Amazon Selling: 1st Party vs. 3rd Party
When it comes to online retailers, Amazon reigns supreme. Amazon owner, Jeff Bezos, claimed his spot as the wealthiest man in modern history thanks to the retail giant; so if you’re looking to sell products online, then turn to Amazon and enjoy a sizable profit. Amazon’s momentum won’t slow down any time soon, so make sure you take advantage of the platform’s capabilities before everyone else jumps on the bandwagon.
At first, the process may seem overwhelming with its complex vocabulary and various approaches. But once you understand the language, you’ll realize the process is actually straightforward. We’ve broken it down into easy-to-understand steps to eliminate all confusion and position your products onto Amazon quicker!
Amazon’s 1st Party Method
Amazon offers two different selling methods: 1st Party and 3rd Party. Selling 1st Party (1P) means that you have a wholesale relationship with Amazon. This is frequently referred to as a “Vendor Control” relationship. Essentially, you execute a bulk order with Amazon via PO. You negotiate a price with them and then secure shipping to Amazon warehouses. Once the delivery is made and the PO terms are executed, your product is officially out of your hands. It is now up to Amazon to move your product as they see fit. They control the prices, chargeback percentages, and countless other factors in the process of retailing your product. Essentially you relinquish control in order to sell your product directly to Amazon in bulk.
Amazon’s 3rd Party Method
If you don’t want Amazon controlling your product or you don’t have enough products for wholesale, try selling 3rd Party (3P). This is frequently referred to as a “seller control” relationship. Under this relationship, sellers are essentially using Amazon as one additional vendor in a web of vendors that makes up their entire distribution network. Although you’re executing sales through Amazon fulfillment centers, you still have complete control over your product’s pricing. Under Fulfillment by Amazon (FBA), you can store your products in one of their fulfillment centers where they will package them and ship them out. You can also fulfill the orders from your warehouse or one of your choosing. Amazon refers to this as Fulfillment By Merchant (FBM).
Which Method is Better for Increasing Sales on Amazon?
Plenty of sellers struggle to figure out the best selling method for them. The 3P method allows sellers to reach customers through Amazon without relinquishing control over pricing and branding. You set the price. You control the distribution. You control the marketing.
Establishing a 1st party relationship with Amazon allows sellers to sell in bulk directly to Amazon via purchase order. This method is far less risky for businesses that are trying to move as much product as quickly as possible. Amazon is the most trustworthy eCommerce source on the web. When you sell them your product in bulk on a wholesale basis, you can trust that they will apply appropriate markups and market your product without damaging your brand.
1P’s major disadvantage, however, is that it forces companies to relinquish control over your product’s pricing and some of its marketing. Amazon marks the price of your product up in order to cover costs incurred when they purchased your inventory. Additionally, by selling in bulk to Amazon, you are essentially marking your product down below its market value.
When you leverage a 1P relationship with Amazon, you trade the ability to price and market your own product for guaranteed wholesale revenue via PO. When you leverage a 3P relationship with Amazon, you maintain control over pricing and branding, but take on the risk of making a bad decision and experiencing a consequent dip in sales.
So what’s the right move?
Try Both: The Hybrid Approach to Amazon Sales
If you’re struggling to move inventory via your 3P relationship with Amazon, you can add some 1P to your Amazon sales strategy. By opening up an Amazon marketplace account, you can work with Amazon to establish a 1P relationship and move product you couldn’t sell on your own. Before you follow this option, we recommend giving your Amazon rep a call to get their thoughts.
Finding The Best Approach to Increasing Your Amazon Sales
While an Amazon sales strategy involving a 1P and 3P combo may sound ideal, the least risky way to sell your inventory is still to use the 1P route. This method will ensure that Amazon processes your products and sends them out quickly and efficiently. It will also provide you with a guaranteed level of sales revenue since you’re essentially selling in bulk to Amazon and then letting them bring your product to market.
If you choose the 3P route, we strongly encourage that you leverage some 1P to mitigate risk.
Build Your Amazon Market With Premiere Creative
The way you decide to sell through Amazon is a matter of preference and output volume. Finding the best selling method and maintaining it can be overwhelming, but Premiere Creative is here to help. With over two decades of experience with digital marketing and eCommerce. We can help optimize your Amazon sales and keep your business running smoothly. Contact one of our Amazon experts today at (973) 346-8100 and let’s talk business!