By Jo Phan & Amelia Coleby | Senior Consultants

The Amazon Vendor vs Seller debate is hotting up as brands begin to question how best to control their presence on the marketplace, and ensure the channel complements their other routes to market.

The two core models for selling - Amazon Vendor or Seller – each have pros and cons. It is also possible to adopt a hybrid model, and we’ll talk more about this alongside two of our clients – Bayer and Pernod-Ricard – at IGD Live on the afternoon of the 6th November in London.

While selling wholesale to Amazon through Vendor Central can seem like the simplest option for large manufacturers, they are questioning whether they should retain more control over their brand positioning and profitability by acting as a third-party seller on the marketplace using Seller Central. We look at the Amazon Vendor vs Seller argument and examine the pros and cons of each model.

Amazon Vendor vs Seller: the key considerations

With Vendor Central, Amazon buys product from a brand and controls the pricing to the end customer; though the brand normally still controls the content of the product listing. With Seller Central the brand retains ownership of its product, and therefore controls price, product selection and its product listings. Orders can still be fulfilled by Amazon (for Prime delivery) if the seller chooses to fulfil that way rather than directly to the end customer.

Brand control – Using Amazon Vendor a brand automatically controls the content of listings, including imagery, copy and rich content. For Amazon Seller, registered trademark owners can still take control through Brand Registry, and reduce the likelihood of other third-party sellers adding incorrect content to product listings. For both models, vigilance is required as third party sellers can hijack listings, resulting in unhappy customers and negative reviews on your products.

Margins and pricing – Amazon aims for price competitiveness with the wider market, and its pricing algorithm for the Vendor model matches the prices of third-party sellers and external competitors. Brands often see prices eroded over time in a downward price-matching spiral that can be driven by rogue sellers and even pricing errors by other sellers. 

While you control your prices and range in the Seller model, it’s advisable to remain competitive as Amazon can hide the ‘Buy Now’ button on products if it feels the price is too high. This is called suppressing the Buy Box.

Inventory and range control – With Vendor, common frustrations brands face include a limited range being stocked, and products going out of stock during peak trade periods. With the Seller model brands can list and sell any product variant – including bundles - without limitation from Amazon. However, it takes time to build up a sales history and win the Buy Box, so sales growth may be slower.

Logistics  – Products sold directly by Amazon are fulfilled by Amazon, and Sellers can use this service too. Inventory deliveries to Amazon must be made in relatively small amounts, in precise time windows and products must arrive in a state to be shipped to customers. Amazon charges for deliveries outside the window, incorrect packaging and additional pick and pack time.

For Sellers who wish to ship straight to the end customer, a costly fulfilment operation is necessary that brands will likely need to set up, unless they have an existing online direct-to-consumer business.

Hidden and additional costs - Accruals and deductions to cover returns, shipping (as mentioned above), marketing and analytics come as standard in Vendor contracts. They can be high, and we’ve seen brands who cannot make selling to Amazon profitable due to these additional costs.

Brands using Vendor Central are increasingly being asked to make commitments on media spend too, to give their products visibility in Amazon search results.

Sellers can also suffer from unexpected fulfilment costs and charges if they use FBA. Amazon’s Profitability Calculator can help with this.

Communications and insight – Businesses often complain about communication issues with Amazon – and it’s a problem that affects both Vendor and Seller accounts. Be prepared for far less communication than you would expect from a buyer within a retail partner, until you are selling very significant volumes through the marketplace. This can be frustrating when you have problems such as incorrect listings, out-of-stock items or technical difficulties with the platform.

Amazon provides limited data to Sellers and Vendors. Brands must purchase additional third-party data tools that generate insights to optimise activity on the platform.

An alternative to Amazon Vendor or Seller

The Vendor model has traditionally been considered the easiest route for large consumer brands to sell on Amazon. But as they begin to suffer from some of the downsides of the loss of control this brings, the Vendor vs Seller question has been raised.

Practicology’s parent company Pattern offers an alternative to Amazon Vendor or the brand acting directly as the Seller. Pattern is one of the largest third-party Amazon sellers in the world, acting as the authorised Seller for more than 60 brands.

We buy the stock on a wholesale basis and take care of the operational side of selling. Our expertise in producing product content, Amazon marketing and logistics means we win the Buy Box more quickly, while reducing discounting and protecting our partners’ brands. We also support brands who want to implement Selective Distribution, to control who is selling their brand online in Europe.

Whether you want our support to optimise your Amazon presence, or are interested in us becoming the authorised Amazon Seller for your brand anywhere in the world, contact us today at hello@practicology.com 
 

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