Brands on Amazon, whether a vendor or a seller, are always in pursuit of how best to control their presence in the marketplace. The battle to chalk out the roadmap to excellence to complement their other routes to market is always on. This is when the debate for the fulfillment options also comes into the picture- deciding between Vendor Central or Seller Central.
A ‘Vendor central’ might always seem to be the go-to option for established brands allowing them to sell in bulk to Amazon, however, the argument revolves around if they are to take charge of the brand’s presence on the platform and thus profitability by adapting as a third-party seller route or popularly known as ‘Seller Central’. But both the models indeed come with their strategic benefits as well as equally relevant shortcomings & it’s, therefore, crucial to have a thorough analysis of both sides before embarking on your journey on Amazon as a brand.
Amazon empowers the sellers by providing multiple assistance models under one umbrella of Amazon fulfillment options, including allowing the seller to choose between Vendor Central or Seller Central.
The significant difference between Amazon Vendor Central & Seller Central is the point of contact through which the product is being sold to the amazon shopper. In Vendor Central, Amazon buys your products from the seller first before reselling them to the shoppers, while Seller Central enables the brand to sell directly to customers, through the Amazon marketplace.
Let’s dive deeper into these 2 fulfillment models.
Amazon as a marketplace offers to choose between individual & professional seller accounts. Although it requires the individual seller to obtain a monthly subscription, the majority of sellers opt for professional seller accounts offering a wide range of analytics tools, preferential marketing treatment, and a range of other features compared to the individual account.
As a third-party seller, there are two fulfillment options for orders received at the Amazon marketplace.
Cost of fulfillment
Sometimes the fulfillment and/or shipping costs can limit the ability to sell lower-priced items via Amazon. The minimum charge for non-media FBA items is currently averaged at $2.41, excluding the commission charged by Amazon. Many times, the fulfillment and shipping costs can limit the ability to sell lower-priced items via Amazon depending on the value density of the products being sold.
To be able to remain profitable in a competitive landscape on the Amazon marketplace amongst hundreds of other brands, a seller must manage the catalog effectively by regularly updating the product description, utilizing various promotional alternatives, and other avenues complementing the consumer behavior. Lack of knowledge and expertise in this domain might turn out to be detrimental to the business growth of the seller
The referral fee charged on the product sold on Amazon through a seller central account is a percent of the product’s sales price, excluding taxes. Referral fees vary by product category ranging between 5% -20% of the product sales price, however, can be of the magnitude of 30%- 45% in case of higher variables often linked to Amazon products or services, including Amazon device accessories.
Often sellers tend to go for Seller Central initially and with efforts over time they generate demand for their products to be able to qualify for the Vendor Central program. Here, for a seller operating through Vendor Central, the phrase “ships from and sold by Amazon” appears on the order page.
Selling your products as a first-party seller impacts the customer sentiment in a positive way and ultimately prospers loyalty. Placing an order through a verified first-party seller assures and gives confidence to the customers, ultimately boosting their confidence in the brand.
Amazon Marketing Services (AMS) empowers brands with a variety of tools for showcasing products in front of shoppers, allowing vendors to capitalize on demand generation through keyword-targeted ad campaigns to increase traffic to the product page. Essentially both sellers, as well as vendors, have access to AMS, however, being a 1P Vendor gives the brand a competitive edge over other sellers with options for running ad campaigns with AMS as managing advertising campaigns and strategically typing keywords into your product page is crucial for success.
Simplified business model
By all means, a vendor Central is a much more robust and easier to operate module than a Seller Central. For a vendor, the trigger is on fulfillment of orders apart from invoicing & preventing chargebacks, while a seller with FBA is solely responsible for sales reconciliation, lost inventory, tax liabilities, etc among other hassles.
Enhanced content and marketing tools
Amazon allows participation in promotional programs like Subscribe & Save (An amazon-based subscription service) and Amazon Vine, which sends your products to top reviewers before they qualify on the Amazon storefront. User-generated content is a crucial factor in building a loyal consumer base and generating revenue for the brand, as it prioritizes the shopper experience related to product quality.
One of the biggest drawbacks of vendor central is the low possibility of adherence to the Minimum Advertised Pricing (MAP) guidelines by Amazon. As the final power to adjust the retail prices at any time based on internal algorithms, rests with Amazon, it can provide incremental revenue to the vendor in case Amazon lowers its product margins; the inverse of this could also be equally true.
Amazon requires its vendors to maintain its in-stock requirements all the time that has very specific and rigid guidelines to fulfill the estimated purchase orders in full & avoid sales loss. Failing to meet these guidelines means the Vendors might be penalized for not being able to meet the service standards & thus charged for a part of its profits as a result
Low channel diversification
The brands/sellers for whom Amazon is the single largest buyer for many brands/sellers, run a risk of being dependent on a single retailer completely & could be prohibitive for business growth in the long term. Established sellers would prefer having multiple sales channels with the larger share attributed to the in-house eCommerce storefront.
A well-branded product is the deciding factor when it comes to winning the Buy-box for sellers if leveraged and managed properly. Despite that, sellers let go of their control over not only brand communication once registered for Vendor Central but also product representation in the marketplace & the privilege to customize the buyer experience.
There are many differences between a vendor and a seller on Amazon, and while the end goal may be the same, they differ greatly in their approach. Perhaps there is much more to this debate than we realize. The only thing we do know for sure is that people will continue to buy products from Amazon and that you should take advantage of all opportunities presented to you!
Still not sure if Amazon Seller or Amazon Vendor is right for your business? Reach out to our team of Amazon Experts to learn more about the pros and cons.