Amazon: bluffing or not? Negotiating successfully in sales
Sales Marvel Limited
Amazon and Visa are both heavily involved in a potentially game changing negotiation when it comes to online shopping. In fact, possibly the biggest game changer to the online shopping experience since Amazon invented it more than two decades ago.
Amazon recently announced it would not be accepting Visa cards to buy its products in the UK.
It has even offered UK online shoppers £20-off their next purchase if they switched to an alternative payment method.
But could this just be a huge bluff on the part of Amazon?
Will the company actually go through with its threat or are they simply trying to strong-arm what they perceive as the weaker party into reducing its transaction fees?
For context, Visa was the UK's leading payment card in 2019 with almost 82 per cent market share*, so Amazon is potentially taking a massive risk with its aggressive negotiation stance. However, Visa's profits are simply enormous, earning 30-50 per cent on each transaction fee, so it also has much to lose if an acceptable way forward cannot be found.
Will Amazon take such a risk?
Amazon does have form in this area. In parts of East Asia, it recently started to apply surcharges to customers if they chose to use a Visa card to make purchases, so it looks like they are prepared to act tough to get what they want - i.e. reduced payment transfer fees.
Negotiation strategies
This negotiation has almost certainly been going on for some time. Amazon Executives might well be getting frustrated at the lack of progress in this deal. Until the negotiation gets concluded, Visa continues to enjoy big profits at the expense of Amazon's bottom line.
So, what are your options if you have a vendor or supplier who just won't play ball with you? Well, no matter how persuasive or influential you think you are, sometimes you have to look at what other tools or strategies are available to you in order to bring the other party to the table.
Five questions you must answer for a successful negotiation:
- What's the impact of success? The size of the prize?
- What's the impact of failure?
- What is the probability (percentage) of success?
- Who's in the ‘£ seat’?
- What is the effect of time on your negotiation?
Until you know the answers to all five of the above questions for all parties, you cannot decide on a successful negotiation strategy.
The £ seat
With 82 per cent market share - far and away the dominant card provider in the UK - you could easily argue that Visa is in the driving seat, or ‘£ seat’ as I like to call it.
However, I've been involved in thousands, possibly even tens of thousands of negotiations over three decades of corporate sales and here's one of my all-time favourite quotations that helps get my clients into the £ seat:
‘You can't always lead a horse to water...but you can salt its oats.’
I believe that, in making these negotiations public, Amazon has salted Visa's oats. Visa now does not have the luxury of time on its side; its shareholders are now aware of the risk to their investment and will be lobbying Visa Executives hard to conclude a swift and satisfactory outcome.
There are many other high-profile negotiations which have taken place in recent years, such as Apple/ARM Holdings, US Government/Bear Stearns and even the UK/EU Brexit negotiations which have all had to consider who is in the £ (or €) seat.
If any of this negotiation discussion resonates with you or you'd like to learn more about negotiating strategies for success, subscribe to Sales Marvel and receive sales hints and tips right into your inbox.
Or, for a free confidential consultation for your own business, email keith@salesmarvel.co.uk
*Source: Statista