Selling on Amazon
At some point, every supplier confronts the Amazon question, since not selling on this powerful platform eliminates millions of potential customers. But Amazon is a beast — a sales monster with all kinds of tentacles. So what is the best, most effective and profitable way for you to sell on it?
Sell your products to Amazon. Or to Amazon customers.
It starts with deciding how you want to sell. Do you want to use Amazon Vendor Central or Amazon Seller Central?
Essentially, when you sell on Vendor Central, you are a first-party supplier, selling items in bulk to Amazon that the eCommerce giant then sells itself, under the umbrella of its brand. Products that are Vendor Central items are usually listed as, “Ships from and sold by Amazon.” When you work through Amazon on Vendor Central, you’ll be using EDI for your transactions — the process will be similar to the one you use with traditional retailers.
With Seller Central, you are a third-party vendor on Amazon, using this web interface to market and sell directly to Amazon customers. You can handle everything from shipping to returns yourself, or you can utilize Fulfillment by Amazon (FBA) — for a fee, of course. With Amazon Seller Central, you gain more control but have increased responsibilities whenever consumers purchase your product, so you’ll want to make sure you have an order management portal that keeps everything accurate and up-to-date.
Amazon Vendor Central or Amazon Seller Central. Let’s talk pricing.
If you want to establish a minimum price for your products — which makes sense if you’re also selling on your own site or on other platforms — you’ll want to be using Amazon Seller Central. While Amazon says it will honor minimum advertised price requests, it also promises its customers that it will match any other seller’s price — and that can be a serious issue for Amazon Vendor Central suppliers. A lower price for the Amazon consumer will carry the day, and you may find your products suddenly marked down.
What about costs and margins?
If you’re going to use Vendor Central, you’ll need to be a skilled negotiator, because Amazon will pursue the best possible wholesale price. That’s essential to their business model, after all. Just as you want to protect your margins, they need to ensure theirs. And don’t be surprised if they try to negotiate lower in the future, and they will also take 4-10% for what is termed “slotting costs.”
With Seller Central, you’ll pay a flat fee based on the price of your product, somewhere between 8-20%. If you choose to use Fulfillment by Amazon, that fee will obviously go higher. The benefit is that you’ll be able to accurately predict what your costs will be with each sale, and price your products so you’re comfortable with the margins. For many, that makes Seller Central more appealing than Vendor Central.
Wait. This makes Vendor Central sound like the wrong choice for everyone.
It can seem that way, until you remember the clout and reach of Amazon.
With Vendor Central, suppliers can tap into the Amazon marketing machine, creating their own stores and leveraging the platform for coupons, content, and advertising.
When it comes to customer service, Vendor Central partners also gain advantages, because Amazon handles all aspects of it, including fraud. That’s a burden many suppliers are happy to put on Amazon. There are also many consumers who, when they’re shopping, value the security they discern from, “Ships from and sold by Amazon.”
Don’t discount the advantages of Vendor Central. Amazon has undeniable power in the marketplace, and suppliers using Vendor Central move a whole lot of merchandise.
But Seller Central has some real advantages.
You already know about the price-setting and margins issue, where Amazon Seller Central offers some real advantages. There are other valuable benefits with Seller Central.
- Accurate inventory management. Amazon has been known to run out of a product that is sold through Vendor Central. Not great if it’s your product that has no inventory, and you may not get a notice when supplies are running low. With Seller Central, you’re in charge of your inventory, and whether you’re storing it at your own warehouse or an Amazon Fulfillment Center because you utilize FBA, you’re in control.
- Speedier payment. If you’re a small business, you don’t need any reminders about the importance of cash flow. Unfortunately, Vendor Central suppliers will tell you that Amazon is not always quick to pay, and this can create real issues for smaller companies. Seller Central partners, in contrast, are paid every seven to 14 days.
- Easier international expansion. If you’re on Vendor Central, you’re limited to selling in the United States on amazon.com. With Seller Central, you can create an account that allows you to sell your products outside the United States.
Make an informed choice.
When it comes to choosing the right avenue to sell your products on Amazon, consider the type of products you offer, their price structure, and the scope of your brand. But no matter how you do it, the bottom line is that you can’t ignore Amazon — over 50% of online shoppers now make it the first site they visit when they’re looking for an item. You need to be a part of that.