The Hybrid Approach To Amazon Selling: 1P vs 3P
Vendor Central, 1st Party, 1P
Amazon sells your products on a wholesale relationship. You send your inventory to Amazon, they control your pricing and your listing displays as "Ships from and sold by Amazon.com".
Seller Central, 3rd Party, 3P
You sell your products on Amazon's marketplace and you have Amazon fulfill your orders from their fulfillment centers (Fulfillment by Amazon, FBA) and/or you can fulfill orders from your own warehouse or 3rd party warehouses (Fulfillment by Merchant, FBM).
Adding 3P (marketplace) to Amazon if you already sell 1P to Amazon
- You can open up a marketplace selling account and safely sell your products that Amazon 1P is not selling.
- You may be able to safely sell on your 1P listings (the ASINs where Amazon is selling your products 1P) but we recommend asking your rep at Amazon if there they have any objections. We recommend telling them that you want to have products available via FBA in case 1P runs out of inventory.
To Sell 1P or not to sell 1P to Amazon, that is the question.
As 3P sellers that control their own brand become successful, they are commonly approached by Amazon Retail about selling direct to Amazon (1P). This is a flattering proposition that should be carefully considered. As with anything, there are pros and cons.This article on 1P vs 3P by our friends at Buy Box Experts is extremely insightful.
- bulk purchase orders from a retail giant.
- ASIN (listing) optimization by Amazon's internal merchandising team.
- listing priority since Amazon is incentivized to sell through your inventory.
- credibility for your brand among skeptical and careful consumers since your products are sold directly by Amazon.
- you lose control over your pricing since Amazon has the right to sell at whatever price their automated system decides -- even below your MAP policy.
- your margins are reduced since you're selling at wholesale prices, not retail prices
- your payment terms are longer than the 14 day disbursement cycle on the marketplace.
- Amazon gains leverage as you become more reliant on your relationship with them. This leads to lower margins and longer payment terms.
The Hybrid Strategy
Many successful sellers (brands, manufacturers) find themselves in a hybrid arrangement with Amazon where they're selling a portion of their SKUs direct (1P) and the remainder on the marketplace (3P). Amazon's merchandising teams are often selective about the SKUs that they decide to carry 1P. The math needs to make sense, this means some SKUs are left to be sold 3P if at all.
We believe it's most ideal to sell only 3P. This is the surest way to protect your brand. If you sell 1P, we hope you will also find ways to sell at least a subset of your SKUs 3P to take advantage of the benefits outlined above.
Zentail supports sellers that sell 1P and 3P. Let us know if you have any questions.