Net PPM

Net PPM is a key financial indicator Amazon uses to measure the true profitability of a product sold via the Vendor Central (1P) model. Unlike gross margin, Net PPM accounts for vendor contributions, such as accruals, contra-COGS, and trade terms - offering a more realistic view of Amazon’s actual margin.

Formula:Where:

• ASP = Average Selling Price
• ACU = Average Cost per Unit (what Amazon pays the vendor)
• Contra-COGS = Vendor-funded contributions that offset Amazon’s cost (e.g. marketing funds, co-op, MDF, freight allowances)

Why Net PPM matters:

• Amazon uses it to assess the financial health of each ASIN
• Low Net PPM can result in CRaP status (Cannot Realize any Profit)
• Influences reordering decisions, PO volume, and negotiation leverage
• Critical metric during Annual Vendor Negotiations (AVN)
• Helps vendors justify or renegotiate terms (e.g., discounts, freight, AVS fees)

💡 Example: A vendor selling a kitchen appliance at $50 ASP, with a $40 ACU and $5 in Contra-COGS, would have a Net PPM of (50 - 40 + 5) ÷ 50 = 30%.

In short:
Net PPM (Net Pure Product Margin) shows Amazon’s true margin on a vendor product after subtracting cost and adding back vendor contributions - making it one of the most important profitability metrics for 1P vendors.