Launching on Amazon: Seller vs. Vendor
The Covid-19 crisis is forcing manufacturers to explore new distribution channels. Marketplaces are a wide-reaching solution that offer an established infrastructure, eliminating the need to build a new online platform. One of the biggest online marketplaces in the world is Amazon, with over 404 million mobile and desktop visits to Amazon.co.uk in January 2020 alone. This established marketplace is a logical place for businesses to use as a jumping off point into this time of increased online purchasing.
How can you sell on Amazon?
Amazon offers two forms of cooperation: Vendor Model and Seller Model. The fundamental difference between them is that vendors sell their products to Amazon, while sellers distribute their products themselves and use Amazon merely as a marketplace.
Seller central: Amazon as a marketplace
In Seller Central, Amazon acts as a marketplace. This means that manufacturers sell their products directly to the customer. They independently enter their products into the Amazon catalogue, define the sales prices and then ship their goods to their buyers.
Even if merchants choose the Fulfillment by Amazon (FBA) option and leave the shipping to Amazon, they are still the owner of the goods at all times. Sellers, therefore, have a high degree of control over their products and their inventory. They can decide for themselves whether they want to sell their items only via amazon.co.uk or on Amazon marketplaces throughout Europe.
In addition, sellers receive precise information about which shopper has ordered something from them and when and can remain in direct contact with their customers.
Sellers can also advertise their products on Amazon via Sponsored Ads. Sellers can easily create a customisable space to showcase their brand with the only prerequisite being that they must first register their brand with Amazon.
To participate in the Seller Program, sellers need only to register via the platform without the hassle of negotiations with Amazon. However, Amazon does charge a commission for every product sold in the Seller model as well as a monthly basic fee for the use of Seller Central.
Seller central including fulfilment by Amazon (FBA)
With the Fulfillment by Amazon offer, sellers have the option of having Amazon handle their shipping. In this case, sellers can send a portion of their inventory to Amazon shipping centers. Amazon will then take care of the rest of the logistics for shipping and storage fees. The management of customer support and returns is also encompassed by the scope of service that sellers can benefit from with this option.
Because Amazon is able to ensure the availability of goods through this method, FBA items qualify for the Prime program and free shipping. As a result, the seller benefits from Amazon’s promotional shipping label and logistical infrastructure without relinquishing seller status.
Vendor central: Amazon as a retailer
Unlike with the Seller Program, within Vendor Central, Amazon operates as the sole merchant. The manufacturer acts as a supplier and then Amazon takes care of the sales to shoppers, distribution and shipping.
Since Amazon is the owner of the products in this case, it also determines the sales prices. Amazon is, therefore, also responsible for the processing of returns and customer service. Also unlike sellers, vendors have no direct contact with their customers and never have access to see which customer buys what item. Vendor products are marked with the label indicating that they are “Dispatched from and sold by Amazon.” Vendors participating in the Prime program and are automatically given access to the free delivery option.
Perks for major brand manufacturers
Vendor Central is primarily suitable for larger brand manufacturers. Vendors must enter into negotiations with Amazon before they can participate in the program, unlike sellers.
Product selection, purchase prices and the conditions of cooperation are determined on a case-by-case basis. Brands that are well-prepared and have a solid basis for negotiations can achieve better conditions as Vendors rather than Sellers. However, it is more timely to set up.
Jumpstart your Amazon business
If you want to start with Amazon as quickly as possible, you should start as a seller. Here, the negotiations with Amazon are omitted and you can put products online faster. But, in this case, an internal team must be set up or an external agency must be organised to manage the Seller account. If, as a manufacturer, you do not yet supply directly to consumers, the necessary infrastructures and processes must also be installed. In the long-term, you can still switch to the vendor model or drive a hybrid model combining vendor and seller central, if required.