If you are a retailer, a distributor, or a brand manufacturer, how should your company approach the fact that Amazon exists? What are the differences between becoming an Amazon vendor and an Amazon seller? What are the pros and cons of working on Amazon vendor central vs Seller Central? And how can your business benefit from Amazon?
Those are only a few of the big questions puzzling customers in the clutter of Amazon’s world.
Hopefully, we can rule out this complexity by analyzing 3 main options retailers have to deal with Amazon:
- Sell on Amazon as an independent seller.
- Sell wares to Amazon, which in turn will retail them on Amazon marketplaces.
- Do nothing, and ignore selling on this channel. But is there an alternative to Amazon?
Comparing Amazon Seller vs Amazon Vendor
Sellers on Amazon
In Amazon’s lingo, a Seller is an independent seller on their marketplace.
Said seller accesses and operates on Amazon via an interface known as Seller Central, or its local counterparts, such as sellercentral.amazon.co.uk, .fr, .de, .it, .in, and so on.
As individual sellers, being on Amazon means struggling in a highly competitive environment. Following SEO best practices for Amazon can help sellers climb up the search results, however, this might not be enough, and sellers can be forced engaging price wars with their competitors, trying to be rewarded by Amazon’s algorithm and get more purchases.
Because of the stiff competition, many sellers decide to reduce risks by diversifying sales channels, using third-party apps like Nembol to cross-list products on different channels.
Nembol integrates with all Amazon Seller Centrals, besides special exceptions due to recent acquisitions or special country status, and therefore allows sellers worldwide to manage their items on virtually all international Amazon marketplaces and sync them with other online channels.
Vendors on Amazon
A Vendor is a commercial business which sells their items to Amazon.
In such case, Amazon behaves as a wholesale purchaser, a client, and the Vendor is almost invariably a Manufacturer, or a large distributor, or a very very large retailer.
To become a Vendor on Amazon your business has to be large, as Amazon requires minimum volumes to engage in a direct relationship, or a very strong brand in some interesting market niche.
A vendor operates on Amazon via Vendor Central, again with its localized entities in each main country market.
The goals of the one and the other
Vendor goal: maximize sales given a reduced effort, without being worried at all by controlling prices and distribution.
Seller goal: maximize control, possibly becoming a benchmark for higher prices on Amazon and better service level.
Overall it’s hard to say if being a Vendor would rack in more sales for you than being a Seller, or vice versa. So Let’s dive into the world of Amazon retailers, understanding all the pros and cons of being a Vendor vs. a Seller.
Differences between Amazon Seller and Vendor
Selling as a Vendor vs. as a Seller
In the following tables, you’ll be introduced to the main differences in selling between Amazon Vendor Central vs Seller Central. This will ease the understanding of all the pros and cons of actively selling on vendor central or seller central.
- Vendor. If you are a Vendor you sell immediately to Amazon. You have a commercial relationship with Amazon, agree on terms (such as price, volumes, delivery schedule, labeling) then ship to Amazon and quite firmly get paid according to terms.
- Seller. If you are a Seller, you have to list your goods on Amazon, but then sell to Amazon only if and when some buyer purchases your item. The payment moment is unpredictable.
- Vendor. Does amazon control prices? The answer is yes! Once Amazon purchased your goods, they own it and they do what they want with it. Sell it when they want, where they want (also internationally), at the price they want. You lose control of retail prices and distribution. There is no way to control any of this, despite what Amazon buyers may tell you when dealing for the purchase.
- Seller. As a seller, you control where, when and at what price your products are shown. There is no way Amazon can authoritatively change your prices. Amazon will induce you to lower your prices, but you are not forced by any means. However, doing it might help you to win the Buy Box (which can help you stand out from the crowd, which is useful mostly if you’re selling unique or rare products).
- Vendor. Strictly there is no margin set. You deal with Amazon a wholesale price, then Amazon will charge the final price they want. In Europe there is an MSRP, a manufacturer suggested retail price, which is suggested. In the US imposed retail prices are legal.
- Seller. Amazon will keep for themselves a transaction fee varying by category, with the mode being 15% on the final sales price. They will pay you your share typically at month-end. Some categories, such as consumer electronics or books, have lower transaction fees.
Amazon content management
You may not know that Amazon products are all collected within a catalog. Amazon always tries to provide customers with the best content and product details to enhance product appeal and increase the chance of sales within the platform.
In this section, we will see how Amazon manages the content and how this affects positioning and traffic between Vendors and Sellers.
- Vendor. Amazon stores your product content and takes the right to use it for free anytime in the future and in any format. If your items are new to Amazon, you will be asked to provide a digital version of your catalogue:
— Product Name
— Description and bullet points
— EAN, ISBN, or UPC barcodes
- Seller. Most commercially available items will already be inside Amazon’s product catalogue when you’ll attempt to list them. This is sometimes surprising, but it is due to the sheer volume of Amazon Sellers and Vendors per each category. In case your items are new to Amazon, you’ll have to provide all content, according to Amazon rules (they’re strict on picture format and quality). After this, you’ll lose control of your content as Amazon may integrate it with other content possibly provided by other sellers.
- Vendor. Amazon will place your items where they prefer on their properties. You have no control on this, which is always the case, but you also have nothing to do.
- Seller. This is tricky. Amazon will always maximize the NPV (Net Present Value) or their net revenues. This means that the product with the lowest current price and the best customer service history will be positioned in order to have the best chances to sell. And that Amazon will always arbitrate between them selling directly at whatever their markup given the marketplace-set price, and you selling at whatever price leaving them their 15% selling fee.
Traffic and advertising:
- Vendor. You don’t worry about traffic. You sold your items to Amazon, and Amazon will take care of promoting the products or generating sales.
- Seller. Amazon has built-in traffic. What counts for you is your product positioning within the Amazon website. You don’t have much control on this, outside of being dynamic with your prices, and running top customer support. However, you might want to increase the chances of selling by buying advertising from Amazon. You must have good margin and a differentiated product to do this, or it may risk being ROI negative
Amazon delivery options: how does fulfillment work for Vendors and Sellers?
Logistics is probably one of the main aspects to consider before deciding how retailing products with/on Amazon. Whether you are a seller or a vendor, it is important to be mindful of the duties and commitment that the shipping plays selling on Amazon. Let’s take a look at it together:
- Vendor. Amazon will run logistics. They bought your goods, you shipped the goods to the location required by them. They will ship it to the final buyers. No hassle for you.
- Seller. Amazon seller delivery options are basically two: FBA (Fulfilled by Amazon) or FBM (Fulfilled by Merchant).
Unless you purchase the additional service of Amazon Fulfilment (more below), you will have to pick, pack, and ship when you get an order. And consider that Amazon will be extremely insistent in inducing you to ship in due time and treat the customer. The quality of your service influences their chances to sell, therefore determining your position on shelf.
- Vendor. You have no control, and risk shipwrecking if you are a distributor or a brand and have clients selling the same items online.
- Seller. You have the chance to become a benchmark in terms of prices, support quality, and progressively content, as soon as you generate for Amazon the best content on the marketplace. You have the chance to fix on Amazon many errors introduced by bad-listers of your own products. This is the most important reason for being a Seller and not a Vendor.
- Vendor.Don’t underestimate the work for your team. Besides dealing the sale, Amazon is very strict on:
— Delivery requirements
— Labeling of boxes and items
— Product coding
On top, if you are a Brand or a Distributor, you’ll have to manage complaints by your own clients as Amazon will actually do what they want with prices, placement, and many times international distribution. Dealing with upset distribution chain will take quite some time of your VP of Sales.
- Seller. Here the work is continuous, to optimize your presence on the marketplace. You’ll have to manage prices, possibly content, and offers. Sellers have to run customer service and be good at it. And pick and pack each item sold.
Is selling on Amazon FBA worth it?
As mentioned above, FBA stands for Fulfilled By Amazon. It’s the warehousing and Pick & Pack service sold by Amazon to Sellers.
- If you are a Vendor, you don’t care. Amazon is shipping anyways.
- If you are a Seller, you may choose to have Amazon shipping. In such case, you must send them a full stock of your goods, hence you finance a warehouse upon their facility. But in exchange they’ll take care of shipping with high-quality service, and you gain the potential to sell to buyers who have Amazon Prime service and buy multi-item carts with your product in.
Despite the undoubted pros of this delivery service, FBA is pricey, and your in-house warehouse is certainly cheaper if it is well run.
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Is there an alternative to Amazon?
Virtually everything is on sale on Amazon as of today. All branded consumer goods, with any brand positioning, are potentially on Amazon, as also handmade products, food & wine, and even fresh products.
Amazon is an open-to-all-sellers marketplace, and they have so many sellers and product offerings by third parties, that their practices today aim rather at reducing the number of sellers in exchange for better control and higher quality perceived by buyers.
There is no way the goods you are selling won’t be on Amazon. Therefore even if you decide to ignore selling on Amazon, your competitors and your suppliers (if you are a seller) or your clients and your competitors (if you are a distributor or manufacturer) will do it instead of you!
Therefore not acting on Amazon does not protect your business from harsh competition by Amazon itself or by other sellers on Amazon.
Hence, even if you can sell on eBay or Etsy alternatively to Amazon, however, you cannot ignore it. You have to do something. The very least you can do, both if you are a seller or a brand/distributor, is to strictly monitor the marketplace and have a strategy to reply to your own clients.
Bottm line: Amazon Vendor or Seller?
In conclusion: we advise brands and distributors to be on Amazon as Sellers.
This will create a little more work for your e-commerce team but will assure you better control over your online distribution.
The temptation of being a Vendor is high, but most if not all the brands we spoke with regret having done it.
Retailers should join Amazon as sellers, and progressively be active on it, especially through price dynamics. Both Retailers and Brands/Distributors, keep the service level high: This means replying to queries as fast as you can, surely within hours if not minutes. Not after days!
With Nembol, both Brands/Distributors and large or small retailers can manage Amazon with low effort and little chance for errors if any. You can use Nembol to list on Amazon, or to sync listings already on Amazon and on other channels, thus reducing your inventory management effort. Also, you can use Nembol to activate new channels, starting from your Amazon listings, so that you don’t have to recreate nor even retype your product content, once you wanted to open your WooCommerce or start a Shopify store with your Amazon products.
Lastly: you can duplicate your Amazon listings on Nembol Easy Website, thus having your own website, mobile-ready, at no additional cost, ready to complete purchase transactions.
Good luck with your business!
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