VFBD

VFBD is a trade term mechanism used in the 1P (vendor) model.
 When Amazon lowers the retail price of a product during promotions or everyday selling, vendors may agree to fund part or all of the discount to protect Amazon’s profitability.

These discounts do not affect the wholesale cost directly.
 Instead, they are applied as off invoice or post invoice funding tied to shipped or sold volume.

How VFBD works:

• Amazon plans a promotional retail price
• Vendor agrees to fund the discount or part of it
• Funding is applied based on shipped units
• Amazon submits a charge or invoice adjustment under the VFBD agreement

Typical use cases:

• Prime Day and major events like T5 or T12
• Category wide price reductions
• Matching competitor pricing
• Driving incremental demand for new launches
• Supporting temporary marketing pushes

How VFBD impacts financials:

• Amazon maintains its margin despite reduced retail price
• Vendor absorbs the discount to boost sales volume
• Helps maintain price competitiveness in highly elastic categories

Benefits for vendors:

• Increased visibility through promotional pricing
• Ability to support retail price moves without long term cost changes
• Potential increase in PO volume and velocity
• Opportunity to win key placements during peak events

Challenges for vendors:

• Budget impact due to funding responsibility
• Requires careful forecasting to avoid overspend
• Must be aligned with broader trade term agreements

Example:
Amazon wants to reduce the retail price of a blender from 59.99 to 49.99 for Prime Day.
The vendor agrees to fund the 10 dollar discount for all units sold during the event.
Amazon maintains its margin using VFBD funding provided by the vendor.

Why It Matters:
VFBD enables aggressive retail pricing while keeping Amazon’s economic structure intact, making it a key tool in 1P negotiations and promotional planning.

In short:
VFBD (Vendor Funded Business Discounts) are vendor supported price reductions that allow Amazon to lower retail prices while maintaining its margin, commonly used during promotions and competitive pricing events.