If you are already an Amazon seller, or maybe an entrepreneur looking for opportunities to grow your brand who is considering to sell your products on the world’s leading e-Commerce platform, you might have heard of the terms “seller central,” and “vendor central.” Being on the seller central side in Amazon means you own the product and have complete control of the sales process of your products, from listing to marketing and promotions– while being on the vendor central side means Amazon has bought your product. While it seems like a very handsome prospect, being a vendor central brand means there will be some restrictions with regard to your products’ sales cycle process flow. Brenda Crimi discusses the pros and cons of being a seller central brand versus being a vendor central brand on Amazon, so you can make an informed decision on how to manage your sales on the e-commerce giant’s platform.
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It’s Brenda Crimi with AMZ Alliance. I’d like to talk to you about being approached by Amazon to buy your product. Is that a good thing or a bad thing? I’m hoping to arm you with the information, so you can make an informed decision on whether it’s right for your business. What we want to talk about is if you’re approached by Amazon to buy your product is a good thing? It’s referred to seller central or vendor central. I want to talk about what that is and what it looks like to you. Seller central is simply selling on the Amazon platform. You open up your professional selling account. It’s $39.99 a month and you fill in the blanks, you list your product, you do all the promotion and things like that. That’s called a third-party seller. You open and manage the seller account and you sell your products directly to the Amazon customers. You’re responsible for either fulfilling those orders are doing FBA.
Vendor central is the platform in which when Amazon buys your products, you then log in and manage your account through vendor central. In this case, you’re considered the first party vendor and you act as a supplier to Amazon. Amazon buys your product and then Amazon sells directly to your customer, the Amazon customer. It’s completely hands off for you. Basically, Amazon buys the product at a wholesale price. An example, when you’re looking at a listing, start paying attention to the listings when you’re shopping on Amazon, so you get an idea of what it looks like from the eyes of the seller. When you see underneath the price, “Sold by a company name and fulfilled by Amazon,” that is a product that’s managed by seller central. It might be sold by Richard’s Expo and fulfilled by Richard Expo, in which case Richard’s Expo is managing the fulfillment as well. In this particular case, it’s sold by Richard Expo and fulfilled by Amazon, so that’s a prime product, an FBA product sold within Amazon. Those types of options are managed through the typical seller central platform.
Here’s a listing example of vendor central. When it says, “Shipped from and sold by Amazon,” that means that Amazon owns those products. It could be that Amazon bought the products or it could be that Amazon owns that product as far as that’s their brand. You’ve seen Amazon deals and things like that. Amazon has started launching their own brands. It could be one of those two ways, but those are managed through the vendor central platform. What’s the difference between seller central and vendor central? I want to give you the information because a lot of times people think it’s a great idea to sell their products to Amazon because it would be completely hands off and, “I’ve got other things to worry about.” When Amazon approaches and says, “I want to buy your product.” You are swooned and, “That’s a great idea.” Let’s talk a little bit about the details as to the pros and cons of each.
In seller central, remember this is where you maintain complete control of your product. You create the seller account. You get fourteen-day payment terms. Every two weeks like clockwork, Amazon makes that deposit into your account for the sales that happened up to that two-week period. It’s very consistent. There’s nothing you have to do. It’s on auto. You just get it directly deposited into your account. That’s a good thing. Cashflow is a huge piece of a benefit of seller central because you’re getting your money in fourteen days. You have complete control over your inventory. If Amazon asks you if you had a vendor central, if they had a deal with you, they would then ask you to send certain amount of units at a time and that may not work within your cashflow to have those units available to you. When you’re in seller central, you have complete control over your inventory. You may send a couple of dozen units at a time. You have complete control over your pricing. This is a huge piece when it comes to seller central. You can set the price based on what’s best for your business, what’s going on with the competition. You can change it daily. I don’t recommend daily, but you can change it as often as you need to. You do that split testing on which price works best but you have complete control over the pricing.
You have complete control over their pricing, you have higher sales margins. You’re selling this at retail, they take their fees, and then you maintain the margins, you received the margins. When you have control of that, then that affects your cashflow in a positive way, so you have higher sales margins. You also have control over promotions in seller central. Let’s say you have a product and it’s not necessarily ranking the way that you want to, you’re not seeing the sales that you want to, and you want to try out some different promotional options, you can run those promotions. You can run them for a week, you can run it for five days, you can run them for a month. Whatever you decide you want to do, you have complete control over those promotions. Then control over listings. When you have control over the listing, you create the listing, you manage the listing, you can change your keywords, and play to see what works best for you. The point that I want to make when you look on the pros that I listed or the details that I listed on seller central, you see the word control a lot. In seller central, you have complete control of your product and what you’re going to do with that product or how you’re going to manage that product.
Let’s look at the vendor central side. First of all, it’s by invitation only. You usually get an invitation from Amazon by having some type of sales history on Amazon, but sometimes they might see your product off on another platform because they have scouts out there looking for products that they might be interested in. Maybe they saw your product within social media or some other avenue. They give you an invitation and say, “Would you like to become a vendor of Amazon?” The first thing I want to point out is cashflow. Cashflow is important to you as a business. Amazon has a 60 to 90-day payment terms. What that means is they’re going to have you supply them the product and then you’ll get the payment within 60 to 90 days of them receiving that product. That might be something that’s important to you if cashflow is tight, so keep that in mind. Amazon is also going to negotiate wholesale pricing. They’re going to offer what they think they should pay for this product and it’s going to be a wholesale price. Your margins may not be as good. This is the next point I want to stress is you have little control over the retail price, how they’re going to sell that product, what price they’re going to sell that product at. That’s called MAP pricing, Manufacturer Authorized Pricing.
What happens with Amazon is it’s their platform and they want to be one of the lower advertised prices for the product. If they see your product out somewhere else on sale or maybe they see a lot of competition at a lower price, they own the product, it’s within their right, and it’s also within their contracts, to lower that selling price to whatever they deem it’s necessary. This might be important to you, especially if you are selling to other boutiques and so forth on a wholesale basis. If you’re retailing your boutiques they have to honor your MAP pricing and then their customers go on to Amazon and see at a lower price, that may not go over so well. That affects your integrity as a brand. Remember that you’ll have little control over pricing. Amazon sets the price of that product. Because you have little control over the pricing the product’s selling for and the wholesale pricing, you’ll have a lower sales margins. You’ll have to decide if that’s worth within your business model to manage.
There are inventory sales gaps. Amazon will go ahead and order the product based on what they perceive as the sales velocity of that product, and they might underestimate, and they might overestimate. One thing that happens is Amazon’s got their hand in several different products. They’ve got a lot going on. They may find that your product is out of stock for a few weeks before they put in another order for you, get it checked in and available to your customer. You may be losing out on sales because of that. The most important is the biggest misconception is, “If Amazon buys my product, if I’m a vendor of Amazon, I get straight to the top of ranking on sales pages.” That’s simply not the truth. Amazon buys your product, you create the detail page, and it’s up to you to manage and pay for the marketing of that particular product. It is not a go pass to the top of page rankings and therefore equaling in so many more sales than what you would get otherwise.[Tweet “Choose which one is right for your business, make informed decisions.”]
In summary, what I want to tell you about this is that in seller central, you maintain complete control of the process and in vendor central, Amazon maintains complete control of the process. Why would one person want to choose seller central versus vendor central? The first thing that comes to mind as a product developer is that you may just not have the time to manage the products on Amazon. The vendor central certainly may seem appealing to you because then you’re not having to spend any time and Amazon is managing that. I want to give you a different point of view on that. Choose which one is right for your business, make informed decisions, but the alternative option is to maintain complete control of your listing and work with an Amazon selling consultant instead.
If you don’t have the time to manage your listing, hire an Amazon selling consultant, like AMZ Alliance. There are lots of us out there. You can Google, “Help with Selling on Amazon” to find other options out there. Then you can maintain complete control of the selling process. I hope I’ve helped debunk some of the questions about selling on Amazon versus vendor central. It’s all informative in itself and it’s an important information to know. If you’re approached by Amazon to sell your product, then you can make an informed decision, whether it’s right for your business model.
Tune in to Brenda Crimi next Office Hours. Connect with and find out more about Brenda Crimi in our Experts Directory.