses regarding termination of the contract and any penalties for breach of contract.
Understanding these provisions helps avoid unexpected costs and safeguard the interests of your business.
The most common types of contracts in Vendor Central
MDF Agreement (Market Development Funds)
A marketing programme aimed at increasing the visibility of your brand.
It may include cross-selling campaigns, search engine ads (e.g., Google), or enhancing product catalogs.
A key issue: lack of transparency regarding how funds are specifically used.
Damage Allowance
A fee covering the costs of returning or disposing of damaged products.
You can opt-out of this option and manage returns yourself.
Overstock Allowance (Markdown Money)
A fee for products remaining in Amazon warehouses.
It protects Amazon from excess inventory, but it can burden your finances.
You can also manage returns yourself and avoid additional costs.
PICS (Pan-European Inventory Consolidation Service)
A service that allows shipping orders to a limited number of Amazon logistics centres for a fee.
Amazon handles further distribution of inventory.
The contract can be renegotiated after three months.
Auto Price Protection
If you lower the price of products, Amazon will automatically adjust the cost price for orders in fulfilment and inventory in stock.
It protects Amazon from losses but may lead to unexpected costs on your side.
How to negotiate contracts with Vendor Central?
Understand your negotiating position
Negotiating possibilities grow with the scale of your business, sales volume, and the significance of your offer to Amazon.
Collaborate with the Account or Vendor Manager
Ask the Manager to review the contract and propose more favourable terms.
If you do not have a dedicated person, contact Amazon support.
Prepare strong arguments
In negotiations, demonstrate the value of your offer, e.g.: consistent sales growth, large delivery volumes, positive feedback, and low return rates.
Consider alternatives
Some agreements (e.g., Damage or Overstock Allowance) can be bypassed by managing processes internally.
Example: Renegotiating the Overstock Allowance Agreement
Returning products complicates processes in your warehouse, so you are considering the Overstock Allowance.
What do you do?
You contact support or the Vendor Manager and inquire about the terms.
If the terms are unfavourable – you negotiate.
After agreements, you wait for the contracts in the panel, check the data, and accept.
If the terms are incorrect, you return to the Manager with a request for corrections.
Summary: Protect your interests in contracts with Vendor Central
Every contract with Amazon is an investment that can yield profits or expose you to costs.
The main steps are:
Carefully reading and understanding the provisions.
Preparing a negotiation strategy based on results and your company's position.
Regularly monitoring terms and making changes when necessary.
Collaboration with Amazon can be challenging, but the right approach helps protect your company's interests and enhance its competitiveness.