GMM

Guaranteed Minimum Margin (GMM) is a retail funding mechanism used by Amazon in Vendor Central agreements. Under a GMM structure, Amazon sets a target profit margin it must achieve on a vendor’s assortment. If actual margins fall below this threshold, Amazon may apply chargebacks, price adjustments, or back-end deductions to make up the difference.

How it works:

• The margin is calculated as: (Selling Price – Cost Price) ÷ Selling Price
• If Amazon’s realized margin drops below the agreed GMM level (e.g., 25%), it will recover the difference from the vendor
• GMM is often part of Annual Vendor Negotiations (AVN) or Joint Business Plans (JBP)

Why it matters:

• Helps Amazon guarantee profitability on low-margin or volatile SKUs
• Shifts pricing pressure and risk to the vendor
• Requires vendors to carefully manage cost structures and funding terms

💡 Example: A vendor agrees to a 20% GMM. If Amazon ends the year with only 17% margin on those products, it may bill back the vendor to recover the 3% shortfall.

In short:
GMM is a financial safeguard that ensures Amazon earns a minimum profit margin on vendor products - with shortfalls typically recovered from the vendor.