Amazon has over 300 million active customer accounts and over 1.9 million selling partners worldwide. With the Amazon marketplace continuing to grow, there are various options for businesses to move forward with in terms of choosing to be Amazon Vender Central or Amazon Seller Central.
When differentiating between vendors and sellers the true factor is who is actually selling the product. If you are listed as an Amazon Seller, businesses are in charge of listing, pricing, and marketing their product values themselves. For vendors, businesses can sell their products to Amazon that then lists and prices out the products themselves. However, the choices do not stop there for businesses. For vendors and sellers there are specific choices for each selection. This article will discuss Amazon’s options below in further detail with pros and cons of each.
Amazon Seller Central
Amazon Seller Central also known as the 3P model is a model, where businesses are considered the official retailer and Amazon just counts for the marketplace. As mentioned above the seller decides the price of the items and the Amazon marketplace charges a simple fee for the transaction. There are 2 programs part of Seller Central.
- Fulfilled by Amazon (FBA) –If a business proceeds with this option, their products are to be sent to Amazon and Amazon takes care of the process of handoff of items to the customer. Amazon also takes care of overall customer support, returns and refunds. The biggest positive with this option is that the FBA program allows for the Amazon Prime tag. According to statistics, 60 percent of the users on Amazon look at products listed under prime only.
- Fulfilled by Merchant (FBM) – This selection requires businesses to send the products to the actual customer depending on the orders received. On this end of the spectrum, the sole business handles overall customer support, returns and refunds. Those in this program do not get the option of an Amazon Prime Tag, however the FBM program does cover availability in case of FBA running out of products.
Nevertheless, sellers still have to pay for Amazon Marketing Services for visibility. For all items that have been sold in the window mentioned above, payment runs for every 15 days.
Amazon Vendor Central
The Amazon Vendor central or the 1P model is only available if businesses are invited. This is where Amazon orders the products from the business or organization in bulk at a cost price. Amazon then proceeds to sell the item to the actual customers at a competitive price based on their terms. However, companies such as SalesDuo feature the Amazon Vine tool which actually allows products to be sent to reviewers firsthand before they ever hit the shelves. This gives way for an overall increase in value of the products because consumers tend to gravitate towards products that have a high satisfaction rate.
For the vendor central program, Amazon offers 3 options.
- In Network – For this option, Amazon sends Purchase Orders (PO) weekly and vendors would need to ship the items to Amazon. From there, Amazon takes care of the other steps such as shipping to the actual customer. Amazon provides 2 shipping options where you can either collect or go about the prepaid option. In collect shipping, Amazon is responsible for shipping and for pre-paid the vendor handles shipment of the product to the Amazon Fulfillment Centers.
- Dropship – Amazon will use your company warehouse as another warehouse and will route customer orders to your company for pick and packing services. After packing, the official shipping is taken care of by Amazon.
- Direct Import – Amazon will pick up the item from the port of delivery. The items are then handled by Amazon where they take care of international transportation, customs, and Import Duties.
The vendor option definitely has some positive benefits where the vendor is paid based on the standard agreement with CoOp fee as orders are paid in bulk. However, having an increase of cost for a vendor’s items is difficult and almost out of the question.
The Option of the Hybrid Model
There is another option that allows companies to pursue a hybrid model by combining the overall vendor and seller options. SalesDuo offers ecommerce solutions and is a great example of showcasing the Hybrid model.
The model combines the positives of each aspect of vendor and seller selections put forth by SalesDuo’s guidance to help businesses to navigate Amazon’s terms.
As mentioned above both models have their own pros and cons. For vendor central, a common problem is often the issue of cost increases and navigating agreements. With diminishing profitability, SalesDuo works to review the agreements and current asking price to determine the value through vendor rules. From there, the company compares it against the potential profit that you may otherwise receive from seller central and provides recommendations on which channel will be best suited for a product. The eCommerce and brand enhancement solution supplied by companies like Salesduo helps assist operators in navigating Amazon’s terms and conditions more efficiently.
The Future of Amazon
The Amazon marketplace is a popular source for ecommerce business with 89 percent of consumers being more likely to buy their products online from Amazon. That being said, Amazon shows no signs of slowing down therefore evaluating the best options for your business can be a big game changer in how you manage operations.
About Arjun Narayan:
Arjun Narayan has 17 years of experience in the business space in which 10 years he has been working in entrepreneurial roles as well as serving as the CEO of two major companies. During his time leading and exiting companies, Arjun has gathered fundraising experience with high net worth individuals as well as marquee investors where he has provided returns on investments of over 15 times in just 5 years. He now serves as Salesduo’s CEO, a dominant Amazon and eCommerce company who provides solutions to major corporate brands.