An Amazon hybrid business model allows retailers two options to sell on the Amazon platform. The first one is about selling directly to Amazon through Vendor Central – commonly known as 1P. Brands can also sell directly to customers through Amazon Seller Central – also known as 3P.
We frequently receive inquiries from businesses asking which Amazon platform is the right one for them. But lately, current Amazon Vendors are asking us more than ever about getting started selling on Amazon Seller Central after Amazon cut off purchase orders to thousands of vendors.
Many Amazon Vendors were scrambling in the immediate aftermath of the purchase order shut-off. All sorts of conspiracy theories started floating around like Amazon One Vendor during the panic, and many business owners are frightened by how instantly Amazon can impact their business.
Since then, purchase orders have slowly started coming back. Besides, Amazon has made it clear that they will only be making purchase orders from brand registered vendors. That has eased the minds of many Amazon Vendors – for now. It is important to recognize the volatility of Amazon’s decisions, which may have the potential to wipe-out part of your eCommerce sales channel.
We recognized that Amazon was moving away from Vendor Central a long time ago and that’s why we believe utilizing an Amazon hybrid model is the best way for Amazon vendors to safely move forward.
Our belief is that starting with a hybrid Vendor Central and Seller Central strategy is a good way for current vendors to hedge their dependency on Amazon or slowly start to transition to Amazon Seller Central.
Vendor Central Advantages
Vendor Central still has a lot of advantages for businesses. We don’t recommend abandoning the platform entirely. Selling 1P gives shoppers increased confidence, provides additional advertising opportunities and simplifies management. These features will become incredibly helpful in the Amazon hybrid model.
Your products will automatically be slapped with the “Shipped and Sold by Amazon” label when you are an Amazon vendor. This provides much more confidence to consumers that your product is legitimate. The amount of counterfeit products on Amazon is becoming more and more visible to the general public. Consumers want to trust that they are buying a real product now more than ever.
Selling 1P on Amazon will also give you access to Amazon DSP which was formerly known as Amazon Marketing Services. Some of the old features of Amazon Marketing Services such as headline search ads have been rolled out in Seller Central. However, other advertising features like Display and Video ads are only available through Amazon DSP.
Vendor Central is much more hands-off than Seller Central. Amazon handles all customer service and individual order fulfillment. You really just need to handle purchase order fulfillment and advertising on an on-going basis. Combining these 3 features with the advantages of Seller Central will help your business develop a great hybrid Vendor Central and Seller Central strategy.
Seller Central Advantages
Selling 3P gives your business access to the Amazon Seller Central platform. This hub offers a more direct control of your products versus just shipping them 1P to Amazon. 3P sellers have acces to better quality analytics and simplified product control. Such perks make this platform attractive to businesses that are looking to be more involved with their Amazon sales.
One of our favorite features about Seller Central is that the marketing features are much more simplified and intuitive than in Vendor Central. Utilizing the marketing features such as promotions and coupons are a powerful way to generate additional sales.
Seller Central provides some incredibly high-quality analytics for no-cost to 3P sellers. The data is much easier to organize and utilize than on Vendor Central, and does not come with the high costs of Amazon Retail Analytics Premium. Information such as sessions, page views and conversion rates are incredibly helpful when it comes to optimizing content and images on product listings. The wide-variety of different reports on Seller Central can even be overwhelming to truly locate the information you are searching for.
Being a Third-Party Seller also gives you much better control of listing content, product pricing and inventory management. It is easy to quickly make updates on Seller Central to product features or images, update pricing or change fulfillment options. Inventory forecasting and management is much more in your control which can be a challenge for some businesses, but working with a inventory management software or an agency like AMZ Advisers can help you manage the inventory planning and forecasting.
Challenges of a Hybrid Amazon Approach
The advantages of both of the Amazon Vendor Central and Seller Central platform can be combined to create a powerful Amazon business model. It’ll allow you to protect your eCommerce channel and hedge against Amazon making an adverse decision for your business.
However, there are some challenges that you will need to overcome with using a hybrid Vendor Central and Seller Central strategy.
- Learning and managing new platform is a challenge within itself, and it requires a more hands-on approach. It also creates additional liabilities for your business, so it’s important to consider every aspect when going down the hybrid Amazon selling route.
- Selling 3P is a much different user experience than being an Amazon vendor. It takes time to learn the navigation of the Seller Central and where you need to go to find what you are looking for. Seller Central is particularly much more in-depth for inventory management and reporting, and also uses terms that you may not have heard before on the Vendor Central side.
- Along with a different layout comes much more time required to manage your account. Selling 3P on Amazon means that you now need to manage your own inventory, prepare your own forecasts, and handle customer service inquires among other things.
- It will take time or help to understand how to utilize different features strategically to grow your Amazon sales. There are some different marketing tools in Seller Central than Vendor Central – and even some difference between tools that are on both platforms like lightning deals and coupons.
Managing your own content in the hybrid Amazon model can also be trickier. Typically, content that is submitted through Vendor Central is given priority over content submitted through Seller Central. Listing a product in both accounts means you need to submit any listing changes through Vendor Central even though you may no longer be selling that specific product on that platform anymore. Failing to do so well just create frustration when you reach out to Seller Support and they tell you they can’t make the changes because of Amazon retail contributions – even though you are more than likely the business who made those contributions.
Finally, hybrid selling on Amazon can create additional liabilities for your business. selling 3P on Amazon means that you are responsible for collecting and remitting sales tax on your products. This can be difficult and we recommend that you reach out to your accountant to better understand what your liabilities can be under the Amazon hybrid model.
Now that you can better understand the advantages of each platform and the challenges of using them both, let’s see how your business can benefit from a hybrid Vendor Central and Seller Central strategy.
Taking Advantage of the Hybrid Vendor Central and Seller Central Strategy
The hybrid Amazon model has certain techniques you can use to optimize, manage and track your products’ performances on the Amazon platform. Both platforms serve a purpose for growing your overall Amazon sales and also protect you against any unannounced changes that Amazon makes to their processes.
One way you can use both platforms for hybrid selling on Amazon is to launch new products in your Vendor Central account. Getting initial purchase orders on Vendor Central can be an extremely frustrating process. The Amazon algorithm is looking for sales history on your product, but your product can’t get any sales because Amazon does not have any inventory.
The Amazon hybrid model works great here because you can list the product on your Seller Central account to try to drive the initial sales that you need. Create a great looking and SEO optimized listing on Vendor Central and then add that product to your Seller Central account. We then would recommend sending some inventory into FBA, and using the marketing features in Seller Central to get the product moving. After your product has enough sales history Amazon should start sending purchase orders to your Vendor Central account for the product.
As a vendor you have almost no control of where Amazon initially lists your product. You put your cost into the pricing template and can even suggest a MSRP, but that does not guarantee that Amazon will adhere to it. Pricing has a direct effect on how your product performs. High pricing can kill your conversion rates, which creates a negative feedback loop for your product performance. The hybrid Amazon model can help you here.
Amazon will always try to compete for the buy box when they are a seller of a product. You can use this to your advantage by manipulating your pricing on Seller Central. If you are selling at a lower price than Amazon, they will adjust their pricing downward to win the buy box back from you. Utilizing this technique, you can essentially reverse the feedback loop we described above – leading to increased conversions, relevancy, appearance in search results and traffic. Adjusting your price upwards on Seller Central after Amazon has lowered their pricing does not necessarily mean that they will likewise adjust upwards. They may leave their price the same or gradually make increases overtime.
The inventorying ordering algorithm that Amazon uses on the 1P side is not the most accurate. If you’ve ever checked the weekly forecasted quantities against what they actually order you would be quite surprised to see the differences. This can cause stock-out issues for brands that are growing quickly on the Amazon platform.
One fix for this is to utilize the hybrid Vendor Central and Seller Central strategy by adding your Vendor Central products to Seller Central and then stocking inventory at Amazon Fulfillment Centers. In the event that your Vendor Central offer runs out of inventory, your Seller Central listings will be able to handle the demand until Amazon can place more purchase orders.
Marketing & Advertising
The Vendor Central platform gives you access to a powerful advertising platform in Amazon DSP. And the interesting thing is that you can actually use this platform to market any product on Amazon – including products that are not yours. This allows you to use the Seller Central platform to generate your sales and utilize advertising features like display ads and video ads that are only available to Amazon vendors.
Hybrid selling on Amazon also allows you to build the demand when you are launching a new product on Vendor Central. You can utilize coupons and promotions in Seller Central to increase your conversion rates, average order units and build your sales history. You can also use other promotion types like giveaways to boost initial traffic to your Amazon listings.
Optimization and Split Testing
Selling 3P on Amazon has one more unique feature that you can utilize to optimize and test new listing content. Vendor Central has a wide variety of reports and data points available, but two of the most important metrics are missing. Vendor Central does not allow you to see your listings traffic numbers or conversion rates which are key when it comes to measuring your performance on Amazon. The Amazon hybrid model can help you capture this data and take advantage of it.
You can list your products in Amazon Seller Central and utilize the business reports section to see listing traffic. Amazon aggregates the total listing traffic for all sellers on a specific product which can allow you to see exactly how many people are making it to your listing. Because Amazon always tries to win the buy box you can assume that any sales on that listing can be attributed to your Vendor Central account, and then estimate a conversion rate based on the number of sessions visible on Seller Central.
You can then take that data and use it to split test how changing images, product titles or details effect your traffic and conversion rates. The hybrid Amazon Vendor Central and Seller Central strategy can allow you to systematically improve your Amazon Vendor Central account and lead to long-term growth on the Amazon platform.
It is nearly impossible to know exactly what Amazon is testing with each change it makes on the platform. And likewise, it is impossible to know exactly what the future of Vendor Central will be. What we have seen over the past few years suggest that Amazon is slowly moving away from the Vendor Central platform and pushing more people to the Seller Central platform. We believe that Amazon will continue to maintain some strategic vendor relationships for essential products moving forward, but that they will continue to phase more vendors over to Seller Central. Utilizing a hybrid Amazon Vendor Central and Seller Central strategy going forward is one way to protect your business no matter what they decide.
The features on both platforms provide powerful tools for your business to continually grow on the Amazon platform. Implementing the hybrid Vendor Central and Seller Central strategy can be a challenge for many businesses to implement on their own and utilizing an agency or making a full-time hire can help you begin the transition successfully. The techniques discussed here will help you get the most out of the strategy and have hopefully helped you realize the value in utilizing each for your business today. Continuing with a hybrid Amazon model will help protect and grow your business against any obstacle you face on Amazon.
Contact us today if you need help implementing a hybrid Amazon Strategy for your account