Is Amazon Vendor Central Changing? What You Need to Know
The Amazon rumor mill is running at full speed. But more alarming than the usual rumblings of mergers, buy-outs, and robots delivering your orders is one big closer-to-reality story: Amazon is getting ready to eliminate first party sellers.
In early 2019, Amazon sent shockwaves throughout the eCommerce world when it briefly stopped issuing thousands of POs to vendors. The eCommerce giant told those brands to sign up for the brand registry, a move many linked to Amazon’s desire to eliminate vendors that aren’t profitable – especially those that sell low quality of counterfeit goods.
But right now, first party sellers and third party sellers on Amazon have completely different platforms for selling and advertising. The core difference? Fulfillment responsibility – who takes on the risks of inventory, pricing, customer service, and shipping – Amazon or Brands. Generally, Amazon absorbs the bulk of the effort for 1P sellers. Naturally, they want all their Vendors to become self-service.
Still struggling with what that means? Let’s lay it out…
|Amazon 1st Party Vendor Central||Amazon 3rd Party Seller Central||Impact|
|Inventory & Pricing||Amazon sets price and issues Purchase Orders for wholesale items based on sales, demand, and category considerations. Vendors fill purchase orders and must ensure products are available for purchase on Amazon.||Seller manages inventory and sets price.||There is potential for a significant impact on manufacturing, demand planning and inventory management for 1P vendors, which are traditionally not set up for real-time inventory.|
|Pricing & Fees||4-10% COOP fees for manufacturers||15% referral fee paid by seller to Amazon||Any fees paid to Amazon eats into revenue. Price point matters, especially with fulfillment costs in the mix.|
|Fulfillment||Amazon houses, packs and ships inventory. Manufacturers receive chargebacks for incorrect labels or packaging||Fulfilled By Amazon brands need to pay fees to store product and fulfill orders. Drop shipping requires brands to stock, pack, and ship themselves, avoiding fees but shouldering the costs themselves.||Most large brands don’t have drop-shipping capabilities due to volume issues. It can cost millions to adapt, but it will be worth it as online shopping adoption rates skyrocket.|
|Customer Service||Amazon is responsible for handling shipping or customer service issues.||All issues managed by individual sellers. They have the opportunity to communicate directly shoppers||The email capabilities on Seller Central are great for promotions and driving loyalty. There are penalties for not responding quickly to customer service issues (including getting removed from Amazon)|
|Advertising||Access to all Amazon Advertising Tools.||Access to Advertising tools is limited to Sponsored Product and Sponsored Brand ads.||Marketing products and brands can be a huge effort. Smart strategy, fluency in the platforms, and a team of content creators is a must-have for selling on Amazon.|
What Brands Can Do Right Now: Get both 1st Party and 3rd Party Access on Amazon
Sometimes brands have both 1st Party and 3rd Party accounts so they can provide customers with options and inventory that Amazon won’t purchase on the 1st Party side. Brands with their own 3rd Party presence can mitigate resellers denigrating their brand with bad customer experiences.
What does this all mean for mid-sized brands on Amazon in 2019?
Here’s the bottom line: Amazon is going to need more from your brand.
The eCommerce platform will increase their expectations for brands to managing fulfillment, marketing, and manufacturing – without help from Amazon. The burden to fulfill customer’s high shipping expectations will fall squarely on the brands – which could seriously eat into profits. If you don’t have help.
1Leigh, Andrea, Vendors snubbed by Amazon’s ordering system – it’s not me, it’s you, LinkedIn Blog, 2019 https://www.linkedin.com/pulse/vendors-snubbed-amazons-ordering-system-its-me-you-andrea-leigh/
2Milnes, Hilary, Amazon walks back vendor purge as sellers look to reduce dependence on the platform, Digiday Blog, 2019 https://digiday.com/retail/amazon-vendor-purge-sellers-reduce-dependence-platform/
3Soper, Spencer, Amazon Is Poised to Unleash a Long-Feared Purge of Small Suppliers, Bloomberg, 2019 https://www.bloomberg.com/news/articles/2019-05-28/amazon-is-poised-to-unleash-long-feared-purge-of-small-suppliers?srnd=premium