In 2022, Amazon receives more than 200 million visits per month from customers around the globe. Amazon is set up so businesses can offer customers a range of items across hundreds of categories, delivering a vast selection of low-priced products quickly. Amazon vendors and Amazon sellers make up Amazon’s behemoth business and drive the eCommerce shopping experience, from kitchen appliances to sporting goods and beauty items. According to Amazon’s published results, third-party sellers generate 50% of sales on Amazon. In the second quarter of 2021, 56 percent of paid units were sold by third-party sellers.
With so much on the table (or, rather, in the shopping basket), comes confusion and questions. Should businesses become a vendor or a seller on Amazon? What's the difference between Amazon vendors and sellers? In 2022, is it better to operate on one platform versus the other?
Unfortunately, there is not a simple answer, as it depends on the particulars of your business, including the product range, margins, inventory levels, logistics, marketing capabilities, and goals for your business both long-term and short-term.
Amazon sellers vs Amazon vendors
Sellers and vendors on Amazon both use a dashboard and toolkit of resources provided by Amazon to sell their items. What is the difference between sellers and vendors on Amazon? Sellers are third-party partners and vendors are first-party partners. Vendors, using Vendor Central, sell products to Amazon’s retail side to be sold by Amazon to end consumers, taking on the role of wholesalers. Sellers, using Seller Central, sell products directly to consumers on Amazon under their own business name and using Amazon as a marketplace.
Sellers get to manage their own inventory, orders, customer service and set their own retail prices. Through Seller Central, sellers have the option to enroll in the Fulfillment by Amazon (FBA) program, which allows Amazon to also handle fulfillment for a business. This grants a brand to access Amazon's vast network of logistics, including fast delivery, customer service, and returns. With a 1P vendor relationship, Amazon manages the orders, inventory, customer service and sets the retail prices.
Pros of being an Amazon vendor
The biggest and most obvious benefit of being an Amazon vendor is that 1p products are “sold by Amazon” on the website. This instills a sense of confidence on the consumer’s part. This also gives all vendors' products Prime shipping and customer service, plus customers can usually be sure they're getting the lowest price when it's an item sold by Amazon. Vendors typically sell high volumes of product on Amazon, so large orders and logistics can be taken care of quickly and almost automatically through Vendor Central.
Historically, more marketing perks were available to Amazon vendors than on the seller side (though these often came with steep fees). Vendors also used to have more depth when it came to reports and analytics, but this is not the case anymore. Vendors often work with vendor managers at Amazon to agree to terms and work with the business. If you have a good vendor manager, this personal relationship can be helpful.
Vendors that are brand owners can register for the Brand Registry and get access to A+ Content, Brand Stores, Amazon Vine, Amazon Posts, Manage Your Experiments, and more. Other programs, like Amazon Transparency, can help vendors with large catalogues to serialize and label their products to reduce IP infringement.
Cons of being an Amazon vendor
Vendor Central is invite-only, with longer (more traditional) payment terms and sales processes. While this may work better for certain businesses with established logistics or certain products and categories, it can be a shock for businesses moving over from a seller relationship. Typical payment terms can take 60 to 90 days and this can put a strain on cash flow for businesses.
The biggest con of the Amazon vendor relationship is the lack of control. Details are negotiated through a contract with Amazon. Vendors have no control over pricing, with Amazon setting the inventory quantity and choosing how much they want of each assortment. In order to stay competitive, vendors may see their prices on Amazon fluctuate (even outside of MAP) to win the Buy Box. Amazon vendors also experience fees in terms of chargebacks for a range of things, varying from compliance issues to overstocks.
While some vendors are assigned to an internal partner at Amazon called a vendor manager, this relationship isn't as beneficial as it once was. Vendor managers move around and are spread thinly across many accounts, so there's no guarantee of what service level you'll get. This can also vary from country to country. Just because you have a vendor manager in the US, doesn't mean you'll have a productive relationship with one in Germany, for example.
Because vendors may not have a vendor manager, the level of support can vary widely. There also is not a lot of help on the web for vendors like there is for the millions of sellers around the globe. Vendor Society by eCommerce Nurse exists for this very reason.
Pros of being an Amazon seller
The most obvious perk of being a seller on Amazon is a greater degree of control for your brand. Sellers set their own prices and listing details and can fulfill orders themselves or use FBA. The payouts are also much faster than Vendor Central. Amazon pays sellers every two weeks.
Like Vendor Central, Seller Central also offers owners the opportunity to use the Brand Registry to influence and protect their intellectual property and brand. Registered brands’ content will take precedence over other content on a product’s detail page, making it a reliable way to ensure a good customer experience for your products. Enrolling in the Brand Registry also unlocks additional selling tools for sellers and brand owners. In Seller Central A+ Content, sellers get two extra module spaces compared to vendors.
Anyone can sign up to be an Amazon seller and use Seller Central, with referral fees and monthly fees laid out clearly. Choose an Individual or Professional selling account and list items quickly and easily without jumping through hoops.
Cons of being an Amazon seller
Sellers only get paid when their items sell. They also may get dinged with long-term storage fees if items are not sold fast enough. But sellers also have no negotiating power with Amazon. Items are charged a fee based on dimensions, so depending on the item and category, it can be expensive to utilise Amazon FBA. If sellers are not using FBA, the seller business is much more hands-on, as sellers will have to be involved with fulling orders, customer contacts, returns, and other issues. In general, Amazon Seller Central is a lot more work. It involves monitoring inventory levels, daily checks, dealing with pricing, promotions, account issues, and more.
When it comes to help, Seller Support is available 24/7 on Amazon to sellers using self-service tickets. The quality of the help is patchy though, with conflicting information and unclear policies. Sellers can have listings suspended or taken down for a number of reasons, and getting them reinstated can be difficult. When launching as a new seller on Amazon, it's hard to generate reviews and get traction amidst so much competition.
Why not both? A hybrid approach
Depending on your business needs and administrative capabilities, the choice to become a vendor when invited may be tempting but also worrisome. Perhaps your products are doing well under your Seller Central account, but you are unsure whether you can manage the margins or the fulfilment obligations for all of your products. It is possible to take a hybrid approach, breaking down the product assortment (if you have a wide range) into categories that can support each platform and maximize your results. You can also transition products slowly and monitor results. This also gives you more access to different promotion types available to sellers and vendors.
While you cannot usually have more than one seller account, it's not violating policy to have a Seller Central and Vendor Central account. This can actually help you take advantage of both platforms and the unique setups required to scale up your business as it grows. A word of caution on the hybrid approach: Multiple accounts (especially with one tied to the Brand Registry) can often create issues with what content takes precedence. Manage this carefully and ensure you are always on top of permissions so that your desired content always takes precedence for your catalogue.
How to choose between Seller Central and Vendor Central
From this brief overview touching on the basics, there are clearly pros and cons to both Vendor Central and Seller Central. It is important for businesses to analyse specifics to their product ranges, business goals, and administrative capabilities (as both require a hands-on approach to some extent to be successful). When deciding what's right for your brand, it's important to look at your business holistically. For example:
- Seller Central may be best if you cannot deal with long payment terms or if your margin is too tight to deal with Amazon vendor pricing terms.
- Because both platforms offer Brand Registry options, Vendor Central might not be as tempting as it once was for brands. A+ Content, Brand Stores, and Amazon Advertising will factor equally for both sellers and vendors these days.
- Some businesses selling heavy or large products might be more profitable selling on Vendor Central.
- Conversely, low-price items might incur too much in fees and be less profitable sold via FBA.
- If you sell to a variety of stores (online or brick and mortar) the way Amazon deals with pricing on Vendor Central may upset your other retailers.
As you can see, there are many business cases for Seller Central versus Vendor Central and vice versa. There is unfortunately not a one-size-fits-all answer, and the answer for your business could very well change as your business grows and evolves. If you are a current vendor, please join us on Vendor Society for free community and resources. If you are questioning your Amazon business and looking for strategy, advertising, or marketing help, reach out to eCommerce Nurse for support.
