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Guide: the correct Amazon Net PPM definition
Even Amazon gets its own Net PPM definition confused, and Martin Heubel's explainer sets out the correct calculation for vendors. For you, this means margin negotiations rest on the right formula, so align your team on the definition before annual talks.
What changed
Even Amazon gets its own Net PPM definition confused, and Martin Heubel's explainer sets out the correct calculation for vendors.
Why it matters for advertisers
For you, this means margin negotiations rest on the right formula, so align your team on the definition before annual talks. What is Net PPM? The Net PPM (also referred to as Procurement Margin) is the main profitability metric that Amazon refers to when talking about a vendor’s bottom-line performance. It considers the average selling price, cost price and trading terms (Contra-COGS) to determine the profitability of a vendor or a product. Note that investments in Amazon Advertising, chargebacks and payment terms are not included in the Net PPM. That’s because these are variable investments that Amazon reports later in its profit and loss account. Net PPM= Average Selling Price – Cost Price + Vendor Terms – Sales Discount
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Guide: the correct Amazon Net PPM definition
Even Amazon gets its own Net PPM definition confused, and Martin Heubel's explainer sets out the correct calculation for vendors. For you, this means margin negotiations rest on the right formula, so align your team on the definition before annual talks.
What is Net PPM?
The Net PPM (also referred to as Procurement Margin) is the main profitability metric that Amazon refers to when talking about a vendor’s bottom-line performance.
It considers the average selling price, cost price and trading terms (Contra-COGS) to determine the profitability of a vendor or a product.
Note that investments in Amazon Advertising, chargebacks and payment terms are not included in the Net PPM. That’s because these are variable investments that Amazon reports later in its profit and loss account.
Net PPM= Average Selling Price – Cost Price + Vendor Terms – Sales Discount
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