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Exploring Amazon vendors, sellers, and hybrids: What’s right for my business?

Guest Blog: Katy Luxem from eCommerce Nurse
23 June 2020 12:00

When first approaching the concept of listing their products on Amazon, many businesses wonder whether it’s best to become a vendor or a seller. Oftentimes, they will have a strong pre-conceived notion of which route is “better,” but like most things Amazon-related, there is not a clear one-size-fits-all approach. One aspect that is crucial for all businesses, however, is choosing the right model for your business from the beginning. This can save valuable time and resources and set your business up for optimal success. This article will point out the key differences and advantages between each platform, as well as discuss a combined (or “hybrid”) approach, which may also suit some companies.

The difference between Amazon vendor and Amazon seller
The basic difference between a vendor and seller is who the customer is. An Amazon seller is a business that sells directly to the consumer, who then buys from the website. An Amazon vendor is a business that sells wholesale to Amazon, which then manages the product on their site. Sellers use Seller Central. Vendors use Vendor Central. The features of both platforms change frequently, but both offer a range of options, such as analytics, marketing tools (such as A+ Content, promotions, etc), and logistics support.

Determining your business strategy
At eCommerce Nurse, we work with vendors, sellers, and hybrid accounts. We are often asked which is preferable, or get requests to go with one platform or another when businesses are starting out. Truthfully, to determine the best setup, it is crucial for potential sellers and vendors to have a clear business strategy that is specific to Amazon. Each one must consider some of the following factors: Resources, inventory, assortment, marketing and merchandising needs, brand control, margins, shipping times, and international sales goals.

Being an Amazon vendor
Vendor Central is invite-only. Vendors are given access to a number of marketing resources, including Amazon Advertising, the Vine review program, A+ Content creation, marketing packages, and traditionally more promotional opportunities. Access to extensive reporting and data via ARA Premium is also available, providing vendors insights into customer shopping behaviour and trends. Plus, beig sold by Amazon.com directly allows vendors to easily gain customer trust.

Potential vendor downsides
Vendors do not deal with customer contact to solicit feedback. They have no control over their content or pricing (Amazon won’t agree to MAP policies), tighter profit margins, and longer payment terms (60 to 90 days). A business might not be set up for wholesale or may not want to deal with Amazon’s strict shipping requirements. Vendors do not manage their inventory, Amazon does. And at times, Amazon may not order enough inventory resulting in possible out of stocks. This is where tools like KhooCommerce come in, managing things such as stock allocation, invoices, and labelling.

Being an Amazon seller
The Seller Central platform is available immediately to most businesses and does not require an invitation. Being a seller gives you control over your brand, control over product listings, and pricing. As a third-party seller, you manage inventory and orders and have direct contact with customers. You also have the potential for greater profit margins, and there are quick weekly or bi-weekly payment terms.

Potential seller downsides
Sellers have to manage pricing, inventory, orders and customer contact. Some businesses may not be able to deal with this level of administration. Or are not set up for direct-to-consumer. While Fulfilment by Amazon (FBA) can help manage certain tasks for sellers, there is still a greater commitment required when it comes to seller resources. There are fewer marketing and promotional opportunities, with no access to Best Deals and marketing packages and Lightning Deals must be recommended by Amazon. Display ads are only available to professional sellers or those enrolled in the Brand Registry. Sellers may also have less access to the premium reports that look at customer shopping behaviour. Another big consideration is competition with other 3P sellers — there are millions of sellers on Amazon hoping to win the Buy Box. It might take a lot of strategy and work to make a profit versus all of the competition.

Vendor, seller, or hybrid approach?
Any one of these summarised points could be discussed in much great detail. Each platform is multi-faceted and complex. What might work for one business, brand, or particular product could be detrimental for another. As a result, some businesses choose to take a hybrid approach and become both a seller and a vendor. This can leverage the advantages of both platforms and be tailored to your brand or business goals. Hybrid accounts require a very hands-on approach to be successful, but it can be done and provide a fantastic experience for customers.

Determining your specific needs, resources, and what would make your brand or business most successful is the key to being either a seller or vendor on Amazon. Because of the expanse of options, many businesses choose to have an agency help out or fully handle their account (or accounts). At eCommerce Nurse, we tailor our services to your experience, needs, and budget. Our team of ex-Amazonians provides expert services, such as strategic consulting, listing optimisation, Amazon Advertising coverage, professional native translation, and more. Please contact us for more information.

 

Key Takeaways:

  • The vendor relationship is typically more advantageous for wholesalers who sell a lot of one product. This simplifies everything from logistics to pricing.
  • The seller relationship can be beneficial for smaller companies who pay for things per product shipped and are shipping relatively little.
  • The higher margins and quick setup of a seller account can attract more businesses, but it's important to understand the hands-on work that is required for a seller account. This means dealing with everything yourself, from promotions and pricing to forecasting, stock levels, and customer interactions. 
  • The same goes for companies looking to switch from vendor to seller. Businesses should think carefully about resources and time commitment a seller account might require.
  • Well-known or larger brands have a tough choice to make: Do they want a vendor relationship where they ship a PO and that's the end of it? Or do they want a seller relationship, where they can more easily control their brand's direction, pricing, and image.
  • Note that vendor accounts are invitation only. There's no getting around this.

 

Still got questions? This is a big topic and tends to involve an in-depth conversation - get in touch with Katy or Carina eCommerce Nurse.