BALANCING AN AMAZON

VENDOR+SELLER STRATEGY
Selling to Amazon vs. Selling on Amazon
Table of Contents

Introduction 3

3P (Seller Central) 5

Amazon’s Ideal 3P Candidate 5

Pros & Cons of 3P 6

1P (Vendor Central) 9

Amazon’s Ideal 1P Candidate 9

Pros & Cons of 1P 10

Transitioning from 1P or 3P 15

Switching from 1P to 3P 15

Balancing 3P and 1P With A Hybrid Approach 18

Challenges With the Hybrid 3P+1P Strategy 19

The Bottom Line 24

 Selling to Amazon vs. Selling on Amazon 3

Introduction
When you’re a vendor on Amazon, life is pretty good.

Once your products are in Amazon’s warehouse, they

take care of everything, and you get paid.

Amazon’s tagline for Vendor Central says it all:

“You make it. We buy it. Your business grows.”

But what about those times when you want to alter

something on your listings, and it’s not within
vendor guidelines?

Or when you’re not happy with the rock bottom price

on a product, but you’re not in control of it?

There are pros and cons between both 3P selling and

1P selling on Amazon, and we’ll explore them all here.
3P (Seller Central)
 Selling to Amazon vs. Selling on Amazon 5

3P (Seller Central)
3P (third party): Sells products directly to consumers via Seller
Central. Can be Seller-Fulfilled or regular FBA (Fulfilled By Amazon).

Amazon’s Ideal 3P Candidate

Fills Selection Gaps

Amazon does want 3P sellers to be successful (so that Amazon

can be successful), but Amazon’s main goal will always be to
please their customers.

Carina McLeod, a former Amazon Vendor Manager, explains:

“Amazon wants 3P to maximize their sales potential on the

marketplace, but it’s all about filling those selection gaps. Amazon
may not be able to get all of the brands they need on the vendor
side, but those brands may access the 3P side. It’s all about the
Carina McLeod
customer experience, and they want the customer to be able to go Former Vendor Manager
on and discover and buy any product they want.” Amazon

Simply put, a 3P seller who’s filling a gap either in product or brand

selection is very welcome, as long as they are not prohibited items.
 Selling to Amazon vs. Selling on Amazon 6

Pros & Cons of 3P

Pro: Control Over Prices & Products

3P sellers have more control over their prices and promotions

because there’s no middleman (a.k.a. Amazon) dictating prices.
Vendors do not have this bonus.

In addition, 3P sellers are in complete control of the products

(and the number of units) they choose to sell on Amazon, while
vendors must frequently concede to Amazon’s requests.

Pro: Control Over Promotions

If you’re a 1P seller, it can be difficult to launch a product using

Vendor Central alone. (We’ll talk more about that in the Vendor
“Cons” section.”)

3P sellers, on the other hand, have access to a wide variety of

3P tools to boost the velocity and sales history of brand new
products right off the bat.

Pro: Set Commission Fee

3P sellers don’t have to worry about the confusing fee

percentages Vendors deal with. Theirs are pretty set.
 Selling to Amazon vs. Selling on Amazon 7

Pro: Access to EBC Content

This used to be a con—the inability to access A+ content—but Amazon

came through with access to Enhanced Brand Content for 3P sellers,
which provides nearly all the same benefits.

Learn more about EBC Content in these posts:

What is Amazon Enhanced Brand Content?
Brand Seller’s Guide To Enhanced Brand Content [PDF]

Con: Handling Customer Service & Returns

As a 3P seller, you are truly in control, particularly if you’re not using FBA.

That means you’re responsible for everything from customer complaints

(and the subsequent poor reviews) to the actual shipping and handling of
a product to a customer. And if you’re not in line with Amazon’s policies,
you could get suspended.

BONUS: Where Does Vendor Express Come In?

If you’re a 3P seller and Amazon hasn’t invited you to become a vendor

(1P), you can use Vendor Express to get a similar program.

Learn more about Vendor Express in these blogs:

What is Amazon Vendor Express?
Should Sellers Use Amazon Vendor Express?
1P (Vendor Central)
 Selling to Amazon vs. Selling on Amazon 9

1P (Vendor Central)
1P (first party): Sells products wholesale to Amazon using Vendor Central.
1P is also called “vendor”. 1P/vendors must be invited by Amazon to join
Vendor Central.

Amazon’s Ideal 1P Candidate

Has a Wide Range of Popular Products That Sell Well

Amazon wants selection that fits what the customer is looking for. That’s
why in most cases, they want access to a brand’s full selection
of products.

Carina McLeod
“It’s not like other retailers that will cherry pick—they will pick all of the Former Vendor Manager
products that make sense and are deemed profitable for Amazon." Amazon

- Carina McLeod, Amazon Consultant

Doesn’t Need Hand-Holding

A buyer may have hundreds or even thousands of vendors depending on the

category. They don’t have time to jump in and assist with listing management,
payment hangups, or promotion issues.

“Vendors should be able to utilize the tools available to them in Vendor

Central to drive sales and grow their business without frequently asking
vendor managers for direct support.”
 Selling to Amazon vs. Selling on Amazon 10

Pros & Cons of 1P

Pro: Less Resource Intensive

Many vendors feel they have more peace of mind when they can pass
products off to Amazon. Amazon must deal with tough customers,
shipping, etc., while the vendor gets paid.

However, there is a reason we said “somewhat"—vendors still have a

responsibility. If your units don’t sell, you could have some problems.

“If you sell 1,000 units to Amazon, but not a single unit sells to
David Cooley
customers—it’s likely Amazon will rethink their decision to place POs Manager, Marketplace Channels
from you for that item and might decide to no longer buy any units.” CPC Strategy

Pro: Fewer Variables to Manage (and Better Ad

Management Services)
This is another huge benefit that’s right up there with safety—vendors
overall endure fewer headaches than the average 3P seller on Amazon.

Most of the selling strategy is taken care of for them—promotions on

Amazon can be handled by Amazon Marketing Services (AMS), and within
AMG, Amazon Media Group, which provides access to display ads and
Kindle & Fire “experiences” with brands.

Learn more about AMS and AMG in these posts:

What is Amazon Marketing Services?
What is Amazon Media Group?
 Selling to Amazon vs. Selling on Amazon 11

Pro: Access to A+ Content

While Enhanced Brand Content just emerged for 3P sellers this year, A+
Content has been around for a while. This extended content can have
a positive effect on conversions, and A+ offers even more modules for
vendors to work with than those available through EBC.

Learn more about A+ Content here:

What is Amazon A+ Content?

Pro: Additional Tools for Launching Products Customer Reviews

(Reviews on Vine)
55,736
Technically, as a vendor, you don’t have the upper hand in product
launches. Amazon doesn’t really have incentive to buy a product that 4.4 out of 5 stars
they’re not sure will sell, Cooley points out.

However, Amazon vendors do have access to Vine, Amazon’s premier

review platform for sellers looking to gain unbiased reviews on new
products without a history.

Considering 3P sellers recently got slammed by the incentivized review

ban and the Early Reviewer Program has been slow to roll out, this is a
pretty fantastic feature.
 Selling to Amazon vs. Selling on Amazon 12

Con: More Confusing Fees

There’s a reason we wrote an entire post about negotiating with Amazon

Buyers—it’s just not quite as simple to figure out where and how Amazon
decides to pay for your products (and the act of selling them).

Con: Limited Creative and Pricing Control

We alluded to this before, but when you’re a vendor, Amazon has the last
say about your product titles, descriptions, and images.

Guidelines are stricter than they are on the 3P side, and if your listings
aren’t up to par, Amazon will either change them without notifying you (in
some cases) or they’ll request that you make changes yourself.

“3Ps sellers like the 3P relationship because they control pricing and product
listings. When they go and sell those products to Amazon on the vendor Carina McLeod
side, Amazon is setting those retail price points. There’s no price fixing, and Former Vendor Manager
Amazon
Amazon alone will choose what they wish to sell those products at.”
 Selling to Amazon vs. Selling on Amazon 13

Con: Potential Cash Flow Problems

Many vendors have complained that their payments have

either been held or are slow to go through for a shipment.

This isn’t technically something that affects every 1P seller, but

it could—so just keep that in mind if you’re really relying on
those paychecks.

Con: Less Seller Support

Many vendors have also complained that they don’t receive as

much support on the 1P side as they do on the 3P side.

And at the end of the day, it’s really a bandwidth issue for
buyers—they expect vendors to be pretty self-sufficient.
Transitioning from
1P or 3P
 Selling to Amazon vs. Selling on Amazon 15

Transitioning from 1P or 3P
There are two routes you could go if you’ve decided you’re not a
fan of the vendor-only route:

1 Switch to Seller Central (sell as a 3P with or without FBA)

2 Sell as both 1P & 3P (hybrid strategy)

Switching from 1P to 3P
If you aren’t working with an agency (or you’re not a huge brand),
it can be tough to get access to Amazon’s 3P onboarding team.

At CPC Strategy, because of our relationship with the Amazon

team, we are fortunate to have access to a 3P portal which gives
us the inside track to that team.

This portal includes:

A dedicated onboarding contact to assist with the transition

Assistance with troubleshooting issues that may arise

Help setting up product listings

Before you attempt to switch fully from 1P to 3P, you should know
that challenges might arise as you transition your entire business
from Vendor Central over to Seller Central.
 Selling to Amazon vs. Selling on Amazon 16

Challenges of Switching from 1P to 3P

90-Day Waiting Period for Buy Box Eligibility (Sans Portal)

If you are transitioning to the 3P side of the business without access

to a portal, there’s a 90-day waiting period for Buy Box eligibility.

Note: CPC Strategy’s portal allows us to bypass this waiting period so the
brand manufacturer can get Buy Box eligibility right away.

You Could Get Blocked

If you are an established vendor, your Amazon vendor manager can

block you from creating a 3p account.

According to Cooley, Amazon Vendor Central and Amazon Seller

Central are viewed as two separate entities fighting for the
same business.

“If a vendor says they want to transition to the 3P side of the business,
what they’re actually saying is that they are going to take their business
away from the vendor side and move it into the 3p. You can think of it
as one company losing business to another, even though it is all housed David Cooley
under Amazon’s roof. That is why vendor managers will sometimes Manager, Marketplace Channels
CPC Strategy
block the creation of the 3p & technically, they do have the final say.”
 Selling to Amazon vs. Selling on Amazon 17

There is a way to get around the buyer’s block, and that’s by creating an
entirely new line of business—of course, that means different banking
information, tax IDs, and more.
David Cooley
“This wouldn’t be the easiest approach, but it is an option if you get blocked.” Manager, Marketplace Channels
CPC Strategy

However, this strategy does come with a risk. McLeod chimes in:

"You could start up your 3P account on the quiet, but then Amazon may Carina McLeod
Former Vendor Manager
discover it, say they never approved it, and may suspend your 3P
Amazon
account immediately.”

If you’re looking to increase your sales the safe way, we usually

recommend a hybrid approach, where you sell products on both the
vendor & 3P side with Amazon’s approval.
 Selling to Amazon vs. Selling on Amazon 18

Balancing 3P and 1P With A

Hybrid Approach
Approximately 20% of CPC Strategy’s clients implement
a hybrid approach to selling on Amazon—meaning
they’re both 3P and 1P.

The hybrid approach offers flexibility and power you

wouldn’t get otherwise. Out of Stock
For example, you'll have inventory coverage for vendor
stockouts. In Stock

Let’s say on the 1P side, you send Amazon some

particularly popular products, and Amazon sells
through them before your next shipment goes out.
Welcome to the dreaded inventory stockout.

This is where the 3P side of your business will come in

handy, and you can offer a backup of those products
and continue to sell from the 3P side.
 Selling to Amazon vs. Selling on Amazon 19

Challenges With the Hybrid

3P+1P Strategy
Your biggest challenge is also the most obvious: Once
3P selling is apart of the equation, you must come up
with a game plan to manage both.

This can be difficult if you’re already selling across other

channels, including traditional outlets. You may need to
hire an internal team to manage your 3P side or hire an
outside agency specializing in Amazon selling.

Here are some other challenges you’ll run into with the
hybrid strategy.

Product Launch Problems

When you have a new product you’re ready to launch on

Amazon, where do you launch it?

Jordan Gisch, Marketplace Channel Analyst at CPC

Strategy, explains:

"There are two questions you run into at this point. You
could launch the new product on the 1P side, which will
give you access to the Vine program, A+ Content, vendor
support reps, and AMS.
 Selling to Amazon vs. Selling on Amazon 20

Or, you could launch the new product on the 3P side, and use reviews from Jordan Gisch
legitimate third parties such as Viral Launch, EBC content, and Feedback Genius Marketplace Channel Analyst
CPC Strategy
to send CRM emails after purchase to get that product moving."

Learn more about launching products on Amazon in our free download:

The Amazon Seller’s Guide to Product Launches

Difficulty Moving Products From 1P to 3P

If a product is performing well on 1P, some sellers want to add that product
to 3P. This could potentially offer better margins, but sales could also drop off.
In addition, buyers will not appreciate a vendor moving a high volume driving
product completely over to 3P.

“Typically vendor managers don’t want their clients to open a 3P account, and in
some instances, they can block it from happening."

Sponsored Products Cannibalization

If you’re running Sponsored Product ads on both the 3P and 1P side, you should
be aware that you could be competing against yourself. Keep an eye on both to
make sure you’re putting the most money towards the highest drivers of sales.

“If you’re running Sponsored Products ads in 3P and Sponsored Products ads in
1P, they could be competing against each other and drive up CPC.”
 Selling to Amazon vs. Selling on Amazon 21

Amazon May Ask for More of Your Catalog

If you’re a manufacturer hoping to expand to 3P, you should INVENTORY

be aware that Amazon may require that you keep best selling
products on the vendor side.
Manage Inventory
Alternatively, if you’re a 3P seller and you decide to expand to
1P at Amazon’s invitation, you won’t have as much control over
Manage FBA Inventory
what you get to sell where.

Let’s say you have 20 products but you only want to sell
two on the 1P/vendor side. According to McLeod, it’s likely
Amazon won’t settle for just those two items.

In fact, Amazon alludes to this on their Product Availability

Policy for Manufacturers:

“If you are a manufacturer and your products are sold by

any other retailers or distributors, we expect you to offer
Amazon Retail the option to source those products at
competitive terms for sale as Retail items only.”

This clause may be vague, but it’s pretty clear that Amazon
wants full access to your product catalog, especially if
Walmart or another retailer already has full reign over it.
 Selling to Amazon vs. Selling on Amazon 22

Here are a few items that vendors typically prefer

to not to offer to Amazon:

1 Discontinued items (unless Amazon agrees to bulk buy)

2 Items with limited stock or poor availability

3 Items with a low profit margin

Essentially, vendors must provide solid reasons why they cannot sell those products to Amazon.

Amazon buyers will most likely pass on products that are not profitable, have low retail
price points (below $10), or bundles that are not prepacked.

As you seek to manage your inventory across both 3P and 1P, remember most attempts at
“getting around” Amazon’s policies don’t go well.

If you’re already a 1P vendor, you have to be extra careful to legitimately manage your 3P
account, and shouldn’t attempt to sneak products past your buyer.
The Bottom Line
 Selling to Amazon vs. Selling on Amazon 24

The Bottom Line

There’s no clear winner when it comes to 3P vs. 1P—it really
just comes down to your current setup.

If you have a wholesale background, solid distribution

strategy, and are already selling to multiple retailers, you're
probably an ideal candidate for 1P. The transition will be
simple, as you're already set up to ship products in bulk
and work with Amazon's wholesale shipping requirements
for vendors.

So who’s the best candidate for 3P? Evolving brands and

private labels are working really well, according to McLeod,
because Amazon 3P is a great place for new brands to test
the waters at minimal risk.

“Ideally, 1P exists as a wholesale route, and 3P exists as a Carina McLeod

direct to consumer route. It really depends on that brand or Former Vendor Manager
Amazon
business’s setup.”

But if you really want to excel on Amazon, it's time to get

away from the 3P VS 1P mentality, and think more about
how they can both propel your brand forward.
 Take the Next Step

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analysis and assessment of brand's existing Vendor Central
account, advertising programs, product order (PO) volume,
and profitability metrics.

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