Amazon 1p vs. 3p – The Differences + Pros and Cons!

‘Selling online’ is slowly becoming synonymous with ‘selling on Amazon’. 

That’s because around 800,000 people sign up for a new Amazon seller account each year.

So irrespective of whether you’re a brick-and-mortar store owner who wants to dabble in eCommerce, an entrepreneur looking to create a lucrative Amazon brand, or a large-scale manufacturer interested in partnering with a capable marketer to promote your products, now’s the perfect time to jump on board. 

Before you start, you’ll need to choose the right business model, i.e., how you sell and market products on Amazon. Terms like 1p, 2p, and 3p marketplaces commonly refer to these models.

In this blog, you’ll learn all there is to know about Amazon 1p, 2p, and 3p selling (mainly Amazon 1p vs. 3p), how each method works, and the pros and cons of each model.

But first things first.

What is the difference between 1p and 3p?

First-party, or 1P, is when you sell wholesale products to Amazon, which resells them to customers under its own label. Third-party, or 3P, is when you market and sell products to Amazon’s customers, competing with other sellers within your product niche. Most Amazon sellers are 3P, with 1P sellers (or vendors) few and far between.

Let’s explore each business model in greater detail and discuss its advantages and disadvantages.

Amazon 1P: Vendor Central 

A 1P seller is a wholesaler who sells products to Amazon, the retailer. In this 1P relationship, you – the vendor – deal exclusively with Amazon, not its customers. 

Amazon 1P is an invite-only program, i.e., you need to get noticed and deemed worthy by Amazon’s vendor management team to obtain an invite. People likely to receive an invite include successful 3p Amazon sellers, offsite eCommerce sellers, and exhibitors at trade shows.

After getting into the program, Amazon will grant you access to a vendor central account and send over purchase orders (POs), your queue to ship inventory to Amazon’s warehouses. Amazon will also ask you to provide information about your product which it uses to set up product listings and determine the price. 

With Amazon at the helm, 1P vendors have limited control over how their products are marketed to customers. They are, however, responsible for billing and chargebacks.

That said, 1P sellers can access the Amazon Vendor Central dashboard to run advertising campaigns, check up on the status of POs, and gain access to insights that help improve business operations.

The following are some of the pros and cons of becoming an Amazon 1p vendor:

Pros

• You’re free from brand-building activities that usually consume hundreds (or thousands) of dollars; consumer trust is already established since your products are sold under Amazon’s name.
• Instant access to A+ content (extra digital real space within your product listings that lets you entice shoppers with enhanced product descriptions and visuals).
• You gain access to new and exciting advertising tools exclusive to Amazon vendors.
• You qualify for free two-day and Prime shipping.
• You don’t have to worry about listing optimization, SEO, tax considerations, or customer services; Amazon handles that on your behalf.
• You pay a flat fee and don’t have to spend time learning about the intricacies and fee changes associated with the different Amazon marketplaces.

Cons

• Monthly revenues are not guaranteed; Amazon can terminate the business relationship at any time.
• There’s little control over the marketing and branding aspects of the business. Amazon can also alter your product listing content as it pleases.
• Amazon determines the product price and may set it below your MAP (Minimum Advertising Price).
• Because you’re a wholesaler, profit margins are usually thin.
• You rely on Amazon’s purchase order replenishment to keep the business running. Also, inventory management hiccups often result in chargebacks.

Amazon 3P: Seller Central

Amazon 3P selling is accessible to everyone and allows merchants to market and sell products to Amazon’s customers. 

Within the 3P dynamic, sellers retain greater control over key business aspects like pricing, listing optimization, advertising, inventory management, business report generation, order management, shipment statuses, branding building, etc.

Unlike 1P selling, your target audience is all those who visit Amazon’s marketplaces, not Amazon itself, which translates to millions of potential customers.

Here are some of the advantages and disadvantages of becoming a third-party Amazon seller:

Pros

• You determine product price and can react to competitors’ pricing strategies in real time. This ensures your offers remain attractive to buyers and protects you from compromising on your bottom lines.
• You exercise complete creative control over product detail page content, including descriptions, images, key features, and A+ content.
• You decide when and how much inventory to ship and store within your warehouse or Amazon’s fulfillment centers.

Cons

• Requires at least a basic understanding of Amazon SEO as well as ad campaign optimization to rank for relevant keywords
• Amazon 3P fees, e.g., fulfillment fees, can cut profits, especially when selling large dimensional items. 
• Quality control takes center stage because negative reviews can cause your product to plummet down the rankings.

Overcoming 3P Challenges with ZonGuru's New Listing Optimizer

While 3P selling offers greater control over your business, it also demands a nuanced understanding of Amazon SEO and listing optimization. That's where ZonGuru's new Listing Optimizer comes into play. This cutting-edge tool, powered by ChatGPT-4 AI technology, simplifies the optimization process by helping you find the most impactful keywords for your Amazon category. Whether you're launching a new product or looking to revamp existing listings, our Listing Optimizer provides real-time scoring and competitive analysis, ensuring your listings are not just optimized but also competitive.

Why ZonGuru's Listing Optimizer is a Game-Changer for 3P Sellers

1. Time Efficiency: Achieve tangible results in just a few keystrokes, freeing up your time for other crucial business activities.
2. Increased Sales: Elevate your sales potential significantly, with some users reporting monthly sales boosts in the tens of thousands of dollars.
3. Algorithmic Alignment: Tailored to meet Amazon’s A10 algorithm requirements, this tool increases the likelihood of your product appearing on the first page of search results.

By integrating ZonGuru's Listing Optimizer into your 3P selling strategy, you can overcome some of the most challenging aspects of listing optimization and SEO, giving you a competitive edge in the crowded Amazon marketplace.

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Can You Sell Both 1P and 3P on Amazon?

There’s nothing stopping sellers from selling 1P and 3P on Amazon simultaneously. But you should only consider such an option if you’ve spent time selling on the platform and have the necessary experience to run both seller and vendor central accounts. If you’re new to Amazon selling, we recommend sticking to 3P or third-party selling.

Amazon 1p vs 2p vs 3p – Choose the Right Business Model

The choice between Amazon 1p, 2p, and 3p depends on the nature of your business, the resources at hand, and your goals. You’ve learned how 1p and 3p works, but what does Amazon 2p mean?

Strictly speaking, Amazon has two business models, 1P and 3P. Within 3P selling, merchants can either handle logistics themselves, also known as FBM (Fulfillment by Merchant), or outsource product packaging, storage, customer service, and fulfillment to Amazon, referred to as FBA (Fulfillment by Amazon).

Some categorize the FBA model as 2P and FBM (or self-fulfillment) as 3P. But generally speaking, the 1P marketplace refers to vendors, and 3P refers to both FBA and FBM sellers. 

FAQs

The following are answers to some frequently asked questions.

How Do I Become a First-Party Seller on Amazon?

The Amazon first-party, 1P, or Vendor central is an invite-only program, so there’s no ‘sign-up’ option. But there are ways to increase your chances of getting noticed by Amazon. These include improving your 3p seller performance (or signing up for a seller central account if you don’t own one), attending relevant trade shows, and growing your off-Amazon brand.

Is seller central 1p or 3p?

Seller central is 3P or third-party. Anyone can sign up for an Amazon seller central account, and once they do, become third-party or 3P sellers. 1P or first-party sellers own vendor central accounts, an invite-only program. However, if you’re considering selling on Amazon, we recommend sticking to 3P for the time being.

How many 3p sellers are on Amazon?

There are around 2 million small-to-medium-sized third-party sellers on Amazon. If you account for all Amazon marketplaces and sellers of all sizes, the figure increases to approximately 6 million. Judging by the growing online sales trend, the overall Amazon seller pool will continue to grow in the coming years.

Conclusion

This wraps up our Amazon 1p vs 3p comparison blog. Now that you know the critical differences between the different Amazon business models, you can start your Amazon journey on the right foot. 

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