Relationships, no matter the type, all have one thing in common. Someone must be in control. When products are selling on Amazon’s marketplace faster than you can manage, you may start to question who should be in control of your account. Should it be you, through Seller Central, or should it be Amazon, through Vendor Central?
Amazon gives you two options to sell, you can sell as a First Party Vendor or a Third Party Seller.
Congrats, you’re officially an independent seller on Amazon’s Seller Central. This is where most sellers start when they come to Amazon, so we’re all in this together at some point. As a third-party seller, your account will allow you to sell your products directly to Amazon’s customers. The seller access to the platform allows you to manage inventory, pricing, and customer service for your products. Basically, Amazon is supplying their store and customers to you, and others who may sell the same products. You can set up shop and sell your goods, as you see fit, according to your own business standards. Amazon is basically providing their space for a fee, and you are doing most of the heavy lifting.
Welcome to Vendor Central where you sell your products, wholesale, to Amazon. Amazon places Purchase Orders with you and you manage your account through the Vendor Central platform. In this scenario, you’ve walked into Amazon’s store with a truck full of goods, and negotiated (kind of) a wholesale price with Amazon to buy everything. As they set up their display with all your goods, you go home and wait for your payday. Amazon does the heavy lifting and you just sit back and relax?
Not quite. You still need to create well optimised listings and manage the Amazon PPC advertising and merchandising to get your products to sell !
If you want to work with Amazon, in either situation, you have to pay. Hey, everyone needs to make a living.
The costs of running a seller account are pretty low. Depending on whether you signed up as an “Individual” or Professional” seller, Amazon asks for 8-20% of the price of each item sold. (10-15% is normal for most products). Professional sellers will have a monthly flat fee to sell products. Individual sellers will pay an additional $0.99 per sale. If you want to opt-in for FBA, you will pay a secondary price for this service. That’s it.
A vendor account is a little more expensive and requires a bit of negotiating with Amazon. You will have to have a conversation with Amazon about the wholesale price of your products and Amazon will try hard to get a great price so that they can always profit. Amazon will also ask for 4-10% cash payout to cover slotting costs and if you try to increase your price, Amazon will try to ask for a lower price or renegotiate.
Brands and manufacturers who are growing quickly or are already high in product sales and inventory may work better with Vendor Central. Under Vendor Central your relationship with Amazon becomes a wholesale relationship. This allows you to manage your inventory and businesses, while Amazon manages everything else. The control in this relationship is given more to Amazon; Amazon sets the price of your product after purchasing it (and usually they price match to other companies). They also decide the quantity of items they will purchase regardless of customer demand. This and other factors means your margins may be lower.
Now, third-party sellers may make more profit than those in Vendor Central, but they will need to sell and ship on an order by order basis. The control in this relationship is placed more in the seller’s hands as you must price, brand, manage, promote, and stock your items yourself. However, if you are willing to pay a fee you access FBA and allow Amazon to take care of your customer reviews, complaints, returns, and exchanges.
As we have discussed, there are pros and cons for each option available to Amazon sellers. The decision will come down to what is best for your business now. If you’re just starting you may have no other option than to start as a third-party seller, with the potential to be invited to Vendor Central. If you’ve been invited to Vendor Central, you do not have to accept right away. Depending on your business, you may need to if you have a large catalog of products and selling at a high volume.
If costs alone are you deciding factor it will be very easy for you to choose. Have a small budget? The answer may lie within Seller Central. If you have a larger budget, due to higher inventory sales, yet do not want to hire people to manage your transactions (which can be 30-60k USD a year), then first-party selling may be better for you as you get more bang for your buck by handing control over to Amazon. Yet, if you’re’ trying to save money regardless, sell quickly, and generate revenue quickly, then third-party selling again may perform better for you.
The best way to decide is to think about your company long term and figure out what your goals are as a seller. If it is to stay small and sell what you can, third-party selling may be the best option. Yet if it is to grow your business with limited resources, Vendor Central may work better. There are even strategies for selling on both, but again that also comes with its pros and cons.
Still unsure about the best option for your business? Not sure what direction your business should be heading on Amazon? We help direct e-commerce businesses in the right direction on Amazon. To learn more about how Elevated Seller helps our clients sell more on Amazon with Vendor CentralListing Optimisation or Seller Central Management. Call us at +353 862 721 245, or by filling out our contact form.