Vendor and Seller: The Hybrid Sales Approach

Often people ask me whether they should be a vendor or seller on the Amazon marketplace. They rarely consider becoming both.

As I discussed in a previous post, each selling platform has its own unique benefits and challenges. Therefore, when I am asked the question, "Should I become a vendor or seller on Amazon?," my first response is, "Why not both?"

Taking the Hybrid Approach

If your business is set up to manage wholesale orders on the vendor side as well as direct-to-consumer orders on the seller side, what is stopping you from selling on both platforms? By taking this hybrid approach, you can tap into each platform’s benefits, maximize sales opportunities, widen customer reach and spread risk.

The process to become a seller on the Amazon marketplace is simple. This can be done online via the Seller Central dashboard and does not require any approval. Although be aware that to list in certain categories, approval is needed; and you will need to provide certain documentation to be approved.

To become a vendor and list your products on the Amazon marketplace, you must be invited by Amazon.com, Inc. ("Amazon") in order to list on the Vendor Central platform.

When I talk about selling on both platforms, I am not talking about mirroring the range that you have listed on Seller Central onto Vendor Central. While that strategy may work in order to avoid missed sales when Amazon is out of stock for a line, it can also create direct competition, conflict of interest and possible price wars. The hybrid approach is about devising a strategy specifically designed for your brand that looks at the full product assortment, a marketing plan and distribution. Unfortunately, no one-size-fits-all strategy exists.

Product Assortment

Start by taking a look at your product mix. Do you have a wide range that you can manage between the two systems? If you only have a couple of lines, it probably does not make sense to list your item on both platforms. If the range is wide, look at the different ways in which it can be broken down, taking into consideration factors such as price points, MAP pricing policy, product life cycle and margins.

Here are a few examples of questions to ask:

• Are there low-priced retail items that don’t make economical sense to sell as a vendor?
• Are there new products to market where you want to benefit from all the marketing and promotional tools available on Vendor Central?
• Do you have MAP-sensitive lines that Amazon may violate on the vendor side? (Remember, Amazon doesn't formally agree to MAP pricing.)
• Do you have discontinued stock that you want to sell in bulk at low prices that you could offer in a job lot to Amazon via the vendor route?

Some of the answers may conflict, but these type of questions should help you define how best to manage the range that you offer on both platforms.

Marketing Plan

At this point in time, Vendor Central provides brands with the best marketing and promotional tools available for the Amazon marketplace. I say at this point in time because the tools available on Seller Central have been improving, and one can only assume they will continue to do so.

Aside from having a range strategy, a brand must also have a marketing plan. Within this plan, the brand needs to consider which items it wants to promote and what types of marketing activity are best to invest in for those products and for the brand needs. This plan should sync well with a brand’s overall marketing strategy. This plan will also help define which products should be listed on the vendor side versus the seller side, based on the tools available on each system.

Distribution

A business must have a well-defined distribution strategy, which may impact whether the business sells to Amazon directly via the vendor route or solely as a seller. Does the business already sell wholesale or only direct to consumers? For example, a business that already has authorized distributors may not want to sell directly to Amazon, as its distributors may already be managing this on their behalf. Alternatively, a brand may have unauthorized distributors selling to Amazon that it wants to cut out. The brand could also potentially jeopardize current relationships with other authorized sellers if they go direct with Amazon.

Within this distribution strategy, the brand also needs to review their logistics and decide whether they have the correct infrastructure to actually manage wholesale orders and shipments or the right third party to manage this on their behalf. If they don’t, what changes would they need to make for that to be possible? What would be the cost? Would this impact their margins?

Note that Amazon Vendor Central has different shipping requirements from Seller Central. Don’t assume it’s one process for all. This is where I have frequently seen sellers that have moved to a vendor relationship get stung and receive charges for not adhering to Amazon’s vendor requirements.

Trade-Offs

One thing a brand must also consider is the trade-offs that come with taking a hybrid approach. This includes:

• Possible loss of control of pricing and product listings, if selling items via the vendor route.
• Possible slowdown in purchase orders on the vendor side if you end up competing on the seller side; as Amazon may decide to no longer attempt to compete, and orders will deplete.
• If your brand is important to that specific category for a Vendor Manager, they may make it difficult for your business to sell via the Seller Central route. I have seen seller accounts not approved for key brands that already have a vendor relationship.
• If a Vendor Manager sees you selling certain lines that are performing well on Seller Central, which you are not offering on Vendor Central, you might have a hard time ignoring and declining the requests for Amazon to list these items via Vendor Central.

Overall, if your brand has the right product assortment to manage between the two platforms, it makes sense to try out the hybrid approach. Just remember: Avoid direct competition and always consider the trade-offs before making the decision. Also, ensure your business is set up to support the two platforms. In my next post I will be offering a look at the set-up a business needs to ensure they can fulfill vendor "wholesale" orders and how this differs from Seller Central’s requirements.