MDF CoOp Agreement: Amazon Vendor Tutorial
Managing CoOp agreements is vital to any Amazon vendor. These agreements lay out terms that have a direct impact on your costs, and therefore your bottom line. But before you can improve those terms, you must understand what is in these agreements.
One of those agreements is the MDF CoOp agreement. But what is it, and how do you make sense of it? This guide breaks down the purpose of this CoOp agreement, what kind of things it lays out, and what it will take to improve your terms.
To learn more about how to better negotiate coop agreements with Amazon, read our guide: 5 Tips for Negotiating Amazon Coop Agreements
What Is an Amazon MDF/CoOp Agreement?
The MDF (marketing development fund) CoOp agreement is one of several CoOp agreements (Amazon vendor contracts) Amazon has with vendors that deal specifically with marketing. These marketing initiatives can include everything from Amazon search algorithms to personalization widgets like “customers who bought x also bought y.”
The agreement doesn’t go into specifics on these marketing initiatives. Instead, it spells out how much of the costs the vendor will have to shoulder (e.g., 12% of net receipts based on cost price) as well as Amazon vendor payment terms and how the vendor can note any discrepancies.
Related article: Amazon Accrual Agreements: How They Work and Why You’re Seeing Deductions
Elements of an MDF/CoOp Agreement
Within the agreement itself, there are three basic sections: the MDF terms, and details about the damage allowance agreement and freight allowance, which are separate from the MDF.
MDF Terms
The first part of the agreement lays out the MDF terms of a vendor's agreement with Amazon. It will include details like:
What percentage of net receipts based on cost price is owed
The length of the agreement
How often payment will be made to Amazon and the payment method
How discrepancies should be handled
Confidentiality terms
Damage Allowance Agreement
The next section will discuss the damage allowance owed to Amazon. Allowances like this allow the company to offset their logistics costs by passing them on to the vendor. This section may include:
The damage allowance percentage of net receipts owed to Amazon
A definition of what qualifies as damaged or defective products
How the vendor will make the payments
How the vendor is to report discrepancies
Confidentiality terms
Freight Allowance Agreement
The freight allowance agreement deals specifically with allowances relating to shipping. Within the MDF CoOp agreement, this includes:
The freight allowance terms as a percentage of total receipts
The length of the agreement
How the vendor will make the payments
How the vendor is to report discrepancies
Confidentiality terms
Note: See our Vendor Central Help Center for more information on CoOp agreements. Specifically, review our Financial Reports User Manual for a fuller understanding of what kind of information is in your CoOp invoices.
Use Data to Get a Better Agreement
Don’t like your MDF CoOp terms? You can improve them, as long as you have the data to back it up. During annual Amazon vendor negotiations, it is possible to get them to provide better terms to save you money. You might show through Vendor Central reports that your shipping costs are way down, and that you are having to return fewer products due to packaging improvements, for example.
However, that means carefully tracking your data, which isn’t easy to do since Amazon makes vendors manually download reports and try to figure out how to combine them into Amazon Vendor Central analytics reports on their own. Download our free whitepaper below to learn how you can better track your company’s data.
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