This post is by Kiri Masters, CEO and co-founder of Bobsled Marketing, a New York City-based digital marketing agency that helps brands grow their revenue on Amazon. Bobsled’s comprehensive launch and optimization process has been used for hundreds of products across Amazon’s North American and European markets.
With over 688,000 unique brands selling on Amazon, competition is rife. It can be difficult for sellers to find an edge through the third-party Seller Central program. The good news is that brands have the option of developing a wholesale relationship with Amazon through their Vendor programs.
Amazon’s wholesale Vendor programs have been getting a lot of attention recently. As a Vendor, your products are sold under the trusted Amazon brand. In addition, Amazon will buy and store your inventory, taking care of shipping, pricing, customer service and even returns.
While there is a lot of information and training available out there for brands who are selling on the Amazon marketplace, there is a severe lack of information for brands who are currently selling (or planning to sell) wholesale on the Vendor platform, using either Vendor Central or Vendor Express.
Before making the leap, brands want to know what the implications are of switching from selling directly to shoppers on Amazon, to selling wholesale to Amazon itself. We often hear questions like:
Is the Vendor program something that might work out for my brand? How much control do I have when selling wholesale in the marketplace? What should I know about the Amazon Vendor programs?
There are two ways of selling wholesale on Amazon. One is Vendor Central, which is an invite-only platform offered to brands with high sales performance. When Amazon sends your brand an invite to the Vendor Central program, take it as a recognition of your brand’s potential within the marketplace. The other option is Vendor Express, which allows marketplace sellers to transition over to the wholesale program without an invitation from Amazon.
Pros and cons of establishing a Vendor relationship with Amazon
Selling on Amazon Vendor Central (VC) or Vendor Express (VE) is different than selling on Seller Central because you’re selling inventory to Amazon on a wholesale basis, rather than using Amazon as a platform to sell directly to customers.
The Vendor program offers a way to grow sales and expand your distribution network with less administrative upkeep compared to Seller Central, but that does not come without hiccups. Here’s a summary of the pros and cons of selling as a Vendor on Amazon.
- For Vendor Central, the ordering process is quite similar to traditional brick and mortar retail – you negotiate terms upfront, then your Vendor Manager places wholesale purchase orders that you fill.
- The other wholesale program, Vendor Express, operates under standard, non-negotiable terms and an algorithm-based purchasing process and pricing.
- Amazon takes over many aspects of your business in the marketplace, so selling wholesale to Amazon means low or zero customer service demands.
- It will be more difficult for other sellers to compete, since Amazon’s algorithm favors their own offers when awarding the Buy Box. (Under Vendor programs, Amazon is the seller of your products on the site.)
- The content of your product page will be protected from changes made by other sellers as Amazon ultimately controls the page themselves.
- You get access to AMS (Amazon Marketing Services), Amazon’s more advanced advertising platform where you can use features such as Headline Search Ads and Product Display Ads.
- You can add more marketing material to your product listings through A+ content, which can help improve conversion rates.
- You have access to a host of marketing opportunities including the Amazon Vine reviewer program, product coupons, and Best Deals.
- Optimizing your product range in Vendor Central and Vendor Express can be more challenging because of the limited interface and support.
- AMS is more challenging to navigate than the Sponsored Products advertising program on Seller Central.
- Amazon may price products as they wish, sometimes below MAP (minimum advertised price), potentially causing channel conflict.
- On Vendor Express, Amazon sets a wholesale price that is determined by an algorithm, and there is no way to negotiate this price.
- Your Amazon Vendor Manager (or purchasing algorithm on Vendor Express) may not place orders for all variations in your catalog. They may not purchase stock in sufficient quantities to meet customer demand, resulting in stock-outs and lost sales.
- You may incur unexpected return fees, and mandatory “co-op” fees for marketing and operational costs that can add up.
Important things to consider before becoming a Vendor
If you have received an invite to sell on Vendor Central, you should consider the following before making your decision:
- You will be able to negotiate terms and pricing on both individual products and your account overall.
- You will have access to improved analytics and reporting.
- With the Flexible Direct Fulfillment option you will be able to switch between fulfilling orders directly from your own warehouse, and fulfillment by Amazon.
- You will have a direct contact at Amazon who will be interested in helping you sell more.
If you’re planning to expand your business through Vendor Express (VE), you should be aware of the following:
- Product pricing will be automated – everything is computer-controlled.
- There is no way to negotiate any specific contract terms.
- Purchase orders will also be automated, potentially creating stock-out issues when the estimates are incorrect.
- Like Vendor Central, you will be able to ship directly to the customer, or send inventory into an Amazon fulfillment center. But you will have to choose direct fulfillment or Amazon-fulfilled per SKU – you can’t switch at will.
- Reporting functionality is very minimal, although it seems to be improving recently. At this stage, no premium analytics are available.
- The manufacturer badge for comments on customer reviews is NOT available via Vendor Express.
The benefits of the AMS (Amazon Marketing Services) PPC platform
AMS stands for Amazon Marketing Services – an advertising service available to accounts on both Vendor Central and Vendor Express.
AMS offers targeted PPC (pay-per-click) advertising solutions to help Amazon vendors reach new customers and drive sales. Seller Central only offers Sponsored Products advertising, whereas AMS provides two additional ad types called Headline Search Ads and Product Display Ads.
Sponsored Products are keyword targeted cost-per-click search ads. They appear on search results pages, currently both above the results and on the right-hand side of the page. Sponsored Products also appear on the product detail pages under the heading “Sponsored Products Related To This Item”.
Headline Search Ads are keyword-targeted cost-per-click search ads that appear at the top of the first page of search results on desktop and mobile. These ads are great to increase visibility and interact with the customer at the very beginning of their purchase process, as they appear at the top of the results. They can also be used as a short-term solution if your product does not rank well organically, by getting some exposure on page one right after a product launch.
Product Display Ads are product- or interest-targeted cost-per-click ads that appear on related product pages. These are the only type of ad which is not targeted by keyword, so come with some unique benefits. One strategy for Product Display Ads is targeting by interest, but we’d only recommend this strategy when your target audience’s interests are really specific (e.g. you only sell hiking shoes, and target people with an interest in hiking).
There’s a lot more to learn and understand about Amazon Marketing Services (AMS). We don’t recommend applying for Vendor Express just to get access to new types of ads – it’s important to learn about them in-depth first. We have a free online training course that explains how to navigate the Vendor programs and how to use AMS for your brand – see the link at the end.
Can you operate both Vendor and Seller accounts?
Comparing the pros and cons of Amazon’s two Vendor programs against selling on the Amazon marketplace may leave some brands feeling puzzled, and compelled to make a decisive choice for one or the other. However, some brands find that marketplace selling using FBA is more profitable for some of their SKUs, while being a Vendor is more profitable for others, so a hybrid selling approach works best for them.
It is possible to have both a Vendor Central or Express account, and a Seller Central account on Amazon, reaping the benefits of both.
In Seller Central you have control over pricing, and also your inventory levels and product assortment. As a vendor, those things are controlled by either your Vendor Manager (for Vendor Central) or computer algorithms (for Vendor Express). But maintaining a vendor relationship with Amazon allows you to access Amazon Marketing Services (AMS). A hybrid approach with Vendor and Seller accounts allows brands to select which SKUs are sold to Amazon directly, based on profit margins and other factors important to your business.
Steve Madden is one brand that uses a hybrid Vendor and Seller model to make the most of their presence on Amazon. You can learn more about how they do it here.
Amazon’s Vendor programs come with benefits and challenges.
For some businesses it can prove to be a profitable opportunity to grow their sales in the marketplace, and expand their distribution network with less fuss than they would experience using Seller Central. For other brands the loss of control might just not work for them.
To make sure you make the best decision, take time to research all of your opportunities and properly understand both the perks and limitations.
Bobsled Marketing has a free Vendor and AMS online training course that explains how brand owners can navigate the Vendor programs and use AMS for their brand. You can also contact Bobsled Marketing here.