The Amazon purge is coming, which means many sellers will soon be forced to switch from Amazon Vendor Central (First Party or 1P) to Amazon Seller Central (Third Party or 3P). Whether your brand is a part of the purge or switching from 1P to 3P by choice, it’s a change that requires a major shift in your business model.
1P and 3P Defined
In 1P, brands sell their products to Amazon. Amazon then sells to consumers on terms they largely control. With 3P, brands have the opportunity to sell directly to consumers by using Amazon as a storefront platform.
Switching Creates Questions … and Opportunity
Making the shift from 1P to 3P leaves many brand leaders scratching their heads. What are the precise implications of the shift? How do we price? How should our storefront be designed? What are the unknowns in making the transition? How does Fulfilled By Amazon (FBA) work? Answering these questions (and many more) can be daunting, but as Amazon 3P specialists, Amify can help you successfully make the transition from Vendor Central to Seller Central and find opportunities in the new challenges. Here are three opportunities we think are most exciting when selling directly to your customers on Amazon.
1. Remove the Middleman to Increase Profit Margins
When you sell to Amazon on Vendor Central or to re-sellers, you are selling your product at wholesale pricing. Seller Central serves as a personal storefront housed in the Amazon ecosystem, which means you’re selling direct to consumers. With over 50% of U.S. e-commerce sales happening on Amazon, Seller Central allows you to reach the consumer in a channel they prefer … at the full retail price of your product. The result? Greater convenience for your shoppers and increased profit margins for your brand.
2. Take Control of Your Brand and Consumer Experience
With Vendor Central, Amazon often prices products below the MAP (Minimum Advertised Price), which can create an unwinnable competition for your other retail channels. Once Amazon has your product, they have the power to adjust prices based on an unpublished algorithm that often leaves 1P sellers with MAP issues and channel conflicts. On the other hand, Amazon 3P sellers have final say on their pricing policy, leaving brands in control of their own profitability and sales. The benefits of switching to 3P go beyond pricing. Brands on Amazon Seller Central have total control of product pages and can utilize brand imagery and other marketing features like A+ content and Brand Stores to customize the user experience. This increased level of control is especially important for brands with strong market positioning and brand identity. For an example, look no further than Nike, which recently decided to leave 1P completely to take greater control over its consumer experience.“ As part of Nike’s focus on elevating consumer experiences through more direct, personal relationships, we have made the decision to complete our current pilot with Amazon Retail,” the company said in a recent statement.
3. Access to Your Customer Data
Selling on Amazon Seller Central allows brands access to valuable customer data like names and addresses that aren’t available to 1P sellers. And while there are limitations on how 3P brands can use this data — it’s prohibited to explicitly use data for remarketing purposes — it does provide valuable insights. Names and addresses can help determine who is buying a brand, how much overlap there is between a DTC site and Amazon and create look-a-like customer audiences. Seller Central users also get access to Amazon Brand Analytics, while Vendor Central sellers can only utilize it through an annual subscription. The platform allows you to research keywords and track attribution from marketing channels outside of Amazon. Access to this type of user data is valuable for brands attempting to scale, as they are now able to see which products are selling to which customers and when. With this access, brands can better focus on how to structure inventory and marketing.
A Worthwhile Adjustment
As Amazon continues to cement its place as the leading e-commerce platform, brands are finding that the benefits of listing their products on the site far outweigh the cons. The news of the 1P purge may have complicated how you approach your Amazon sales strategy, but the added uncertainty is likely to lead to greater profitability if brands embrace selling directly on 3P — which seems like a fair trade. There are many Amazon resources for 3P sellers — including Amazon Storefront, Brand Registry and Fulfillment by Amazon — that give brands more control than they would get as a vendor. And the good news is that you don’t have to go it alone: there are capable, experienced experts in the space to help navigate this new marketplace. Let’s talk to see how Amify could help your business sell directly to your customer.