First-Party VS Third-Party Selling on Amazon
Amazon has changed distribution and retail globally, and business decisions in the mid-market of both sectors must consider how to stand out from the digital giant’s shadow. However, another option exists for those vendors willing to compromise by selling product through Amazon, leveraging their extensive branding and fulfillment reach. Amazon currently (more on that later) offers two channels to pursue this opportunity, one for first-party (1P) vendors and the other for third-party (3P) sellers.
Here are the differences between 1P and 3P selling on Amazon, and what future developments may impact the viability of both:
1P VS 3P Amazon Selling
Paul Dworianyn and Shawn Cassinelli of Awesome Dynamic recently presented on the pros and cons of the 1P and 3P Amazon vendor channels during MAPADOC Connections 2019 in New Orleans. As explained by the Dynamic team, the former (Vendor Central) allows your business to act a direct vendor for Amazon while the latter enables you to be a third-party seller on Amazon’s platform. Either option brings its own Amazon dashboard interface, marketing and fulfillment resources, and variation in pricing structure.
Amazon Vendor Central
The Amazon Vendor Central web interface is designed for 1P suppliers, i.e. manufacturers and distributors. Vendor Central is invite-only, but those who are accepted have their products promoted as “sold by Amazon,” lending authority and legitimacy to a listing on a platform that unfortunately can become plagued by fraudulent 3P sellers. The catch is that since it is their representative buying from you for their marketplace, Amazon has all of the power in dictating price in exchange for offering their branding and marketing tools.
Amazon Seller Central
Amazon Seller Central is the interface used by 3P sellers on the platform that list products themselves, set their own prices and market directly to customers. Seller Central users can perform fulfillment themselves with Fulfillment by Merchant (FBM) or pay a fee for Fulfillment by Amazon (FBA). Storage and other items can bring costs up to a sizable chunk of sales, but the rates are fairly consistent and easy to calculate in profit margins according to the Dynamic team.
Amazon Seller Central VS Amazon Vendor Central
Some of the key takeaways Awesome Dynamic discussed at MAPADOC Connection in comparing Amazon Seller Central against Vendor Central:
- The support for Seller Central is more robust than the support on Vendor Central
- Cost for doing business on Vendor Central is complicated and results in set wholesale pricing that almost never increases
- You have to pay for analytics on Vendor Central while Seller Central provides more detailed sales and inventory reports
- Marketing is where Vendor Central provides more value than Seller Central with access to a number of different programs
- You manage your inventory on Seller Central while on Vendor Central, you are at the whim of Amazon when it comes to restocking
- Seller Central pays vendors every 7 to 14 days while vendors on Vendor Central are on terms of 30, 60 or 90 days
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Hybrid Channel Approach
While these two channels are designed to offer a different level of access to the Amazon marketplace, some experts have recommended considering a hybrid approach that leverages the advantages of both. This model plays to the strength of either channel instead of relying on a single strategy, and is best utilized for dividing products which can turn a profit at wholesale prices and those vendors want to keep at retail.
Amazon One Vendor
Rumors throughout 2018 indicated that Amazon would begin making changes to their currently methodology for vendors. One theory proposes that the e-commerce giant will begin migrating both Vendor Central and Seller Central users to one platform tentatively called “Amazon One Vendor.” Though Amazon continuously denies all rumors of any transition, recent events indicate that there may be big changes coming.
Vendor Purchase Order Drop
In March of 2019, Amazon suddenly stopped multiple purchase orders from thousands of wholesale suppliers using Vendor Central. Several observers have predicted that this is first sign of a massive consolidation by Amazon that will limit suppliers to either 3P selling or to the proposed merged One Vendor channel, including many former Amazon employees.
Learn More About the World of Selling on Amazon at SWK Empower in NJ
Awesome Dynamic will be returning to present the Keynote at the upcoming SWK Empower Northeast User Conference, taking place at The Madison Hotel on 1 Convent Road in Morristown, NJ, on July 17, 2019. Register now for free, courtesy of Sage!
Register for the SWK Empower Northeast User Conference now and find how you can capture the best value from selling on Amazon.
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