I have a small company and we’ve been selling on Amazon for about a year. We have used Amazon Vendor in the past, but have now opened a Seller account.
We’ve been wondering if we still need a Vendor account since moving to FBA as a marketplace seller.
Should we be worried about damaging our product listings? Do you have any suggestions for us on what to do with these accounts, or if we need them? Which is better?
We sell boating accessories, parts and clothing mostly.
— Mike, San Francisco.
Happy to talk through this. It’s actually a fairly common question that’s coming up this year. You’re not alone in worrying about this.
In many ways, this is a strategic question for your business model. There are pros and cons to Amazon Seller and Vendor, already covered in a past Web Retailer article. I’ll gloss over those since they already did a good job of tallying the details.
I’ll focus more on the fundamentals, then explain some approaches which make strategic use of your Vendor account to actually help you as a Seller using the marketplace and FBA.
Who are you?
The 3am rant in me would ask, “Do any of us truly know who we are?” Deep stuff. For business, this question is just as valid, but often a bit easier to figure out.
Businesses evolve. They change. The longer they stay in operation, the less similar they will be to the original inception. They always have a key starting point, a mapped route and a destination point. But the direction and look of the company will change.
All companies sell things, one way or another. The entire world is just one big massive transfer of goods and services, with each layer pocketing or upcharging along the way. You sell stuff direct to consumers, which is easily one of the very first commercial models humanity figured out, when we were trading fire for better floor space in the communal cave.
These days, you can sell stuff in two ways: in bulk to other businesses, or in individual units directly to consumers. Wholesale or retail, basically. To tie this back to Amazon, Vendor is of course wholesale, and Seller is retail.
The very first question you should figure out is which model you want your company to adopt and focus on. As we’ll examine below, this is more important today than at any time in the history of everything. Ever.
Ecommerce changed us
Before Al Gore invented the internet, we had a fairly consistent method for selling stuff. People would make things, and then sell them to consumers. As they became bigger entities, they would start to sell their stuff to other companies, whose sole business was to the resell the stuff to other companies. And those companies sold to the final user.
Manufacturer → Wholesaler → Store Owner → Happy Consumer
This model existed for a few thousand years then the internet messed everything up, for better or worse, depending on where you sit.
While this flow still exists, ecommerce is causing a dramatic change. We now see more and more of these flows instead:
Manufacturer → Store Owner → Happy Consumer
Manufacturer → Happy Consumer
Needless to say, wholesalers are not always happy about this, and we’ve seen more and more contact us for advice on starting their own brands or selling direct. And for good reason.
In today’s world, the ability to create our own brand or purchase products directly from a manufacturer is easier and cheaper than ever. It’s only going to get easier. In the next two decades, wholesalers and distributors will become far less critical to the chain of retail. Companies simply don’t need them the way they used to, with such a closely connected business world.
But physical stores will always need support, and there will always be some items bought physically, and some people who prefer to shop that way.
This is great for you. You have a choice.
If your plan is to develop, grow and expand as a wholesaler, Vendor is the place to focus. Amazon is your customer, you sell them your stuff, and it’s their job to sell it on to consumers.
However, as the world is making it easier to reach the consumer directly, why limit yourself?
Vendor Strategy #1: Launching Products
We often work with companies in a similar situation. They started on Amazon as a Vendor, and are now moving to Seller and FBA. Why keep Vendor?
There are some good reasons to keep using Vendor.
Firstly, it’s easier for cashflow, and a simpler transaction. Selling individual units is hard work. The margin is better, but you have to do more to earn it. With a Vendor order, you sell a bunch of product in one go, get paid, and move on!
Vendor instantly means FBA and Prime, which typically means better sales velocity and prominence on the page. For lazy buyers like me, who filter everything for Prime, it can be the difference between being found or lost.
All these perks are perfect for new ASINs (product listings). We all know that a brand new listing puts you in a catch-22 initially. You need to be found to grow positive traffic. But you don’t have the traffic, so can’t be found to grow it.
Vendor’s built-in perks mean you have a far better chance of building a positive history for new listings. Amazon has already bought your items, and needs to sell them to make a return, so they will push their position to make sure it happens!
So Vendor is a useful strategy to build some history on new product launches… which you can then “borrow” at a later time as a Seller. After a while, stop replenishing the Vendor orders that come in, and instead use a Seller account to send in an FBA shipment for the same product. Vendor laid the groundwork, now you can take back a huge chunk of margin, and ride the wave they started!
Vendor Strategy #2: Reseller Hit List
Although a bit mean, you can use Vendor with an entirely different focus. This is not my own despicable idea, but it does seem to work for some sellers.
If you have a lot of competition on an ASIN with resellers all racing to the bottom to make a cent or two, you are likely not in the best position as a brand owner.
Anyone trying to create or grow a brand will know that price parity between channels is a nightmare for tracking and relationships. The last thing you want is a reseller pushing your branded product out the door just above cost. But sometimes, when contracts, stern emails and begging don’t help, you need to fight fire with fire.
Sell your branded goods via Vendor. Vendor will reprice your items until they sell. Given that Amazon owns the fulfillment, they will have a better margin than your other resellers, especially if they are buying for the same price.
This way, Vendor will shake out your cut-price resellers fairly quickly. Your resellers won’t order a product they can’t turn a profit on, so eventually they’ll give up and move on. Once they have all admitted defeat, you can dominate the market by switching your branded item to Seller and Amazon FBA.
Great waffle Matt, but which do you promote overall?
I’ll often waffle on and on, stewing in my narcissism, forgetting that I had a real reply to your questions. I would apologize for it, but I’m starting to think you might like it.
In my humble opinion, there isn’t really a debate on this topic. Pick Seller. Always pick Seller. The first key difference is control. As an Amazon Vendor, the transaction is easier but you lose control over price. If you lose control over price, you can lose the product or even the whole brand. As an Amazon Seller, you keep control of this critical point.
In conclusion, any way of adopting Vendor (apart from strategies such as those above) will have the same end results possible using Seller Central and FBA.
But once you factor in the margins, FBA is often better. As long as the product has a market (something it will need either way), you stand to gain more return for your efforts on Seller.