Why it pays for Vendors to start selling on Amazon Seller Central as well

TABLE OF CONTENTS

What are the differences between an Amazon Vendor and Seller account?

How does Amazon Vendor work and what are its advantages?

What are the strengths of selling on Seller Central?

How to manage the transition from Vendor to Seller?

Conclusions

What are the differences between an Amazon Vendor and Seller account?

First of all, let’s try to understand the main characteristics of the two types of accounts. Although they operate on the same marketplace and share several similarities, Vendor and Seller differ in several aspects:

• Business Model: Sellers sell directly to consumers, with a referral fee on the sale (usually 15.45%) retained by the marketplace, while Vendors sell their products to Amazon as suppliers in the most traditional sense of the term;

• Catalog: Sellers can list all the items they wish, while Vendors generally have to wait for a purchase order from Amazon or attempt to enroll in programs like Born to Run;

• Logistics: Sellers can choose to manage shipping independently or through Amazon logistics (FBA program), while Vendors entrust the entire process to Amazon;

• Registration: Any company can sign up for the Seller program (ideally with a gold partner agency), while the Vendor program works by invitation only from the marketplace;

• Pricing: Sellers set the prices of their items, which can be modified at any time. Vendors, instead, agree on a cost price with Amazon, which then decides the final price to the consumer at its own discretion.

As mentioned, the two types of accounts also involve several similarities, including:

• Content Management: Even though products are formally sold by Amazon, it remains the supplier's job to work on SEO, graphics, and all other types of content on their product pages to try to increase traffic and sales;

• Advertising and Promotions: The advertising console is practically identical for Sellers and Vendors, as are the promotional tools. This wasn't the case until a few years ago, as many features were only available on Vendor Central;

• Logistics: We listed this as a difference because Sellers have the option to choose independent shipping. However, most Sellers choose to rely on the FBA program, which shares many processes with Vendor logistics.

How does Amazon Vendor work and what are its advantages?

So far, we have compared the two platforms for selling on Amazon, analyzing the main differences. But, in more detail: how does Amazon Vendor work and what are its main strengths? And when is it better to be a Vendor rather than a Seller?

The Vendor program is aimed at larger companies and more recognized brands and, therefore, primarily addresses their needs.

As mentioned, Vendors are for all intents and purposes suppliers to Amazon. After accepting an invitation, the supplier must negotiate a supply contract.

Among the usually negotiable terms are (non-exhaustive list):

• Shipping costs from the supplier to Amazon;

• Marketing costs for product promotion (which would be in addition to Amazon Ads console costs);

• Handling of customer returns and damaged items;

• Handling of returns on unsold stock;

• The possibility of sending goods to a smaller number of fulfillment centers;

• The minimum amount for a purchase order.

Based on market demand, the marketplace periodically sends purchase orders to the supplier, who can decide whether to accept or decline them (fully or partially).

Based on the terms mentioned above, Amazon will withhold a percentage on every order placed.

The percentage can be negotiated; the more protections the Vendor wants to reserve, the higher the percentage will be.

The contract must then be renegotiated annually, although some clauses can be agreed upon and inserted even after the agreement has started.

This solution is often preferred by larger companies that see Vendor as a leaner management of the relationship with the marketplace. Once terms are negotiated, they only have to manage medium-to-large orders without worrying about how Amazon handles all other aspects of the sale.

Furthermore, in the eyes of the customer, a product that is sold and shipped by Amazon - which is the wording that appears for all products managed via Vendor - is synonymous with greater security and shipping speed.

Amazon also tends to give more visibility to products it sells and ships directly compared to those managed by third-party sellers.

Last but not least, suppliers are assigned a Vendor Manager, who acts as an intermediary between the two parties. Their main role is to facilitate negotiation and provide additional support to resolve various platform issues.

As mentioned, the Vendor model meets, at least on paper, the needs of large corporations.

What are the strengths of selling on Seller Central?

Seller Central follows different logic compared to Vendor.

There are no purchase orders or contracts to negotiate; Amazon only acts as a storefront for the Seller's products with a business model somewhat similar to consignment.

For every product sold, the marketplace will retain a referral fee, and the seller must ship their items using their own logistics or Amazon's.

The cost structure is fairly simple. From the final retail price, the following are subtracted:

• VAT

• Amazon Referral Fee, which for many categories is 15.45%

• Shipping cost, which depends on the weight and volume of the product if choosing Amazon Logistics (FBA)

• Product manufacturing or purchase cost.

But if Sellers have to manage shipping independently, how can there be advantages?

In reality, the advantages of Seller Central compared to the Vendor method are multiple, and it is for these reasons that more and more companies - even large ones - are preferring the opening of a Seller channel over Vendor. Among the main ones, some already mentioned, are:

• The ability to freely set the retail price, modifying it at will. For many Vendors, especially those selling to distributors and/or physical stores, this represents a major obstacle that forces many companies to end their relationship with Amazon;

• There are no returns on unsold items. Almost every Vendor knows this is one of the negotiable clauses, but at the cost of a further increase in the percentage Amazon withholds on orders placed;

• It is possible to list all products in your catalog without waiting for a purchase from Amazon;

• It is possible to publish products immediately in all countries where Amazon is present;

• Accounting and payments are clear, a statement that cannot always be made for Vendor, where it is often necessary to perform audits and investigations to understand the nature of certain charges or credits and find the relevant documentation;

• Selling costs remain fixed, without increasing year after year as often happens when renegotiating a Vendor contract.

These and other reasons are pushing many companies to abandon the Vendor channel to focus on the Seller platform. How? We discuss it in the next paragraph.

How to manage the transition from Vendor to Seller?

The reasons why companies transition to Seller Central are mainly 3:

• Companies cannot achieve any profit from the Vendor model and decide to migrate to Seller;

• Amazon Vendor terminated the contract with the company;

• The company is just starting to sell on Amazon.

The transition is not particularly complex, although it is necessary to first understand the mechanisms of the Seller platform to set up the best strategy.

In fact, to start selling on Amazon Seller Central, you just need to open an account, manage your brand on Brand Registry, then immediately start uploading products to the catalog and managing the first shipments.

To handle the process in the most efficient and effective way, it is recommended to contact an agency or a specialized consultant.

Furthermore, by contacting an Amazon Gold Partner agency (like Amastar) and opening the Seller channel with them, you can join a free Amazon program that provides dedicated assistance for platform issues (unfortunately, there are many), the chance to be included in top deals during events like Prime Day or Black Friday, and other services dedicated to new Sellers.

Regarding your items for sale, virtually nothing will change:

• Reviews will remain unchanged;

• Ranking will stay the same;

• The Prime logo will be maintained, provided that Amazon logistics (FBA) is used.

Conclusions

While the Vendor model may seem more attractive on paper for companies, especially larger ones, in recent months more and more brands are abandoning the channel in favor of the Seller Central platform.

Managing the transition is much easier than one might think, and Amazon itself is offering free support to new Seller Central users through its top partner agencies.

To join the program or for more information, contact us without obligation!