pp-live-2020-nov-19
pp-live-2020-nov-19
Oct 31, 2019

Vendor versus Seller Central

Paul Sherratt, of Solutions for Sport, explores amazon options

I’ve written many times over the years about the impact of Amazon on the sporting goods industry - the traffic, and subsequent sales, that it has brought to many brands, and also the opportunities it has opened up for many businesses to penetrate new international markets.

But one of the key questions I regularly get asked is what’s the difference between Vendor Central and Seller Central and which one is right for my brand strategy.

Lets start with the basics: The fundamental difference between Vendor Central and Seller Central is who will be selling your products. With Vendor Central, Amazon’s retail team buys and resells your products to their customers. With Seller Central, you are selling directly to Amazon’s customers.

Seller Central

Amazon Seller Central (often referred to as Marketplace) is the web interface used by brands and merchants to market and sell their products directly to Amazon’s customers. In this instance you are a ‘Third Party Seller’.

As a marketplace seller, you have two options for fulfilling orders you receive from Amazon’s customers. You can handle the shipping, customer service, and returns for each individual order yourself or you can allow Amazon to handle this for you by enrolling your products in the Fulfilled by Amazon or “FBA” program. Fees are associated with each option but, FBA fees include storage and shipping costs.

Key to note here is that products can be listed for sale alongside your listing (for example by some of your retail customers) and this is the first fundamental point to consider. If you do not have control over your supply chain you may end up in a price war with your own customers. However, if you are the first to list the product then you do have control over the listing and thus the brand and product messaging relating to the product.

At the time of writing, a clear advantage of Seller Central is the ability to push out listings to other Amazon global marketplaces. However, it seems likely that additional legislation will be implemented which may make this more challenging in the future, particularly within the EU.

Vendor Central

Amazon Vendor Central is the web interface used by manufacturers and distributors. If you sell via Vendor Central, you’re called a first-party seller and are acting as a supplier in the same way as if you were wholesaling goods to any other retailer.

Registration on Vendor Central is by invitation only and it is often the case with many of my clients that they have begun selling through Vendor Central with some success and are then contacted by an Amazon buyer. A tell-tale sign that a company is selling through Vendor Central is the phrase “ships from and sold by Amazon.com.”

The Pro’s and Cons

Both Seller and Vendor Central will allow you easy access to a huge marketplace (over 40 per cent of UK eCommerce traffic is to amazon.co.uk). Within Seller Central, as a manufacturer, you will have the advantage of a much higher selling price and thus some margin gains. However, if you have deep market distribution then the likelihood is that you will end up selling against your own wholesale customers and price point erosion may result. Revenue made against all sales will be available for immediate withdrawal and thus cash flow advantages exist.

Any items stocked in FBA qualify for Amazon Prime which continues to drive shoppers to purchase by offering next day delivery. Having your products sold as a first-party seller through Vendor Central means that, as far as shoppers are concerned, your product is being “sold by Amazon.” That seal of approval can provide a boost in consumer confidence that you don’t have as a third-party merchant and, like FBA, is eligible for Amazon Prime.

The process is relatively straightforward and is simpler through Vendor Central than through Seller Central. As a vendor, your primary focus is on filling purchase orders, billing, and avoiding chargebacks. As a seller, especially utilizing FBA, you will be responsible for sales reconciliation, lost inventory, and taxation liabilities.

However, be aware that Amazon has very specific and rigid guidelines for filling their purchase orders. Vendors that struggle with maintaining stock and/or quickly fulfilling orders open themselves up to significant chargebacks.

Control

Control over price, messaging and channels is often the primary concern when looking at the Amazon options. On Seller Central you can control the price. On Vendor Central Amazon decide the selling price.

With that in mind, if your products are already in the market then it is likely that to control either option will be challenging. One solution is to create either completely new, or bundle, products that are only offered on seller central.

This ensures price points can be set by the brand and not disrupted by other third party sellers listing against them. Margins can thus be maintained. This strategy may result in some retail customers requesting to purchase these lines. However, if your channel strategy and communication is clear then these issues can be turned into a positive that you are looking to maintain brand kudos/visibility/ pricing but adopting this strategy.

Another issue to consider is that often manufacturers discover that their retail partners and/or unknown Third Party sellers list and sell bundles or older versions of their products without consent.

Legal challenges have been made over the years but with limited success and thus the most effective way to combat these is to firstly enrol in the Amazon brand registry programme and then use this to empower Amazon to remove the listings.

Conclusion

With so many shoppers using Amazon as the first website they visit when making purchasing decisions it is critical that brands have a clear strategy to reach these shoppers. Amazon search is, arguably, more important than google search and thus it’s critical that you create a marketing strategy specific to Amazon.

A combined Seller Central and Vendor Central strategy can be effective as long as selected products are placed accordingly and as long as the wider channel strategy is considered.

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