Brands have several options for how you can approach your presence on Amazon. It’s important to understand what your options are and what are the pros and cons of each option.
In this episode we explain the pros and cons of 5 different approaches you can take to Amazon as a brand.
First, an Important Distinction
There is a big difference between you (or other third parties) selling your products ON Amazon and you selling your products TO Amazon:
Selling on Amazon is also called third-party or 3P, and it involves you and/or other 3rd-party merchants selling your products directly to consumers (B2C) on the Amazon marketplace through a Seller Central account.
Selling to Amazon is also called first-party or 1P, and it involves you entering into a B2B wholesale relationship with Amazon where you sell your products directly to Amazon via a Vendor Central account, and Amazon then sells your products on their marketplace.
Amazon Brand Registry
Regardless of which route you go, you should always have your brand registered through Amazon’s Brand Registry program.
5 Strategies for Brands on Amazon
1. Free-for-All (or the Do Nothing approach)
- None (for more on this, listen to Episode 1: 6 Reasons You Can’t Afford to Ignore Amazon)
- Damage to the brand…incorrect pricing, poor customer service, poor or incorrect product images and details, inconsistent availability
- Hurts relationships with other retail partners, both brick-and-mortar and online
- Hurts sales both on and off Amazon
- Makes you vulnerable to counterfeiters
- Damages your brand’s reputation
2. 1P – Vendor Central (you wholesale your products to Amazon)
- If Amazon stays in stock, then they’ll almost always have the buy box and be making the sales, so you can be fairly confident customers will get authentic items
- Access to additional Amazon advertising platforms and opportunities – in the past it was Headline Search Ads, Enhanced Brand Content, Product Videos, AMG (Amazon Media Group), etc. Now most of that is being made available to brand-registered Seller Central accounts.
- Ease…receive a PO, send out product, done
- No pricing control (and Amazon often pushes your prices down as hard as they can)
- Can be hard to get changes/fixes made to product detail pages
- No champion for your brand, making sure your brand is represented the best possible way and your sales are maximized
- Amazon doesn’t always stay in stock
- Net 30 or 60 or 90 terms…tie up more cash
3A. 3P – Self-Managed Seller Central (you have your own Seller Central account for selling your products on Amazon B2C, and you manage the account yourself)
- Maximum control over pricing, inventory supply and product availability, product detail pages, etc.
- Best margins = make the highest profits
- Helps cash flow…get payouts from Amazon every 14 days
- You own and control your Seller Central account, no one can take it away from you
- Sales tax nexus
- Takes work and consistent management
- Can be vulnerable to damage caused by an account suspension…but can mitigate a lot of this risk by managing the account properly
3B. 3P – Third-Party Managed Seller Central (you have your own Seller Central account for selling your products on Amazon B2C, but you bring in a 3rd party to manage your Seller Central account for you)
- Get the benefits without the demand for consistent time investment and constantly staying up-to-date with Amazon’s evolving platform
- Bring in specialists who have a level of expertise you’ll never be able to achieve
- Tons of motivation for the third-party to do well and improve your sales and margins if some of their compensation is tied to revenue or profits they generate
- Caution: make sure you’re working with someone you really trust
4A. Other 3P – Multiple Authorized Sellers (you don’t sell your products on Amazon or to Amazon, instead you authorize multiple third parties who sell your products on Amazon through their own Seller Central accounts)
- Enforce pricing agreements, content on product detail pages, etc.
- Lessen the risk of one account suspension wiping you out on Amazon for a time
- Offload sales tax liability
- You don’t have ultimate control
- Whenever there is more than one seller of your brand, there’s always temptation for someone to drop prices or create duplicate listings or employ other damaging tactics to try and capture a larger share of your brand’s sales
- With two or more sellers there is far less motivation for any of the sellers to put extra effort or money into improving and optimizing your product details pages or promoting your brand
4B. Other 3P – Exclusive Authorized Seller (you have one exclusive authorized seller who is the only seller authorized to sell your products on Amazon, which they do through their own Seller Central account)
- Most of the pros of the 3P approach with multiple authorized sellers
- Huge bonus: exclusive seller is motivated to put effort into increasing sales and policing your brand, watching out for unauthorized sellers
- If you protect your exclusive authorized seller with a good deal, they may be willing to shoulder advertising costs for promoting your product and growing your sales on Amazon
- You’ve offloaded sales tax liability
- You don’t have ultimate control (which doesn’t have to be a huge issue if you have a good relationship)
- If the seller sells other brands or has other selling activities on Amazon, this can increase the risk of them getting an account suspension which would temporarily stop your products from selling on Amazon
4C. 3P – Exclusive Authorized Seller via Consignment (same as 4B, but you carry the cost of inventory…as products sell, the third party retains their agreed-upon profits and then sends the rest to you)
- All of the above for 3P exclusive seller arrangement…one tweak to this arrangement is that you don’t make the exclusive seller purchase from you wholesale. Instead, your inventory gets sent in to Amazon and as it sells, the exclusive seller keeps whatever portion you’ve agreed and then sends the rest of the proceeds on to you.
- This can make the exclusive seller arrangement more attractive to a third party
- Tie up more of your cash
5. Blended 1P/3P Approach
- Get access to all Amazon’s marketing platforms, while maintaining more influence and control over product detail pages
- Make sure adequate inventory supply happens to products stay in stock
- Most of the cons previously mentioned with 1P, most notably no pricing control
Let Us Help You Decide
Need help deciding which route is best for your brand? Fill out this form and we’ll give you a free 30-minute phone consultation!