Two primary options are available for selling on Amazon: Amazon Vendor Central (1P) and Amazon Seller Central (3P). In this guide, we will explore the features and considerations of both Amazon Vendor Central and Amazon Seller Central, and we’ll discuss common mistakes to avoid when navigating these platforms. Let’s dive in and explore the pros, cons, and key tips for success in each selling model.
Amazon Vendor Central or 1P
A 1P seller acts as a wholesaler, supplying products directly to Amazon, the retailer. In this exclusive 1P relationship, you, as the vendor, interact solely with Amazon and not its customers.
Under the guidance of Amazon, 1P vendors have limited control over marketing their products to customers. However, they are responsible for billing and chargebacks.
Nevertheless, 1P sellers can utilize the Amazon Vendor Central dashboard to run advertising campaigns, monitor the status of purchase orders, and gain valuable insights to enhance their business operations.
Becoming an Amazon 1P seller is an invitation-only program where you need to grab the attention and approval of Amazon’s vendor management team. Those likely to receive an invitation include successful 3rd-party Amazon sellers, eCommerce sellers operating outside of Amazon, and exhibitors at trade shows.
Once accepted into the program, Amazon provides you with a vendor central account, granting access to crucial features. You’ll receive purchase orders (POs) from Amazon, indicating when and where to ship your inventory to their warehouses. Additionally, Amazon will request information about your product, which they will use to create product listings and determine the price.
Let’s explore the advantages and disadvantages of the 1P selling strategy.
Pros
Consumer trust – Customers feel more confident purchasing directly from Amazon because of its name recognition.
Streamlined Business Approach – Collaborating directly with Amazon as your primary buyer is simpler than taking care of the multitude of individual customers a seller would typically face on Seller Central. As a vendor, your primary tasks revolve around fulfilling orders for Amazon, managing billing, and avoiding chargebacks.
Marketing tools – As a vendor, you can access promotional programs like Subscribe & Save or Amazon Vine. Plus, you have additional options when running ad campaigns with Amazon Marketing Services (AMS)
Cons
Reduced profit margins – Amazon decides at which price sells your products, and they don’t strictly adhere to the Minimum Advertised Pricing (MAP) guidelines from manufacturers. The result is that, as a vendor, you may get reduced profit margins and lose revenue.
Limited brand control – Amazon retains authority to modify aspects of your product’s branding, so sellers lose control of much of their brand messaging once they sign up as vendors.
Amazon’s Order Fulfillment Criteria – Amazon has established guidelines for filling purchase orders to which vendors must adhere. Those with inventory problems who can’t reach Amazon’s standards suffer significant chargebacks that negatively affect their profits.
Amazon Seller Central or 3P
Amazon 3P is the most common way of selling on Amazon, as it’s an available option to everyone. As a third-party seller, you sell your products to Amazon’s customers and not Amazon itself. This means you gain access to millions of potential customers while retaining control over key aspects of your business.
Seller Central is the main platform Amazon provides for business management. You can control payments, product catalogs, inventory, order fulfillment, pricing, advertising, and more.
When being a third-party seller, you’ll have to choose between two options:
- Forwarded By Amazon (FBA): A program provided by Amazon that allows them to store and deliver your products for a fee.
- Forwarded By Merchant (FBM): You store, package, and deliver your products.
There are some pros and cons to consider for the 3P selling strategy. Let’s go through them.
Pros
Performance data – These are tools accessible to all 3p sellers made to track metrics and sales performance. They allow sellers to measure many key aspects of their business, such as order defect rate and policy violations that don’t meet Amazon’s standards.
Pricing control – Third-party sellers set their own prices.
Inventory control – Sellers can constantly adapt to market demands because they have full inventory control, meaning they can decide how much to ship and store within their facilities or Amazon’s warehouses.
Cons
Marketing – An effective marketing strategy requires third-party sellers to adapt to consumer trends constantly. They have to change their listings to appeal to the buyer’s needs. If they lack the knowledge to do so, there can be devastating consequences.
Referral fees – Amazon charges third-party sellers with referral fees for every product they sell on the platform. It has a bare minimum of 0.30 cents of charge per sale, but it is a percentage that varies depending on the type of product they’re selling.
Frequent Policy Changes – Amazon often changes its policies and algorithms, which means sellers must continuously adapt and stay updated.
Tips and common mistakes to avoid
After deciding the best business model for your brand, it’s time to take the proper first steps. Check the following common mistakes you’ll want to avoid.
Control your distribution
A lot of sellers don’t have control over their product distribution. This can disturb your growth as Amazon’s algorithm often prefers cheaper items, which means there is a higher chance of knockoffs or outdated products being sold at lower prices. Knowing where your products are shipped and sold is important to protect your brand and keep your prices steady.
If you control your distribution channels effectively, you ensure your prices stay consistent while maintaining your brand’s good reputation.
Always negotiate
As a 1p vendor, when working with your Amazon manager, the worst thing you can do is not negotiate for better product prices. Amazon is a customer-centered marketplace. They’ll always try to sell your products at the lowest price possible to stay competitive. That’s why you should always negotiate with Amazon to get the best prices possible and amplify your revenue.
Conclusion
Understanding the differences between Amazon Vendor Central (1P) and Amazon Seller Central (3P) is crucial for success in your Amazon selling journey. As we already saw in this article, both options have pros and cons in different aspects. And both of them require experience to master. That’s where Bellavix becomes relevant. If you are a seller, then BellaVix can help you upgrade your listing and unlock your product’s full potential by boosting its visibility on the search engine. On the other hand, if you choose the 1P business model, our Vendor Central Management Program will provide you with detailed analytics and reporting to maximize your sales on Amazon.
BellaVix can help you upgrade your listing if you choose any of both business models and unlock your product’s full potential by boosting its visibility on the search engine.
If you have additional questions or want us to help you on your Amazon journey, don’t hesitate to contact the BellaVix Team.
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