There are quite a lot of vendors who want to shift from being a vendor to a third party seller on Amazon. Being a vendor has its advantages. The lure of more control over the entire selling process versus having Amazon call all the shots, however, is a strong one. The attraction is pulling many towards the move to becoming a third party seller. It is always possible for a vendor to opt for a shift, and this shift does not always have to be a complete change. Vendors must think carefully about this decision, though. There is a process and a few considerations that can affect a brand’s decision to make the change.
Vendor Versus Third Party Seller
Vendors sell to Amazon and not to customers. Amazon will decide how much of each product they want to sell. Amazon will also decide how much they want certain products to sell for. This will affect the price offered for your inventory, wholesale. You can appeal for better numbers before signing your agreement with the platform, or by going through a contract renegotiation. Ultimately, however, Amazon holds the power in this relationship and will accept or reject your proposed terms. This is the extent of a vendor’s control over products. Once the wholesale exchange has been made, the products belong to Amazon and Amazon has complete control over them, marked as sold by Amazon and shipped by Amazon.
Third party sellers on Amazon maintain ownership over the products that they sell on the platform. They therefore have control of all aspects of the process, apart from the platform regulations that they must comply with. Being a seller is of course a lot more responsibility, and so the decision to switch over must not be taken lightly. Sellers are responsible for all aspects of the business, from inventory that doesn’t sell to marketing to customer complaints.
#1 – Inventory
The Ships and Sold By Amazon.com label can be an advantage for vendors. Online shoppers have a high level of trust in the online retail giant, and will continue to buy from Amazon because the company is built on a foundation of excellent customer care. As more customers buy the products that you sell to Amazon, your relationship with the platform as a vendor will solidify, providing you with a steady source of income.
Third party sellers have control over how much product they want to sell on Amazon. They are selling directly to Amazon customers and are at liberty to increase or decrease inventory at will. They are also free to add new products to offer on Amazon, provided of course that these products are permitted on the platform and meet Amazon’s high standards. This freedom is a major factor for the growth of any Amazon business.
Vendors do not have a very good chance of pushing new products through without allowing Amazon the chance to sell a sample of these products first. Launching a new product via Vendor Central is a tricky business since Amazon can end up giving you a low price offering for a product that you know will become a big hit. Again, you can try to renegotiate the terms of your agreement with Amazon after they have realized the product’s potential, but there is no guarantee that Amazon will share a piece of the pie with you.
As a third party seller, you can launch your new products as you wish, with whatever marketing methods you deem fit, and price and reprice them as you like in line with your launch campaign and as the product gains popularity. Sellers can also take advantage of advertising tools that provide them with the data that they need to encourage conversions and gain recognition from Amazon for better rankings on the platform. Third party sellers now have the whole pie, and can entice Amazon to buy the product or continue selling it exclusively.
One distinct advantage of deciding to branch out into third party selling is taking advantage of stockouts. It often happens that Amazon will make a purchase order for a product from a vendor but then sell out before another order can be made. As a vendor-seller, you can take advantage of these instances by having the out of stock product available when Amazon runs out.
It is important to note here that third party sellers are often unable to compete with Amazon pricing. This means that Amazon will usually win out every time where pricing alone is concerned. It would not be a good business decision to rely solely on Amazon stockouts for certain products. Sellers can, however, provide additional value to customers in various ways to win back and maintain a fair share of the customer base on top of the occasional stockout.
#2 – Pricing and Promotions
Vendors have no control over how much Amazon will sell the products that they have wholesaled to the platform. They also have no control over how these products will be marketed and promoted.
Sellers have more control over how they price their products. Successful third party sellers must certainly consider the pricing of the competition before they list exorbitant rates. At the end of the day, however, is a seller has a truly unique product with a lot of value, the price can be as high as they want it to be – as high as the market can tolerate. Sellers also have complete control over any promotions that they want to offer to customers, and how often they want to do this. There are more Amazon regulations regarding promotions, such as the recent ban on requesting reviews in exchange for free products or discounts. Third party sellers are free, however, to promote their products by all available means on Amazon, and on other platforms as well.
#3 – Listing
Amazon knows best how to optimize listings to rank on their own platform, and products sold by Amazon are certainly at the top of the charts. Vendors can ride this wave as the Amazon products become popular and demand increases. The contents of all listings are created by Amazon based on the information requested from vendors. Vendors have no control over what Amazon decides to out there, though.
Sellers have complete control over the information that they choose to include on their listings, again, as long as it complies with Amazon’s terms. Sellers certainly know much more about their products than Amazon does, and this allows sellers to better communicate the products’ value to customers. This is another distinct advantage of choosing to do a partial switch from vendor to third party seller.
#4 – Customers
Vendors have no contact with the end customers. Amazon takes care of the entire process from marketing and shipping the products to providing customer service.
Sellers can choose how much contact they wish to have with their customers. They must maintain a high customer satisfaction rating to remain competitive on Amazon, of course, but they choose how they communicate with their customers and how often. This open line of communication provides third party sellers with the distinct advantage of being in control of their relationship with customers. The quality, tone and depth of this relationship is important to the growth of any business, but more so on a platform like Amazon that puts so much emphasis on customer loyalty. Sellers are able to answer product inquiries more precisely with their in-depth knowledge of their products, can develop a more defined brand personality that speaks directly to customers, and deal directly with all concerns that affect their product and brand.
As a last note, although any vendor can technically switch over to third party selling, Amazon does prevent some vendors from moving over to selling. Amazon has a vested interest in maintaining their established vendor relationships. Having a good vendor relationship with Amazon is of course also advantageous. Amazon sees these switches not as positive expansions, however, but as business being taken away from them. If Amazon prefers to keep you as a vendor exclusively, they have the power to prevent you from entering the seller side, whether the switch is partial or full.
If you are blocked from becoming a third party seller, there is a workaround. If you are able to create a separate business with all new banking and tax information, you still have a chance to enter the third party side. This is not the ideal way to accomplish a switch, but it may be the best option that you have if Amazon votes against your application.