by Carina McLeod, on June 7, 2018
Businesses can work with Amazon.com, Inc. ("Amazon") in two different ways: as a vendor or as a seller. A vendor relationship is when a manufacturer or distributor sells to Amazon via wholesale, while a seller is a retailer on the Amazon marketplace selling directly to the end consumer.
Vendors work with Amazon similarly to how they would work with brick and mortar stores. Amazon purchases the items from the vendor at wholesale prices and sells the product to the end consumer. Amazon places orders in bulk and holds inventory in their fulfillment centers (unless the vendor agrees to ship orders directly to the consumer). Amazon is the vendor’s customer (not the end consumer) and once the goods are shipped, ownership of the goods is passed on to Amazon. Amazon becomes the retailer and seller of record.
How Do We Become a Vendor?
To become a vendor on the Amazon marketplace, you need to receive an invitation from the retail team. If the retail team are interested in your brand they will make contact, usually through email, although I have had vendors be approached by Amazon at trade shows and exhibitions. If you don’t receive an invite, you could try and reach out to Amazon via the Contact Us link on Vendor Central. Alternatively, I have heard some brands make contact directly with Vendor Managers via LinkedIn. There is no guarantee this direct approach will work or even get a reply. If your brand makes enough noise in the industry, they should be in touch!
To be invited, you need to be attracting Amazon’s attention. It might be that you are a private label seller with a rapidly growing brand and top-sellers in certain product categories. It might be that you have a brand that has a certain market share or influence in a specific industry, or you could have a wide range of products that Amazon is interested in for selection purposes. A lot depends on the product category and their goal at that point in time.
Amazon predominantly works with manufacturers and brand owners, but can also work with distributors if they have brands that are hard to source and can provide Amazon with adequate margins.
What is Vendor Central?
If you decide that you want to proceed and become a vendor, Amazon will send an invitation for you to open an account via Vendor Central. Vendor Central is the system that all vendors access to receive their purchase orders, manage their shipments, raise invoices and manage their products and marketing activities, similar to Seller Central.
Upon receiving the invitation, you will need to accept the trading terms and enter your banking details before you can have full access to the account. It is advisable to negotiate the terms and not accept Amazon’s first request. It is easier to negotiate terms at the start than to renegotiate them once you've agreed. Just make sure you read the small print and build all allowances in to your calculations. Plus, Amazon will ask for margin improvements annually, so be prepared for this in your costs!
Once you have full access to Vendor Central, you are then able to set your products up. When setting products up, allow additional time before the items appear live on site. Unlike Seller Central, items that are set up on Vendor Central will not go live immediately. They will need to be reviewed and approved by the catalog team to ensure they adhere to Amazon style guides.
When the items have been set up, you can expect to receive purchase orders. These are typically sent weekly. You can request the time and date you would prefer to receive these. One thing to note: Simply setting up the items does not guarantee that Amazon will order inventory, and if they do, the quantity may be extremely low. Amazon has an automated ordering system that manages their orders; this system takes into account sales history, glance views, conversion, current inventory levels and lead time. To help products become available from day one, consider offering your products via Direct Fulfillment and shipping items directly to the end customer.
Resources and Requirements
Vendors can enhance and promote their listings by taking advantage of the different tools Vendor Central offers. To help boost conversion, you can create A+ content to enhance product listings, join the Vine program to generate customer reviews and set up promotions, as well have access to Amazon Marketing Services (AMS) to build advertising campaigns to help improve traffic.
One thing vendors need to be aware of is Amazon’s strict requirements when it comes to receiving and shipping orders. Amazon holds little inventory; with such a vast selection of products, they don’t have the space. Plus, it helps keep costs down to allow Amazon to invest more heavily in other initiatives, such as the Prime program. This means it is vital that the process, from sending orders to receiving the goods, is as short and efficient as possible. Amazon has specific metrics vendors must meet, and if they don’t, Amazon will fine vendors in the form of chargebacks, as failure to meet these standards results in delays and out-of-stocks.
Being a Vendor is Not the Same as Being a Seller
The vendor relationship differs from the seller relationship. Businesses that are already familiar with the seller side cannot expect to mirror the same approach on the vendor side. For more detail on this, I recommend you watch the Transition from Seller to Vendor webinar and take a look at the white paper I wrote on the Seller, Vendor or Hybrid approach.
In short, if you are a direct-to-consumer business not looking to expand to other distribution channels, the vendor side may not make sense for your business. However, if you have a wholesale set-up or have such plans for the future, the vendor route might be for you. Of course, there are more factors that will influence your decision, but it is key as a business that you are first clear on how you plan on distributing your products.