Breaking Down Amazon Vendor vs. Amazon Seller

In today’s world, you can’t hear the word “Amazon” without bringing to mind the eCommerce giant rather than the rainforest. Appearing in over 50 countries, Amazon is clearly in demand —  74% of Amazon consumers use the online site to find new products, and US customers are buying 8,600 items per minute. 

And why wouldn’t it be? The notorious marketplace displays brands with visually appealing content, attracting customers to browse through hundreds of goods before selecting which one they want to show up on their doorstep in 48 hours. Plus, by offering incentives like a premium subscription and seamless returns, people are more than enticed to shop through the enterprise’s jungle of sellers.  

While Amazon is undeniably great for increasing sales and entering international markets, it's not a journey you can easily take without a map. When selling your products on Amazon, there are two primary business models to choose from which will help guide your way: Amazon Seller and Amazon Vendor.

What does it mean to be an Amazon Vendor (1P)?

Being an Amazon Vendor essentially means that you are a wholesale supplier, selling your products to Amazon. This means that you receive a purchase order from Amazon, fulfill the purchase order, and sell your products directly to Amazon. In rare cases, direct fulfillment is an option even as a vendor, however it requires robust warehousing and fulfillment capabilities. It’s important to note that you must be invited by Amazon to be a Vendor.

Most often first-party vendors are brands that may sell D2C on other channels, but in this instance Amazon is now the retailer that is selling your product. This means that you set the list price, but the selling price is determined by the market. Each year when you negotiate your contract with Amazon you negotiate your margins directly.

Although Amazon is now the owner and seller of the products, you are still responsible for setting up the item and for providing some of the product content. Amazon will make some optimizations on the product detail page for you, but you must also make efforts to ensure that your product record is complete and accurate, to ensure that your products sell and Amazon wants to place more purchase orders with you. You also still have the ability to advertise and run promotions for your products so they sell faster and Amazon continues to buy more from you.

Vendor Central

First-party Amazon vendors manage their relationship with Amazon through Vendor Central. That’s where you can make updates to product listings, view purchase orders, and access available reporting.

What are the benefits of being a first-party Amazon vendor?

Selling as a first-party vendor on Amazon tends to be easier than third-party selling. This is because it works like a wholesaling model. By fulfilling Amazon’s purchase order, you can take advantage of a much more hands-off approach, while still taking advantage of the volume of consumers shopping on Amazon.

Furthermore, you can take advantage of the trust that comes with being an Amazon Vendor. This allows you to take advantage of Amazon’s reputation for fast shipping and easy returns. When potential customers see ‘Sold By Amazon’ you get the added value of perceived trust from consumers.

What are some of the downsides of being an Amazon Vendor?

When you sell your products directly to Amazon you no longer have control over your products. One aspect of that includes pricing. Since Amazon determines the price of your product depending on the market, and you are acting as a wholesale supplier for Amazon, you may have lower profit margins. Typically, on an annual basis, you negotiate your margins directly with Amazon. This can mean there is less predictability than a 3P Seller that pays a flat percentage fee.

While Amazon Vendors have access to more marketing and advertising options which can be a bonus, they are still responsible for any additional costs associated with them. For example, in order to move product quickly, an Amazon Vendor may wish to run Sponsored Product Advertisements on Amazon which they pay for on a cost-per-click basis. The Vendor is responsible for all fees and managing all campaigns to market and advertise the products.