Seller Central vs Vendor Central | 3P vs 1P
Once you have made the decision to expand your online business and start selling on Amazon, your first question is probably this – how should I sell my products? Let us start by clarifying that Amazon offers businesses two ways to sell their products:
They can operate as a third-party “seller” (3P) and sell directly to consumers through the Amazon Marketplace
They can act as a “vendor” (1P) and sell their products directly to Amazon, which then sells them to consumers through Amazon Retail under the platform’s own brand name
Amazon Sellers and Vendors each have their own Amazon dashboard – Seller Central and Vendor Central, respectively – and have access to different pricing structures, marketing resources, fulfillment opportunities and more. Unsure of which selling platform is better for your online business? We have outlined the primary differences, opportunities and challenges of each below.
Comparing Pricing: Sellers Have the Advantage
Since Sellers operate as independent retailers within the Amazon Marketplace, they tend to enjoy greater control over their Amazon activities. This is certainly the case when it comes to pricing controls. Sellers are free to set whatever prices they want for their Amazon products. They can also alter the prices and their discretion without any input from Amazon. This allows Sellers to easily capitalize on high-demand periods, such as the holiday season, or offer sales whenever they want.
Amazon Vendors, on the other hand, are not allotted such control. You see, Amazon has promised consumers that it will match the prices advertised by other sellers. This applies to all products sold by Amazon Vendors, meaning that if a customer notifies Amazon that a Vendor’s product is available elsewhere online for a cheaper price, that Vendor can expect the price of their item to drop without any say in the matter.
This lack of control over pricing is a drawback for many Vendors, especially if you consider that Amazon has no minimum pricing policies. If a pricing war takes place and the price dips too low, a Vendor could potentially lose money.
Comparing Seller Support: Sellers Have the Advantage
Amazon Sellers have access to Seller Support which can help them address issues concerning inventory, payments and listings. Sellers can easily manage their Case Log through their Seller Central account.
While Vendor Central does have a case log and dedicated support teams, Vendors often find it difficult to contact support via the phone and are forced to rely solely on email and written cases. At the same time, Vendor Support is often much slower to fix problems and often takes several attempts to do so when compared to Seller Support.
Seller Support can also be frustrating at times and require multiple attempts before an issue is addressed, but there are a few distinct advantages:
Sellers can often find a way to fix a problem themselves by looking through the help files, reading through the seller forums or even googling the problem to find help elsewhere.
Sellers are able to call in for most issues and even mark issues as Urgent when they need to be addressed more quickly.
Sellers can escalate their issue higher up the chain of command by phone – possibly even to their Captive team, a US-based call center with access to additional tools, resources and experience to fix more complex issues.
That being said, Sellers have far greater responsibilities than Vendors when it comes to account management. While Vendors sell off their products wholesale and let Amazon handle the rest, Sellers are responsible for their own prices, promotions, fulfillment and customer service.
Sure Sellers enjoy greater control over their Amazon products. But with great control comes great responsibility. Sellers need Amazon Seller Support service to help handle all that comes with selling directly to consumers.
Comparing Costs: Sellers Have the Advantage
The cost of doing business is pretty straightforward for Amazon Sellers. Depending on if you are an individual or professional Seller, you will pay either an additional $1 per item sold or a flat $39.95 per month. Additionally, most categories are subject to a 15% referral fee. Sellers who choose to participate in FBA are also subject to additional fees.
Things become a little more complicated for Vendors. Since Amazon purchases products wholesale from Vendors, it tries to negotiate the lowest price possible to achieve a comfortable profit margin. And this is not a one-time negotiation. It is common for Amazon to come back to Vendors and try to negotiate for an even lower price as sales go up. Almost never will the wholesale price increase once an initial negotiation has been made. As a general rule of thumb, we recommend setting an initial price 10-20% higher than that of the price you are comfortable with. This way you give yourself a buffer in/when Amazon comes back to renegotiate in the future.
With these wholesale prices come Vendor Terms Fees, which are calculated based on the negotiated cost price and are recalculated annually. These fees include:
Base Accrual: AKA the money Amazon constantly invests to improve the customer experience and make a Vendor’s products easier for consumers to find.
Freight Allowance: The cost to get products from the Vendor’s warehouse to Amazon’s fulfillment centers.
Damage Allowance: The cost of insuring a Vendor’s products if/when they are damaged.
Payment Terms: The additional percentage Amazon will reward itself if it pays ahead of its due date.
While Sellers are usually subject to greater fees on a more regular basis, the costs of doing business as a Seller are much more consistent and easier to calculate than those of Vendors, giving Sellers yet another advantage over Vendors.
Comparing Profit Margins: Sellers Have the Advantage
Sellers earn retail margins on their sales to consumers while Vendors earn wholesale margins on their sales to Amazon. As we have discussed above, Sellers are able to set their own prices while Vendors are subject to Amazon price matching and wholesale price negotiations – giving Sellers greater control over their own profit margins.
Comparing Reporting: Sellers Have the Advantage
All else being equal, Seller Central provides Sellers with much more detailed sales and inventory reports than Vendor Central’s Retail Analytics Basic. But, if a Vendor decides to pay for Retail Analytics Premium – which can range anywhere from 10's to 100's of thousands of dollars – they can enjoy access to much more demographic and consumer information that is not available anywhere in Seller Central.
Comparing Marketing Opportunities: Vendors Have the Advantage
Up until this point, you have probably been thinking, “It seems like Sellers have all the advantages, are there any benefits to Vendor Central?” Of course, the answer is yes. In fact, one of the key advantages Vendors have over Sellers is in the marketing options available to them. Vendors have unique access to Product Display Ads, Vine Voice reviews and certain invite-only programs. These are marketing tools that are simply not available to Sellers.
That being said, all Sellers and Vendors have access to coupons, Sponsored Products, Promotions and Lightning Deals. All Vendors, as well as Sellers in Brand Registry, have additional access to Sponsored Brands (formerly Headline Search Ads), Brand Stores and enhanced listing content (called either Enhanced Brand Content in Seller Central or A+ in Vendor Central).
Comparing Inventory: Sellers Have the Advantage
It will come as no surprise to you that, like much else, Sellers have greater control over their inventory levels than Vendors do. Amazon is notorious for running out of Vendor stock – often without any notice of low inventory. On top of that, Amazon tends to cut down on inventory of specific ASINs over time, increasing the odds of a stockout.
On the flip side, Amazon Sellers can directly manage their inventory and fulfill orders themselves, or they can work with Amazon to do so through the FBA program. Either option gives Sellers much more control over their inventory than Vendors.
This is especially beneficial for Sellers who are bringing new products to market. Generally speaking, it is much faster for Sellers to launch new products than it is for Vendors since Sellers have the freedom to decide when to send inventory and usually do not require Amazon’s approval for any and all listing content.
Vendors, however, must wait for Amazon to issue a Purchase Order before they can start stocking. They are also required to have all listing content approved by their retail team. Sure, Amazon may offer Vendors greater opportunities to market these new products, as mentioned above, but that generally doesn't make up for the lack of control over inventory and availability of stock.
Comparing Payments: Sellers Have the Advantage
You do not have to look far to find instances of Amazon’s reluctance to compensate Vendors. Amazon terms (2% Net 30, Net 60, or Net 90), co-op fees, chargeback fees and disputes over the delivery of inventory are just a few examples of some of the headaches Vendors have to endure when trying to get their payments from Amazon. Sellers, on the other hand, get paid every 7 to 14 days – minus any FBA fees and commission.
Comparing Customer Service: Sellers Have the Advantage
As we mentioned above, Sellers are responsible for conducting their own customer service, while Amazon handles all customer support for Vendor products – including fraud issues. While there are certain benefits to having Amazon handle customer service, many Vendors are frustrated by the fact that they have no direct communication with customers when it comes to things like reviews and after-purchase support. Sure, Vendors are not "responsible" for customer service, which can lower support costs, but many Vendors would prefer to handle it themselves as it is a big part of their brand image and promise.
Vendor Central (1P): Summary of the Pros & Cons
Pros
- No monthly fees
- Possible greater sales due to the “sold by Amazon” endorsement
- Amazon handles order fulfillment and customer support – including fraud
- Access to certain marketing opportunities not available to Sellers
Cons
- Amazon controls the prices of Vendor products
- It can be difficult to get issues resolved using Vendor Support
- Amazon is constantly trying to renegotiate and lower the wholesale price
- Amazon often runs out of Vendor inventory without notice
- It is generally slower to bring new products to market since Vendors must wait for Amazon to issue a Purchase Order
Seller Central (3P): Summary of the Pros & Cons
Pros
- Sellers have complete control over their own prices and promotions
- Sellers have access to a variety of resources, through Seller Support and beyond, to help address account issues
- Seller fees are fairly consistent and easy to calculate
- Sellers can manage their inventory levels however they please
Cons
- Sellers are subject to monthly fees, referral fees and, in some cases, additional FBA fees if participating in the FBA program
- Sellers must manage their own fulfillment (or pay for FBA) and customer service
- Certain marketing tools are not available to Amazon Sellers
- Sellers must collect and remit sales tax in certain situations
Protection for Sellers: The Amazon Brand Registry
Vendor Central is available to Vendors by Amazon-invite only, meaning that many companies start out in Seller Central. This is perfectly fine for most brands since Seller Central seems to offer many advantages over Vendor Central. When getting started, though, some Sellers worry about their ability to protect their brand from fraud.
For those Sellers who manufacture or sell their own branded products and own the trademark, Amazon offers the Brand Registry program. This program allows qualifying Amazon Sellers to exercise greater influence and control over their product listings and help protect against infringement.
Vendors can also enroll in Brand Registry to access the same sort of intellectual property protection and reporting tools that Sellers can, such as finding and reporting copyright issues, reporting trademark issues and even reporting fraudulent sellers/counterfeit products through a test buy process. Being in Brand Registry as a Vendor, however, does not grant you access to additional marketing opportunities like it does for Sellers, as Vendors already have access to these tools.
In some cases, it may make sense for businesses to tap into both Vendor and Seller Central to leverage the unique benefits of each platform. Some manufacturers are adopting this hybrid approach by first using Seller Central to quickly list and sell the product, get traction and focus on getting reviews and providing fantastic customer service.
Once an item is well-established and mostly on auto-pilot, the manufacturer will transition the SKU over to Vendor Central where all they have to do is fulfill Purchase Orders (which should be frequent and in larger quantities since the ASIN has an established sales history), make occasional updates to the product listing and manage any advertising – which Amazon may do for you anyways if you’re a good seller.
If you are considering a hybrid approach, we never recommend selling the same ASIN in both programs, as Amazon is taking action to remove the Seller Central privileges of those who operate simultaneous Seller and Vendor Central accounts for the same product. To avoid this, always make a clean cutoff with Seller Central before transitioning to Vendor Central and make sure you are fully up-to-date on Amazon's policies on this matter.
