As you likely know, Amazon is the largest online retailer in the world. Now worth half a trillion dollars, Amazon has grown from an online bookstore into an entirely different beast that really has one agenda; expansion. Daily, sellers flock to the site looking to partner with the retail giant and this exponential expansion does not appear to be stopping anytime soon. It is estimated that over half of all online shoppers turn to Amazon first when looking for a product.
According to Fox Business: “New research shows that Amazon will control 44% of all online sales in the U.S. this year, according to eMarketer data cited by Recode. That’s an increase from Amazon’s market share of 38% in 2016. Amazon’s online sales are on pace to grow 32% to $196.8 billion in 2017, including third-party listings. Amazon is far and away the leader in e-commerce sales. The closest competitor is eBay, which is projected to hold a 6.8% share of the market this year. Apple and Walmart are bound for third place at 3.6%. Home Depot, Best Buy and Macy’s round out the top seven retailers online.”
Because of this, it is extremely important for brands to not miss out on the opportunity for businesses to create a marketing strategy specific to Amazon. If you do decide to sell using Amazon’s service, you will have the option to sell as either a first-party partner or a third-party partner and there are significant distinctions between the two. Both of these services have their pros and cons, which we will discuss at length below.
Amazon Vendor Central
If you decide to act as a first-party vendor, you will employ Vendor Central for distributing or manufacturing. Generally, you will be selling bulk shipments to Amazon, and from there, Amazon will sell those products under its own brand name to the customers.
Items from Vendor Central partners have a phrase that says, “Ships from and sold by Amazon.” With this platform you sell your inventory to Amazon on a wholesale basis, rather than using the Amazon platform to sell directly to customers. This program allows wholesale distributors to grow sales and expand their distribution network without some of the headache of selling directly to customers.
Do note that this is an invitation-only wholesale program Amazon intended for manufacturers and distributors that own their brand. Generally, these brands are on the larger scale and typically own their own factories. What you give up in control and margins for your product you recoup in volume and allows you the time to focus on innovation and improvements instead of selling.
Pros Of Amazon Vendor Central
Amazon’s A+ Content, Vine and Subscribe and Save
If you’re selling through Vendor Central, Amazon gives vendors the option to create enhanced content through Amazon A+ detail pages. This allows you an opportunity to showcase your products and increase brand awareness. Amazon has found that utilizing A+ leads to increased shopper engagement and an estimated 3% to 10% increase in sales. You are also given the opportunity to join in promotional programs such as Amazon’s subscription service Subscribe and Save, or Amazon Vine, which gives Amazon’s top reviewers access to testing your product so that they can write, blog or vlog about them before it hits the shelves.
Having reviewers that other consumers trust endorse your product gives you a leg up and helps build buzz around your brand and lend credibility. User-generated content and reviews are far more effective ways of boosting sales than through simple advertisements.
Amazon’s Marketing Services – AMS provides brands with a formidable marketing device that helps boost product visibility. You can utilize features such as Headline Search Ads and Product Display Ads. You can also create keyword-targeted advertising campaigns or pay-per-click campaigns intended to increase traffic and thus sales.
Brand recognition and consumer trust – For all the customers know, what you are selling is Amazon’s product. You have their stamp of approval, which means they have a much higher confidence in Amazon’s brand than they do with a third-party merchant. For all intents and purposes, your product is now Amazon’s product and that comes with all the guarantees provided and the trust created by being the largest online retailer in the world. Amazon’s algorithm, Buy Box, favors its own products. It is in Amazon’s best interest to sell their new products in lieu of products from third-party sellers with whom they must split revenue. This preference gives you a competitive advantage over other sellers and gives your product a better chance to be seen and then chosen.
Protection – If you are an amazon vendor, there is a far lower chance of your account being suspended for unknown reasons. The content of your product page will be produced from alterations employed by other sellers. Because of your partnership, they will protect and favor your brand.
Simplified business model – The business process with Amazon is far easier through Vendor central than through Seller central. All that is required of you is selling the large orders, filling purchase orders, shipping inventory to the warehouse, and billing. You do not need to deal with all of the headaches of actually selling, storing, or dealing with customers about broken, lost or unsatisfactory goods. You also get to avoid the nuisance of figuring out taxation liabilities. This wholesale model allows you to focus on what you do well (manufacturing and creating) and lets Amazon do what they do well (selling and customer service).
Amazon Vendor Central Cons
Less control over pricing – Amazon does not firmly adhere to Minimum Advertised Pricing (MAP) guidelines from manufacturers. Amazon has complete control of pricing and can adjust pricing whenever they so choose. You have far less direct control over pricing as a result.
Amazon’s Strict Purchase Order Requirements – If you do not follow Amazon’s specific guidelines for filling purchase orders to the T, or if you do not maintain stock or fulfill orders on time, you will face heavy charge backs.
Slower Payment Terms- Payment occurs via purchase orders rather than individual customer orders. Depending on Amazon’s defined terms of payment to vendors, you might not be paid for up to 90 days. Payment does not occur the moment your item sells which can result in extreme negative cash flow for long periods of time. This model is also typically more expensive than Seller Central.
Amazon Seller Central
Amazon Seller Central is the web portal used by brands and merchants to sell their goods directly to Amazon’s customers. If they chose to utilize seller central they are then considered a third-party seller. You still have the option to enroll in the Amazon Fulfillment program, whereby Amazon ships and processes every order, they also handle customer service and returns for orders. You also have the option to handle all of these things yourself, if you so chose.
Pros of Amazon Seller Central
Amazon Analytics – Seller Central gives a comprehensive report on consumer data. This data can be used to get a better idea of who your customers are, what they are looking for and understanding what other customers are buying and where.
Customer Support – If you want support from Amazon when things go wrong; a shipment gets lost, broken or any other type of issue with your product, seller central is the option you will want to choose. You can expect solid seller support that helps with any problems regarding payments, listings, or inventory. Vendor central does not give you this type of support unless you are a major name brand. You also have the flexibility to make alterations to page descriptions, images, titles and bullet points.
Messaging Control – Seller central lets you enroll in Amazon’s brand registry program. This program controls and prevents unauthorized listings, whereby a retail partner or third party seller lists or sells bundles of older versions of a product without your consent.
Pricing Control – With seller central you have far greater control over retail pricing. You get to choose prices and change them to match or compete with other vendors. You also have the option to automatically match competitor’s pricing.
Payments – Seller central allows you to avoid the cash flow problems that can arise with Vendor central. Since you get paid for individual orders you will get your money within two weeks of a sale.
Amazon Seller Central Cons
Fulfillment Costs – The various fees Amazon charges you for services such as shipping and fulfillment make it more difficult to make any money selling low priced items.
Lower Sales – Items that have Amazon’s seal of approval, “Ships from and sold by Amazon.com” do better than those by a third party seller. Because Amazon does not directly benefit from your sales nearly as much, your product will not be favored in ranking algorithms and similar “Amazon” products will take priority.
If you are debating the merits of seller central vs. vendor central consider the following. Seller central is open to all, a platform which sells directly to customers, gives you flexibility, quick payments, pricing control and increased direct communication with customers. Vendor Central is invite only, you sell to Amazon, purchase order payments, no pricing controls, but you do have advantages of A+ content and a variety of advertising options. Thoroughly weigh these pros and cons before you decide to partner with either Amazon sales platform.