Brick and Mortar or eCommerce? Vendor Central vs. Seller Central? For many businesses, navigating the unique marketplace that is Amazon is a winding road full of twists and turns. It involves careful planning and forecasting that minimizes risks while simultaneously ramping up production and inventory management to achieve maximum profitability. One of the most important decisions that your business will face is whether to be an Amazon Vendor or Marketplace Seller or a hybrid of both. This specific choice will determine how your business will operate moving forward and ultimately influence your strategy to succeed on the platform. Faced with these challenges, it is imperative to understand which path makes the most sense for your products and business.
Amazon Vendor Central (1st Party)
As an Amazon Vendor, your relationship will mirror that of a wholesaler in that your products will be sold directly to Amazon who in turn is selling them direct to its customers. Amazon will provide you a contract outlining the terms and allowances in your agreement that they expect to receive from you as a result of your partnership. Under this agreement, Amazon places orders based on customer demand and sales performance. The faster items sell through, the more likely Amazon will reorder product for their customers. For those products that do not sell, they will likely not be reordered unless concessions can me made. In the hyper-competitive world of eCommerce, a vendor should remember that Amazon’s mission is to provide the most robust selection at the most competitive prices for its customers albeit while also remaining profitable. As a vendor, this means that Amazon controls many aspects of how your products are sold including and not limited to pricing. This acknowledgement aside, Amazon’s established infrastructure and customer reach can most definitely be an asset to your bottom line especially for smaller brands or manufacturers looking to scale.
For businesses with limited bandwidth and resources, handling individual order logistics and customer service can prove burdensome. This is where Amazon provides exceptional value for its vendors who not only benefit from the use of the vast Amazon fulfillment network but also Amazon’s world class customer service. In addition, Amazon provides both paid search (Amazon Marketing Services) and paid display (Amazon Media Group) marketing programs that vendors should embrace in an effort to drive continuous sales and traffic to their product catalogs. Remember that more traffic leads to more sales and more sales leads to more Amazon reorders. This is but one example of Amazon’s flywheel at work.
Amazon Seller Central (3rd Party)
Whereas being a vendor means Amazon buys your inventory and sells your product, the Amazon Seller Marketplace is an open platform. Rather than a set contract, professional sellers are required to have a monthly subscription for selling privileges and only pay Amazon order related fees per transaction. One of the biggest upsides of the Marketplace is that sellers can curate and dictate their product selection directly to customers. For a brand owner, the key benefit to functioning as a seller is the ability to have more control over the customer experience including brand identity and more importantly pricing. Because the marketplace is open to all sellers, one should be cautious and remember that there are opportunities where resellers can pose a risk if not well monitored and managed.
Because Amazon recognizes the important of the Marketplace, a suite of programs and services have been specifically created to support sellers. Fulfillment by Amazon (FBA) offers sellers the opportunity to store their products in Amazon’s fulfillment centers. This means product in FBA would be Prime eligible to receive 2-day Free Delivery to customers and Amazon would also handle order returns and customer service. Not only can sellers create promotions and deals on their products, sellers can use onsite marketing like Sponsored Products and Headline Search ads to drive onsite traffic resulting in increased sales. All of this is to say that being a Marketplace Seller is very much a “hands on the wheel” approach.
As we have discussed, there are many more forks in the road along the Amazon highway. When it comes to selling on Amazon, there is no right or wrong answer. The debate between Vendor Central vs. Seller Central depends on your business needs and goals. Should you choose to explore being an Amazon Vendor, Marketplace Seller or perhaps even adopt a hybrid approach, Orca Pacific can provide the expertise and guidance to help your company make those business-critical decisions. Talk to our Amazon experts to learn more about our services.