When a business decides to sell online, Amazon makes it pretty easy to join the party. As of Q2 2020, more 53% of paid units sold on Amazon are sold by third-party sellers. In 2007, that statistic hovered around 20%. When you take into account the sheer volume of items sold on Amazon, that’s remarkable growth and market share. For customers buying something online, Amazon seems perhaps a monolith. But in reality, Amazon is essentially built from millions of small businesses around the world using it as the ultimate marketplace.
As an Amazon-focused agency, eCommerce Nurse supports both Amazon sellers and Amazon vendors. Many businesses that come to us for help wonder whether it’s best to become a vendor or a seller. They even have a strong preconceived notion of which they prefer, or which is “best.” But in truth, there is no one-size-fits-all approach. What works for one company may be totally incompatible with another’s product type, operations/logistics, and level of resource. This blog explores the differences between Amazon vendors and sellers and answers some common queries.
The basic difference between the two can be explained by thinking about who the initial customer is. A “seller” sells directly to consumers who buy from the Amazon website. A “vendor” sells wholesale to Amazon, which then manages the product on their site. Sellers use Seller Central. Vendors use Vendor Central. The features of both platforms change frequently.
The Seller Central platform is available to most businesses. You can join it in a matter of minutes by choosing the Professional Seller account ($39.99 a month) or an Individual Seller account ($0.99 per item sold). These plan costs do not take into account fulfillment fees, referral fees, and other costs. To set up either type of account, you need a business name, address, credit card, tax ID info, and phone number.
Being a seller gives you control over your brand, control over product listings and fulfillment (for instance, you can fulfill orders yourself or choose Amazon FBA), and flexibility with pricing. As a third-party seller, you manage inventory and orders and have direct contact with customers. You also have the potential for greater profit margins, and there are quick payment terms.
On the downside, sellers have to manage pricing, inventory, orders and customer contact. Perhaps you’re not able to deal with this level of administration, or are not set up for direct-to-consumer. While Fulfilment by Amazon (FBA) can help manage certain tasks for sellers, a certain amount of resource is required. There are fewer marketing and promotional opportunities and limited access to certain deal types or marketing packages. Ad choices are slightly different and access to the premium reports may also differ. Another big consideration is competition with other 3P sellers — there are many sellers on Amazon hoping to win the Buy Box. It might take a lot of strategy and work to make a profit.
The vendor life is invite-only. Amazon must invite your business to become a vendor. This often means very large, top-tier brands already running a demonstrated and successful business on the seller side, or off-line may join. Amazon vendors use Vendor Central, and their products are always “sold by Amazon.” They are always eligible for Prime and take Buy Box precedence, inspiring a level of customer trust and access that some businesses find very attractive.
Vendors do not deal with customer contact to solicit feedback. They have no control over pricing (Amazon doesn’t agree to MAP policies), and their content can be harder to control. They also have tighter profit margins, and longer payment terms (60 to 90 days). A business might not be set up for wholesale or may not want to deal with Amazon’s strict shipping requirements. Vendors do not manage their inventory. At times, Amazon may not order enough inventory, resulting in possible out-of-stocks or overstocks. No matter your choice, ZonGuru’s Products tool can help you manage your inventory.
Amazon used to provide a much higher level of support to vendors in the form of internal vendor managers. But many aspects of running a vendor business now require more diligence on the side of business owners, especially if they want things done a certain way.
Some businesses may be invited to become Amazon vendors and jump at this chance without thinking it through. Occasionally, businesses can really benefit from using both the seller and vendor models simultaneously. This is because what might work for one business or product could be a disaster for another. Leveraging a hybrid approach can be the perfect option if you sell a range of items with different needs (for example, furniture and clothing). Determining your specific needs, resources, and what would make your brand most successful is the key to being a seller or vendor on Amazon.
While there used to be a great deal more opportunity open to vendors (for instance, they could access detailed marketing tools and reports or utilize A+ Content, while sellers had to pay a fee), the actual tools and options on the platforms vary less and less these days. Sellers can upload product videos, create A+ Content pages, access a wide range of Amazon Advertising choices, sell internationally via Amazon’s FBA networks, and run similar promotions. Sellers who own their brand and use the Amazon Brand Registry can also unlock powerful self-service tools, reports, and protection. For many vendor programs, such as Amazon Vine, there are seller programs that can accomplish nearly the same thing (i.e., the Early Reviewer Program). Find out more about the Amazon Vine program here!
The vendor model will be more attractive for certain business types. For example, large wholesalers who sell a lot of one type of product will benefit from streamlined logistics and the process simplification of being a vendor. These types of businesses may want a quick PO and have Amazon essentially handle the rest. Other businesses, particularly smaller ones shipping comparatively little or a diverse range of products, will get more from a seller relationship. The seller model is also ideal for businesses that want to have more control, such as on pricing, stock levels, and their brand’s direction and image.
We always recommend having a clear, Amazon-specific business plan. It’s important to understand the scope of your business when it comes to Amazon marketing, sales goals, forecasting, operations and logistics capabilities, and customer interaction. Each Amazon platform is multi-faceted and complex, just as your business and products are. For tailored support, services, and additional questions, please contact eCommerce Nurse.
P.S. Do you want to know how to bring a flatlined listing from $0 sales back to life? Our in house experts recently resuscitated a flatlined Amazon product using the latest listing optimization techniques and PPC strategies. Watch the complete series here.
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