Amazon

How Amazon Vendors Expand To Seller Central [And Why The Time Is Now]

By Tinuiti Team

Oct 09 2019

More and more brands today sell on both Amazon Vendor Central (1P) and Seller Central (3P) to make the most of Amazon’s marketplace. Vendor Central and Seller Central have unique advantages, which is why many businesses consider selling on both.

But expanding your catalog to two platforms is not without its challenges.

Which approach is right for your business? Keep reading to learn how businesses are using both Vendor and Seller Central to manage their catalog and grow on Amazon.

Learn how to gain tighter control over inventory, product pricing, and, most importantly, flexible options to manage and scale your business.

Where does selling on Amazon stand today?

The Amazon selling ecosystem is broken up into two main parts: Amazon Vendor Central (1P) and Amazon Seller Central (3P).

1P includes:

Product purchase orders
Direct Prime Fulfillment
Direct Fulfillment

3P includes:

Fulfillment by Amazon (FBA)
Fulfillment by Merchant
Seller-fulfilled Prime

So why would a brand on Vendor Central choose to expand to Seller Central? For many vendors, this isn’t as much a choice as a necessity based on some of Amazon’s recent actions.

Here’s what Leo Carrillo III, Associate Director, Amazon & Marketplace Growth said in a recent webinar:

“In March 2019, Amazon stopped issuing POs to some Vendors. I’m willing to bet many of you listening were also impacted by this. Today we are having this discussion because when Amazon stopped issuing those POs many Vendors were left wondering: What are we supposed to do? Although Amazon did resume PO orders eventually, we want to ensure brands are equipped with the strategy if Amazon ever decides to halt POs again.”

Why expand to Seller Central? (Vendor Central vs. Seller Central)

Amazon Vendors often experience pain points around the following:

Contract terms, cost increases, & constant funding requests
Confusing chargeback costs
Lack of control over product pricing
Inconsistent purchase orders
Communication with Vendor managers
Lack of demand forecasting

Selling on Seller Central avoids many of these pain points for brands by giving you more control over your inventory, processes, and much more.

Advantages of selling through Seller Central (3P)

Here are some of the main advantages of selling on Seller Central has over Vendor Central.

1. Control over inventory

Stockouts can harm any seller on Amazon — not only will it decelerate your sales, but it can also cause your product to lose organic rank on the product listing page.

In Vendor Central, Amazon’s Purchase Order system means that you don’t have control over inventory management. With Seller Central, you have full control over how much inventory is available. You also have more control over your fulfillment options, including FBA, Fulfilled by Merchant, and Seller-fulfilled Prime.

2. Control over product pricing

With Vendor Central, you have no control over your pricing. Amazon can constantly re-price your products. Amazon also focuses on lowering the cost of goods sold (COGS) so that they can sell your products for even less.

With Seller Central, you have full control over pricing (and re-pricing). Of course, this comes with the responsibility to manually update prices as necessary.

3. Resolve issues with ASIN-level profitability

For Amazon Vendors, it’s also diï¬ƒcult to address issues with ASIN-level proï¬tability, especially when your margins are already minimal. These challenges are much easier to address with the control and ï¬‚exibility offered by selling your products on Seller Central.

What to consider before expanding onto Seller Central

Based on all of the above, expanding onto Seller Central sounds great, right? And it can be — but it can be a complicated technical process, too.

(It’s also worth noting that if you’re already an established Vendor, your Amazon Vendor manager can block you from creating a 3P account.)

Choosing between Vendor Central and Seller Central will depend on:

Your resources as a merchant
The level of control you want
The fees you’re willing to pay

Financial considerations for selling on Vendor Central vs. Seller Central

You pay higher fees when you sell on Seller Central — but you also have less control over your product pricing and marketing.

When you sell on Vendor Central…

You act as a wholesaler
Amazon sets how much they sell your products for
You invoice for the entire amount shipped at cost
You get paid in 30-60 days (based on P.O. terms)
Amazon creates the purchase based on need, limiting the planning staff needed on your side
No storage fees
Amazon fees are deducted from your payment
The average Amazon deduction is 17% of the cost of the product

When you sell on Seller Central…

You act as a retailer
You set the price and Amazon can’t adjust it
You own the inventory in an Amazon Fulfillment Center until it’s sold, meaning you’re responsible for storage fees for any unsold products
You get paid only on units sold, not on total inventory value
You get paid every two weeks
You’re responsible for the entire inventory planning function
You pay a referral fee
Total fees range between 25-40% of retail price
You’re responsible for tax payments

Business operations for Vendor Central vs. Seller Central

In addition to fees, your business operations will look different with Vendor Central vs. Seller Central. When you sell on Vendor Central, you ship your products to Amazon, then Amazon ships orders to the end customer. On Seller Central, you have control over fulfillment by choosing either FBA or fulfilled by merchant (FBM).

Sellers can also directly interact with customers who purchase from them. As a Seller on Amazon, it’s your responsibility to maintain peak Account Health, which means providing the best customer service to buyers. The majority of this will be responding to Buyer Messages. Make sure you understand customer service best practices to keep your customer communication up to Amazon standards. (Otherwise, you risk being suspended from Amazon.)

How to get started on Seller Central

If expanding to Seller Central sounds like the right choice for your business, here are some steps you’ll need to take:

1. Seller Central walkthrough and UI training
2. Inventory hydration and feed file setup and submission
3. FBA training: How you should ship, label and evaluate the proï¬tability of fulï¬lling through Amazon
4. ASIN matching and catalog setup: Parent/child relationships, merging, etc.
5. Learn what platforms and tools are must-haves for 3P sellers and what metrics should you pay attention to
6. Follow content and page optimization best practices
7. Get familiar with customer service standards to keep up your Account Health

(If this sounds overwhelming, don’t worry; transitioning to Seller Central is an ongoing process, and Tinuiti’s Amazon experts can help you along the way.)

Conclusion: 3 key takeaways

Now you have the information you need to choose whether expanding to Seller Central is right for your business.

Here are 3 tips from our experts to keep in mind as you consider the transition:

1. 1. Make sure the transition from Vendor Central to Seller Central makes sense ï¬nancially for your business
  2. Once your Seller Central account is set up, the operational process is similar to Vendor Central
  3. Transitioning from Seller Central is an ongoing process, not a one-time event

If you want to learn more or need additional advice, you can schedule a 1:1 strategy evaluation with Tinuiti to figure out which Amazon strategy is best for your business.