amazon-prime
December 30th, 2016

Selling on Amazon: Vendor vs. Seller

by Christine Hennessey

There’s no way to deny the facts: Amazon.com is a behemoth when it comes to ecommerce. The site boats over 250 million active users and over 50 million Prime members. Being this big doesn’t necessary make Amazon’s job easier. A company of that size simply can’t satisfy all their customers’ needs alone, which is why they not only welcome but need independent businesses selling goods on their platform in order to meet demand and keep their customers happy. That’s where you come in.

If your business wants to sell its products on Amazon, there are a number of choices you have to make. Many of the issues boil down to the same question: control. How much do you want to have, and how much are you willing to give to Amazon? This includes how things like pricing, brand identity, and inventory, and how much you control depends on how you choose to sell your products. When it comes to Amazon, you have two options: First Party Vendor, or Third Party Seller.

First Party Vendor, or Vendor Central  

You’re considered a First Party Vendor if you choose to sell your products via Amazon’s Vendor Central. This means you sell your products to Amazon at wholesale prices (that is, 50% of MSRP). Your products are listed as “Sold and Fulfilled by Amazon,” and Amazon places Purchase Orders with your company when it’s time to pay up. Or, to put it another way, you’re no longer considered a merchant in Amazon’s eyes; now, you’re a distributor.

This option is best for very large brands and manufacturers who don’t have the time or desire to deal with customer service issues or direct sales. In these cases, Amazon serves as a wholesaler who sells your products on your behalf. You also benefit from the inherent trust consumers place in Amazon, as your product is being sold by the company.

The main concern with selling on Vendor Central is the loss of control you have over your own products, especially when it comes to pricing. Amazon decides how to price your inventory, and will sometimes price match to excess, violating MAP. This can confuse customers and fans of your brand, especially if they see the same products available in other stores or on your own website at a much higher price. Amazon also decides how much inventory to keep on hand, and it can be difficult and time-consuming to update product listings. It’s also invite-only, so you can’t even control if and when you take this step. While you can request an invitation to become a First Party Vendor, there’s no guarantee Amazon will grant you one.

Third Party Seller, or Seller Central  

You’re considered a Third Party Seller when you’re an independent seller. This means that you sell your products directly to Amazon’s customers through the Seller Central system. You manage your own inventory, set your own prices, add new products, and provide customer service. You pay Amazon a 15% referral fee on top of the product selling price, plus fulfillment fees.

When you choose Seller Central, you’re paid more often and have direct control over pricing, inventory, branding, management, and promotion of your products. It’s easy to set up an account and start selling your products on Amazon—you can get started in just a few minutes.

The downside to Seller Central is that you can only use basic product pages—there are no bells and whistles available to third party sellers. Reviews and customer service are incredibly important if you want to be a successful seller, and that means staying on top of any and all customer service issues. Thanks to Amazon’s vast audience, this can quickly become a full time job in and of itself. In 2015, more than 1 billion items sold on Amazon came from third party sellers, adding up to tens of billions of dollars. In many ways, these sellers are an integral part of the Amazon model, and if you have the time and energy to devote to this channel, it’s absolutely worth the effort.

What Route Should You Take?

The route you take will depend on your unique situation, and how much control you want and need over your products, inventory, pricing, and brand will play a large role in your decision. I hope reading this article helps shed some light on the options available to you as a business owner. If you still have questions or concerns, contact Sage Island. As digital marketing professionals, website developers, and brand builders, we’ve helped many ecommerce businesses find their footing on Amazon, and we’d be happy to do the same for you.