Relationships, no matter the type, all have one thing in common. Someone must be in control. When products are selling on Amazon’s marketplace faster than you can manage, you may start to question who should be in control of your account. Should it be you, through Seller Central, or should it be Amazon, through Vendor Central?
Amazon Seller Central vs. Vendor Central: What’s the difference?
Amazon gives you two options to sell, you can sell as a First Party Vendor or a Third Party Seller.
Seller Central, Third Party
Congrats, you’re officially an independent seller on Amazon’s Seller Central. This is where most sellers start when they come to Amazon, so we’re all in this together at some point. As a third-party seller, your account will allow you to sell your products directly to Amazon’s customers. The seller access to the platform allows you to manage inventory, pricing, and customer service for your products. Basically, Amazon is supplying their store and customers to you, and others who may sell the same products. You can set up shop and sell your goods, as you see fit, according to your own business standards. Amazon is basically providing their space for a fee, and you are doing most of the heavy lifting.
- We’re All Invited: No invitation is required, and anyone can open up an account to sell.
- Full Control: You decide what you are selling, when, and for how much. Decide to sell as an “Individual” or “Professional” seller, which impacts selling fees and tools available within Amazon.
- Profit Margin: Third Party sellers have the opportunity to take a larger chunk of the profits than First Party sellers.
- Free Analytics: Yup, all that beautiful data is yours for the taking so that your company can grow.
- Quick Payments & Retail Profits: You list your item at a retail price, someone buys it, they pay you, and you get paid within 2 weeks. Yes, it is that easy! Analyze your data to help you adjust pricing against your competition, as your customers are ALL of Amazon’s customers.
- Fulfillment By Amazon: For a small fee, Amazon can take care of pick, pack, and ship. With Fulfillment By Amazon (FBA), you don’t need to worry about shipping, returns, or customer service. Amazon has you covered.
- Enhanced Brand Content (EBC): Enhanced Brand Content pages are not permitted for all sellers, but if Brand Registry is set up, getting approval will be easier.
- Paid Search Advertising: Looking for a way to advertise your products on Amazon? Sponsored Product Ads and Headline Search Ads are easy ways to promote your products using the Amazon campaign management and bidding tools provided.
- International Sales: The world is your oyster and everyone who has internet access can purchase your products.
- Customer Work: Unless you’re using content marketing, product ads, or social media strategies your customers may have a harder time finding your products in their searches.
- Smaller Volume: This may be a positive at first because you will be selling less product and making a profit. At some point in time, you will want to sell more, which does require more time to be invested in optimizing products and taking advantage of marketing opportunities
- FBA Shipping Fees: Shipping to the Amazon Warehouse is your responsibility and if you do not sell your items quick enough you may have to pay a fee to Amazon for storing your goods.
Vendor Central, First Party
Welcome to Vendor Central where you sell your products, wholesale, to Amazon. Amazon places Purchase Orders with you and you manage your account through the Vendor Central platform. In this scenario, you’ve walked into Amazon’s store with a truck full of goods, and negotiated (kind of) a wholesale price with Amazon to buy everything. As they set up their display with all your goods, you go home and wait for your payday. Amazon does the heavy lifting and you just sit back and relax.
- “Sold and Fulfilled by Amazon” Badge: Customers identify that your products are Amazon approved meaning more purchases.
- Invitation Only: This is the big league and an invite means Amazon has taken notice that you’re crushing it.
- Larger Volume: You can sell A LOT of your product.
- Advanced Ads: Besides leveraging Sponsored Product Ad campaigns, you get access to Amazon Marketing Services, which has more paid search ad choices including targeted banner ads that can be targeted at specific brands
- A+ Detail Pages: A+ Enhanced Content pages ensure more traffic and potential for conversions
- Access to Vendor Central Platform: Access to marketing and seller promotions as well as control over listings and shipping options.
- Pricing: Pricing will be adjusted by volume meaning you may not make as much on a single sale, but if you sell a lot you will make more in the long run. Be aware, Amazon may not pay any attention to MRSP, as you could see your products selling at a lower price than you expected.
- Paid Analytics: Now that you’re making more money you need to pay for your data. This sales data will help you figure out what to sell, who to sell it to, where and when.
- Packaging Requirements: Shipping to the Amazon Warehouse is your responsibility and if your products are not shipped correctly, Amazon may not accept the materials.
- Standard Payment Terms & Wholesale Profits: You’re still going to get paid, it just may take a little bit longer and it may be a little bit less depending on Amazon’s pricing and purchasing habits. However, the bulk of your profit now comes from your wholesale pricing and negotiations with Amazon. Amazon is now your client.
- USA Sales Only: Amazon.com is a USA based company and you can only sell to them but who they sell your product to is up to them. If you want to sell your product to Amazon Canada and/or Amazon Mexico you will have to set up additional accounts under each site.
Seller vs Vendor Cost Differences
If you want to work with Amazon, in either situation, you have to pay. Hey, everyone needs to make a living.
Seller Central: $$- Low-Medium Costs
The costs of running a seller account are pretty low. Depending on whether you signed up as an “Individual” or Professional” seller, Amazon asks for 8-20% of the price of each item sold. (10-15% is normal for most products). Professional sellers will have a monthly flat fee to sell products. Individual sellers will pay an additional $0.99 per sale. If you want to opt-in for FBA, you will pay a secondary price for this service. That’s it.
Vendor Central: $$$- Medium to High Costs
A vendor account is a little more expensive and requires a bit of negotiating with Amazon. You will have to have a conversation with Amazon about the wholesale price of your products and Amazon will try hard to get a great price so that they can always profit. Amazon will also ask for 4-10% cash payout to cover slotting costs and if you try to increase your price, Amazon will try to ask for a lower price or renegotiate.
Which Amazon Seller Are You?
Brands and manufacturers who are growing quickly or are already high in product sales and inventory may work better with Vendor Central. Under Vendor Central your relationship with Amazon becomes a wholesale relationship. This allows you to manage your inventory and businesses, while Amazon manages everything else. The control in this relationship is given more to Amazon; Amazon sets the price of your product after purchasing it (and usually they price match to other companies). They also decide the quantity of items they will purchase regardless of customer demand. This and other factors means your margins may be lower.
Now, third-party sellers may make more profit than those in Vendor Central, but they will need to sell and ship on an order by order basis. The control in this relationship is placed more in the seller’s hands as you must price, brand, manage, promote, and stock your items yourself. However, if you are willing to pay a fee you access FBA and allow Amazon to take care of your customer reviews, complaints, returns, and exchanges.
The Choice is Yours: What Type of Seller Will You Be?
As we have discussed, there are pros and cons for each option available to Amazon sellers. The decision will come down to what is best for your business now. If you’re just starting you may have no other option than to start as a third-party seller, with the potential to be invited to Vendor Central. If you’ve been invited to Vendor Central, you do not have to accept right away. Depending on your business, you may need to if you have a large catalog of products and selling at a high volume.
If costs alone are you deciding factor it will be very easy for you to choose. Have a small budget? The answer may lie within Seller Central. If you have a larger budget, due to higher inventory sales, yet do not want to hire people to manage your transactions (which can be 30-60k USD a year), then first party selling may be better for you as you get more bang for your buck by handing control over to Amazon. Yet, if you’re’ trying to save money regardless, sell quickly, and generate revenue quickly, then third-party selling again may perform better for you.
The best way to decide is to think about your company long term and figure out what your goals are as a seller. If it is to stay small and sell what you can, third-party selling may be the best option. Yet if it is to grow your business with limited resources, Vendor Central may work better. There are even strategies for selling on both, but again that also comes with its pros and cons.
Not Sure If Seller or Vendor Central Is Right For Your E-commerce Business?
Still unsure about the best option for your business? Not sure what direction your business should be heading on Amazon? We help direct e-commerce business in the right direction on Amazon. To learn more about how OperationROI helps our clients sell more on Amazon with Vendor Central Management or Seller Central Management. Call us at 1-888-277-5429, or by filling out our contact form.Need Help Selling on Seller or Vendor Central? Contact Us Today!