Whether your brand is selling products on Amazon for the first time or reevaluating an existing sales strategy, it’s common to struggle with the decision to go the Vendor Central (1P) or Seller Central (3P) route. Making an informed choice begins with understanding the key differences between the two.
On the surface, the difference is simple. With Vendor Central, brands wholesale their products to Amazon who then sells them to their customers. With Seller Central, brands sell directly to consumers on Amazon’s platform.
Choosing one option over the other is less simple. The path you take will have a major impact on the legwork required by your company, the way your brand is presented to customers on Amazon and, critically, the level of control you have over their experience.
Before you make the choice, here are five major factors to consider:
A brand is only as strong as the character and consistency of its messaging. Unfortunately for those brands that go the 1P route, they relinquish substantial messaging control to Amazon. In contrast, if you choose to be a 3P seller, you’ll maintain complete messaging control. Seller Central even comes with access to marketing features, such as Amazon’s A+ Content offerings and Brand Stores, to tell captivating stories. No surprise, then, that some of the most celebrated –– and best managed-brands, such as Nike, have made the decision to stop selling on 1P.
Pricing is one of the most consequential decisions your brand must make. If you’re a 1P vendor, you effectively hand this decision to Amazon (more specifically, their pricing algorithm). They set prices at their discretion, even if this means selling below your MAP (Minimum Advertised Price). 3P sellers, on the other hand, set their own prices. This means that they can charge full retail, increasing their margins.
Logistics and Inventory Control
Amazon maintains very high logistics standards for its 1P vendors and will charge penalties for non-compliance. In addition, while Amazon may initially purchase your whole product line, they can¾and do¾drop products. Their purchase orders can be hard to plan for and vary greatly. 3P sellers have more day-to-day management to handle when it comes to logistics and inventory, but also more flexibility. To participate in Prime, many companies choose to retain the services of FBA (Fulfillment by Amazon) to warehouse, pick-pack orders and ship them to the end consumer. Because 65% of US households have a Prime membership and Amazon’s shipping rates tend to be better than UPS or FedEx, FBA is a very appealing option when selling on 3P. However, it is still the seller’s responsibility to forecast and send items to Amazon’s FBA warehouses.
Amazon shares some powerful customer data with 3P sellers that it doesn’t with 1P vendors. While you cannot market directly to these customers, the insights are still valuable. For instance, gaining access to names and addresses can help determine who is buying your products and how much overlap there is between a DTC site and Amazon. You can also use the data to create lookalike customer audiences to target with marketing.
3P sellers also get access to Amazon Brand Analytics, which allows you to research keywords and track attribution from marketing channels outside of Amazon. With this sort of data, brands can better manage their inventory and marketing campaigns. When you are on 1P, you have to pay for Amazon’s Brand Analytics subscription.
At first glance, going 1P may look like the easier route to take. Amazon handles much of the supply chain and fulfillment details and you can wholesale your products in one go. But, as mentioned above, that “ease” comes with a number of pricing concerns and a lack of control over brand experience that can cause more stress ¾and problems¾down the line.
So, what does this all mean for your company? Vendor Central and Seller Central both offer benefits, but if you’re interested in greater control over your brand experience and sales strategy, we believe that 3P is the best path forward.
Managing a Seller Central presence may seem daunting, but we’re here to help. Partnering with Amify, an Amazon as a Service partner, will lighten your workload, reduce stress and most importantly––improve your profits. If you’d like to learn more, let’s talk.