Ways to Sell on Amazon

Amazon is the leading marketplace for e-commerce, whether you’re a small business that’s just starting out or a medium-large business with an established presence. The “million dollar question” is – which way to sell on Amazon is the best? Which model will boost your eCommerce brand presence and help scale your business? Well, there is no single answer that fits all. It rather depends on the type of your products, your business goals, size, capacities, and preferences on how to operate.

In this article, we will go over three popular models for selling on Amazon in detail, so that you can decide on the best model for your brand.

1P (Vendor Central)

In the 1P (first-party) model, Amazon buys your products wholesale and sells to the customers on your behalf. This is mediated through Vendor Central, which is exclusive and invite-only. Your role is to provide wholesale supply for Amazon as the retailer, who takes care of everything from product listings to pricing and fulfillment cycles. This is a great choice if you don’t want to or don’t have the means to deal with logistics and order fulfillment on your own. What’s more, as a vendor, you will only pay a flat monthly fee and no sales-based commission.

Pros of 1P Sales

• Increased trust in customers with the “Sold by Amazon” label
• Access to Amazon Prime eligibility & two-day shipping
• Exclusive benefits (e.g. placement priority, advertising opportunities) and comprehensive analytics
• Optimized product listings, ASINs, tax management, and customer service
• Little to no inventory risks

Cons of 1P Sales

• Not having control over pricing (your products may be sold below your MAP)
• Less frequent payments (30, 60, or 90-day intervals) and lower profit margin
• Little to no control over inventory availability
• Amazon can override your listing and content strategies and make adjustments as it sees appropriate
• Exclusive, only accessible via invitation

3P (Seller Central)

The 3P or third-party selling model entails being an independent seller on the marketplace. Your relationship with Amazon is mediated via Seller Central. In the 3P arrangement, you have maximum control over your marketplace presence. However, with great power comes great responsibility. If you choose the 3P model to run your Amazon account, the product listings, pricing strategies, and fulfillment cycle will all be handled by you.

Pros of 3P Sales

• Having full control over pricing decisions & selling processes
• Generating retail margins determined by your MAP policies
• Better flow of cash with biweekly payments
• Flexibility and control over inventory, ability to run a multichannel sales strategy
• Stronger brand presence and diverse options to customize branded content and strategies

Cons of 3P Sales

• Having to create and constantly optimize listings
• Running marketing campaigns, Amazon ads, and more on your own
• Dealing with inventory management and fulfillment
• Being directly responsible for customer satisfaction
• Paying additional fees to Amazon (variable closing fees, referral fees, fulfillment and shipping fees, etc.)

Working with an Amazon Agency

Developing a successful selling strategy and scaling your business is not always easy, even when you get Amazon’s help with a 1P approach. Working with a well-versed Amazon agency can ease a lot of your burdens, and even help with switching between different models, syndication, and cross-border market expansion. Depending on your needs, you can access expert insights and technology to help with your marketing and content optimization efforts, or even partner up with a full-plate agency that will take care of logistics, inventory management, and order fulfillment.

Pros of Working with an Agency

• Well-informed strategic decisions by partnering with an expert, minimizing errors and risks
• Technical support & access to technology for data analysis and insights
• Not having to deal with customer issues or Amazon headaches by yourself
• Keeping up with Amazon policy changes and new features as they emerge
• Working with specialists to pinpoint problems and come up with tailored solutions

Cons of Working with an Agency

• Depending on external help for knowledge, metrics, and operational processes
• Having to set aside a budget for comprehensive, recurring support
• You may still have to deal with inventory management and order fulfillment
• You may have to be responsible for filing, collecting, and remitting taxes
• Running into a wrong match for your brand may waste your time and resources

We hope this rundown of different ways of selling on Amazon has given you an idea to kickstart or scale your eCommerce business. Each model has its own advantages and challenges. As we stated in the introduction, the key is to find the right fit for your business goals and structure. Think through how involved you want to be in different stages of marketing and order fulfillment, and how much of it you would be willing to entrust in the hands of experts. Depending on your budget and operational capacities, you will arrive at the right answer that will set your business up for success.