Vendor Central vs Third-Party


Brand owners on Amazon have a significant choice to make when it comes to selling their merchandise to customers. Do they choose to become a first party seller, using the Vendor Central interface, to sell directly to Amazon Retail? Or do they themselves become a third party seller — or hire a third partner seller — to manage their brand? Ultimately the pros and cons list varies, and it’s up to the brand owner to figure out the best strategy for their business.
While the benefits of third-party (3P) selling do tend to outweigh first-party (1P) selling, here is how it all breaks down:
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When it comes to controlling your brand, Pay-Per-Click (PPC) and loss of sales from your own sales domain, there isn’t a discernible difference between 1P and 3P selling.  The same goes for shipping and accounting and reporting and analytics.
Brand Control: Either way the seller does possess a considerable amount of control over how their merchandise is sold. The 3P seller might have a slight advantage here as Amazon Retail cannot alter their branded content; this is something Amazon Retail can do with 1P sellers.
PPC: Despite 1P or 3P status, Amazon will start bidding on keywords for your product to drive traffic to their site.
Loss of Sales From Primary Site: Brand owners sometimes worry that their primary website will suffer once they start selling on Amazon. While a sales decrease is typical, overall sales tend to climb based on Amazon’s vast customer base.
Shipping and Accounting: As a positive, Amazon Retail provides inventory forecasts for suppliers 60 days in advance. On the downside, their system for receiving POs, acknowledging and process is antiquated, and wholesalers are required to break up shipments to (sometimes many) different fulfillment centers. On the flipside, third-party FBA sellers can ship to far less fulfillment centers. But 3P sellers must shepard their own forecast inventory and ensure that they are fully stocked.
Reporting & Analytics: Amazon Retail Analytics costs extra but is well worth the money. Similar analytic capabilities are not available to 3P sellers. The 3P Seller Central portal is a nice alternative for accounting and general sales reports, compared to Vendor Central.
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The issue of Tax Nexus and Daily Involvement isn’t as cut and dry when it comes to deciding between becoming a 1P and 3P vendor.
Tax Nexus: Though selling 1P to Amazon Retail does have a slight advantage, it really does depend on the individual situation.  Amazon Retail is less likely to create a new sales tax nexus for a brand, opposed to a 3P seller who may need to create a tax nexus if their merchandise is stored in Amazon’s FBA fulfillment centers. One way to navigate around this is to partner with a 3P seller who handles the selling; in this instance, there is less chance more taxes will be foisted upon the brand.
Daily Involvement: This is another component of the business that doesn’t have a distinct winner when it comes to 1P or 3P sellers. Basically, it will come down to how much control you wish to have over your brand. If you sell to Amazon Retail, someone will need to take the reigns and check orders and review product feed data. If you are already familiar with selling wholesale to 3P sellers, the process is pretty much the same on the Amazon platform. And if you are selling as a 3P seller, you will need to hire a staff to handle all manner of business. (A reputable 3P partner should be able to manage those responsibilities.)
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Selling as a 3P seller does have a slew of benefits, including: multi-channel fulfillment, price control, sales velocity, support from Amazon, costs and margins, staying in stock, selling to Canada, Mexico and EU markets and payment.  
Multi-Channel Fulfillment: By selling as a 3P using FBA, it is permissible to use multi-channel fulfillment. Amazon Retail does not allow you to use the same inventory to fulfill multi-channel orders. Where this mostly comes into play is when brand owners are looking to grow their business and don’t want to deal with splitting inventory or run into roadblocks fulfilling individual orders.
Price Control: Although Amazon Retail will claim to honor a brand owner’s MAP policies, this isn’t always the case. Amazon Retail will match other seller’s prices — either on Amazon.com or elsewhere — which will subsequently, and potentially negatively, affect your pricing. Once prices drop, it’s a slippery slope getting it back on track. As a 3P seller, the brand owner is in charge of every aspect of pricing. Or, if the brand owner works with a reputable 3P seller, you will still be in control.
Sales Velocity: The siren call of Amazon Retail is its promise to significantly grow sales. While it’s true that sales may increase, it does come with some baggage: the majority of sales will likely shift from existing 3P sellers, and as a result, brand owners lose control over pricing. Amazon Retail also sets sales targets for the brands to generate each year; if the brand is underperforming, Amazon Retail will expect brands to spend money on merchandising. If the brand continues to underperform, it will likely receive less attention from the Amazon vendor manager.
Support from Amazon: 3P sellers won’t have a dedicated account manager from Amazon, but Seller Support is reliable in responding to and fixing problems. However, if you choose to sell through Amazon Retail, and your brand is comparatively smaller and less profitable than others, receiving help from Amazon support will prove to be a Herculean undertaking.
Costs & Margins: Amazon Retail will usually ask for a payment of 4-10% to partially cover ostensible marketing or slotting costs. Additionally, as sales grow, Amazon Retail may push to lower prices or throw in more fees for marketing or account support. 3P vendors manage to circumvent those issues by paying a flat commission fee, with no additional selling fees added to the mix.
Selling as a 1P or a 3P vendor will produce typical wholesale margins; however, 3P won’t feel any additional marketing or slotting fees from Amazon Retail. Further, 1P sellers will see their margins squeezed over time as Amazon Retail will ask for lower prices.
Staying In Stock: A 3P seller has the ability to control every aspect of how their products are sold. Amazon Retail, on the other hand, will request the full catalogue upfront but take it upon themselves to trim items from the line as they deem fit.
Selling into Canada, Mexico, and EU Markets: Amazon.com Retail deals primarily with the US market. Venturing into other countries (Amazon.ca or Amazon.com.mx) requires separate vendor discussions. If you work through a 3P account, it’s easier to sell to these other markets.
Payment: 3P sellers are usually paid every 7 or 14 days. Amazon Retail will typically offer 2% on Net 30, Net 60, or Net 90 terms.
Getting Paid
While Amazon Retail typically offers 2% Net 30, Net 60, or Net 90 terms, third-party sellers are typically paid every 14 days or every 7 days.
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Amazon Retail comes out on top with marketing and promotional opportunities and customer service.
Marketing & Promotional Opportunities: Although it will cost you, Amazon Retail’s merchandising options are pretty significant — and are not available to 3P sellers. The reach is fairly wide: Brand/Store Page, A+ Detail Content, Vendor Powered Coupons, Headline Ads and the Amazon Vine program. It should be noted that unless your brand is one of the top sellers on Amazon, you won’t get as much attention from Amazon Retail unless you’re prepared to spend a pretty penny on merchandising.
Customer Service: Amazon Retail is responsible for handling customer service and competitor fraud issues, which can otherwise be a drain on a seller’s resources and time. A 3P seller is on the hook for providing these services themselves. However, if a 3P seller utilizes FBA, Amazon will step in and provide assistance with customer service issues.
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Each seller’s situation is unique and what is right for one might not be right for another. Weigh the pros and cons and determine the right move for you!
 


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