As the largest eCommerce retailer in the world, with more than 1 million small businesses in the U.S. selling on its site, Amazon is expected to surpass a 50% share of the US eCommerce market by 2021. If your business is selling online or preparing to do so, at least evaluating your options for getting in on the unprecedented visibility and reach of the Amazon platform should, very likely, be part of your strategy.
In today’s post we’ll help you do that evaluation by comparing Amazon Seller Central and Amazon Vendor Central so you can understand what each of these programs can offer your business.
What is Amazon Seller Central (a.k.a. Amazon Marketplace)?
Amazon Seller Central is the interface Amazon offers for merchants to promote and sell products directly to Amazon’s customers. When you have an Amazon Seller Central account, you are selling as a marketplace or third-party (“3P”) seller. You are essentially acting as a B2C company, selling items directly to consumers. This means that in addition to pricing your items, you are responsible for handling shipping, customer service, and returns.
You may choose to take care of all of these functions yourself for each order you receive (known as FBM, Fulfillment by Merchant or sometimes MFN, Merchant Fulfilled Network), or you may pay to enroll in Amazon’s FBA (Fulfillment by Amazon) service and let Amazon take care of shipping, customer service, and returns for you. There’s also a third option called Seller Fulfilled Prime which gives you the ability to offer Prime shipping if you can meet the requirements, and if Amazon’s SFP registration window (which opens and closes periodically) is currently open.
You can sign up for Amazon Seller Central under one of two selling plans: the Individual plan or the professional plan. The individual plan provides an option for lower volume sellers and uses a per item fee of $.99 for each item sold. Amazon recommends this plan for those selling fewer than 40 items per month. The professional plan is offered as a subscription service with a monthly fee (currently $39.99) and includes access to a lengthy list of features (many that would be essential for a business to manage sales and marketing decisions) that aren’t available under the individual plan.
Pros and Cons of Amazon Seller Central
The main advantage of Seller Central can be stated in one word: control. And the flip side of all that control is the main disadvantage: the hands-on work that comes with having all of that control.
As a seller, you have control over your pricing, so you can establish a retail price, adjust your pricing to respond to high or low demand, to initiate a sale, or to match a competitor’s price. Greater control of pricing means greater control of your profit margins. You also control your product marketing and can take advantage of the Amazon Brand Registry as a registered seller in order to protect your brand from use by unauthorized resellers of your product. On the down side, there are certain Amazon marketing tools that are not available to sellers.
Seller Central also gives you the ability to manage your inventory levels as you see fit. You can make your inventory decisions independently and choose how you want to fulfill your orders, whether you do so yourself or by using FBA.
As a seller, you also have access to lots of customer analytics, for free, which you can use to better understand your customers’ buying behavior.
Another advantage of being a seller is that your costs and payments from Amazon are more straightforward and consistent than they might be as a vendor through the Vendor Central program. While sellers may have more fees that happen more frequently, they are known costs that are relatively easy to calculate. Sellers also have the advantage of regular payments from Amazon, which happen every 7-14 days.
Generally speaking, sellers experience more helpful support from Amazon when they are having a problem with listings, inventory, or payments. Extensive help files and forums, as well as the ability to call in for help and even escalate the issue up the chain of command, provide sellers with lots of options for researching solutions and contacting Amazon for help. Of course, this is due to the fact that sellers maintain control and responsibility for their product listings and fulfillment processes.
Speaking of fulfillment, one of the biggest negatives for businesses considering Amazon Seller Central is the cost for fulfillment. Managing direct sales and the logistics involved can be expensive. Also, due to the number of fees associated with Seller Central (including FBA fees if you’re paying for that service), it can be difficult to sell lower priced items at a profit as a seller.
But perhaps the most significant negative of being a seller? Your sales may be lower than they could be as a vendor. Statistics show it’s tough to compete with the “Shipped from and sold by Amazon.com” message displayed on products from vendors supplying Amazon, which is the topic we’ll cover next.
What is Amazon Vendor Central?
Amazon Vendor Central is actually the portal that Amazon uses with manufacturers and distributors who become suppliers. When you sign up with Vendor Central, you are signing up for Amazon to distribute your products. It’s a more traditional B2B supplier arrangement, and is simpler in some respects than managing the complexities of selling through the Seller Central marketplace. You sell your items in bulk to Amazon, and then Amazon resells them to customers as an Amazon product. Amazon is buying and storing the inventory, and handling customer service, pricing, shipping, and returns. With Vendor Central, you’re a supplier, or what’s known as a first-party seller (“1P”).
The tricky part with this arrangement is that registration as an Amazon vendor is by invitation only. Amazon is always searching for the next products to add to their offerings, inviting manufacturers experiencing high demand, existing marketplace sellers moving products, and suppliers making contact with Amazon buyers at expos and trade shows.
Pros and Cons of Amazon Vendor Central
When Amazon is offering a product that is sourced by the company through Vendor Central, there will be a statement in the product’s description that reads, “Ships from and sold by Amazon.com”. And therein lies the supreme benefit of being a vendor: your products are Amazon products and Amazon has poured billions of dollars into helping their customers feel confident about the successful outcomes they will experience when buying Amazon products.
Vendors also have access to exclusive advertising opportunities and marketing tools not available to marketplace sellers. These advantages help vendors’ products stand out and convey the credibility that comes with being part of the Amazon brand.
Being a vendor is also a simpler business model; you are a B2B supplier and Amazon is your customer. There are no monthly fees, but instead of selling at retail prices (as in Seller Central), you are selling to Amazon at wholesale prices, and as you can imagine, Amazon is a tough negotiator. And, the price you agree to accept when you begin selling to Amazon could be in play at a future date if the company comes back to negotiate the price down.
Another potential pricing negative is that Amazon is not bound to follow minimum advertised pricing, so your products (that are now Amazon products) could be sold at prices that are lower than what you’d prefer in order to beat a competitor’s price or for another reason. You may also wait longer to be paid as a vendor than you would as a seller, and vendors have also experienced the problem of Amazon running out of inventory without notice being given to the vendor that inventory is running low.
In terms of fulfillment, being a vendor means you don’t have to deal with individual customer orders and fulfillment, but you must be able to meet Amazon’s EDI requirements so you can receive purchase orders and send advance ship notices and invoices back to Amazon. Of course, vendors must also make sure to have inventory available to fill Amazon’s orders quickly when purchase orders arrive. Kissinger helps many Amazon vendors integrate Amazon EDI with Sage 100 ERP for efficient and affordable order processing. Request an EDI savings analysis today.
How to get started?
One thing’s for sure: for many small and medium-sized businesses, getting started with Amazon seems like a no-brainer, given the company’s dominance of eCommerce and the fact that the number of consumers who look to Amazon first continues to grow. Amazon Seller Central is a great way to get started, and Kissinger Solutions offers affordable eCommerce integration for Amazon Seller Central and Sage 100. And if it turns out that Vendor Central is an option for your business, it could be a great opportunity to increase sales volume, but do your research to make sure you’re aware of the potential bottom-line impacts so you can maximize your opportunity for success.
Have questions about EDI and eCommerce solutions? Contact us.