Should a Successful Seller Move Over to Vendor?

The invitation arrives in your inbox, inviting you to sell to Amazon as a vendor via Vendor Central. But, if you are already selling on Amazon as a seller and have a successful, strong business, is this really the right move?

It is not an easy decision and there are many factors that need to be considered. There is no "one size fits all" approach. A lot depends on how your business is set up, your goals and future plans. The vendor platform is very different from the seller platform and one should not confuse the two.

While both are sales channels, the route to sale is very different. A vendor takes on the role of a wholesaler, selling directly to Amazon. Amazon is their customer and purchases the products at a wholesale price and then sells directly to the customer, adding a markup for profit. A seller takes on the role of a retailer, selling directly to the end consumer. They manage the orders, inventory and set their retail prices. Although if they sell via the Fulfillment by Amazon (FBA) program, Amazon handles the order management on their behalf.

The Benefits of Being a Vendor

Years ago, it would have been easy for me to highlight the advantages of becoming a vendor versus a seller, partly because of the selling tools and features available to vendors. Today, it is very much an even level playing field. This is especially true if you are a brand owner enrolled in the Brand Registry unlocking more seller features in Seller Central.

Looking at the selling tools available, both vendors and sellers have access to campaigns ads, Amazon A+/EBC pages, brand stores, promotions, a review solicitation program, and business pricing. However, some of the tools are different between Vendor Central and Seller Central. For example, with review solicitation, on the vendor side there is the Vine program. Sellers can participate in Vine as well as the Early Reviewer Program. Also, the type of promotions available differ and with the campaigns ads, display ads are only available to vendors that have access to Amazon Marketing Services (AMS).

The only major differences are that vendors now have access to marketing packages, where they can pay to have their products appear in key placements across the site, such as category pages and even emails. Also, with promotions vendors get greater visibility when promoting certain products, with higher chances of their items appearing on the Deals page. However, I would question the success rate of investing in those versus AMS. Do customers still browse category pages? Can products be easily found among the masses on the Deals page?

Aside from the selling tools, we used to mention that Amazon would place volume orders on the vendor side. But that is not necessarily the case, especially with Amazon’s continued goal to shorten the lead time as much as possible to enable them to hold little weeks of cover, as well as the launch of Direct Fulfillment. It is also a complicated subject, as ordering is all automated.

As there are few benefits these days, the points raised above are usually not the key decider as to whether a business should shift to the vendor side. Today, a lot of decisions that brands make to become a vendor on Amazon come down to brand protection and distribution.

Protecting Your Brand

How is your business set up and how are the products distributed? For example, are you selling to other retailers via distributors or are you only selling direct to consumer? This is important, because if you are a seller and sell a lot of items via a distributor and you as the manufacturer decide to not sell directly to Amazon as a vendor, the distributor might. If that happens you might find yourself competing for the Buy Box with Amazon in addition to having poorly created listings, which will override your seller listings regardless of the Brand Registry.

If you don’t sell via a distributor but do sell to retailers, be aware of Amazon’s Product Availability Policy for Manufacturers, which states, “If you are a manufacturer and your products are sold by any other retailers or distributors, we expect you to offer Amazon Retail the option to source those products at competitive terms for sale as Retail items only.” Also, in Europe, as a manufacturer you need to be familiar with the EU’s Competition Law. If you sell only direct to consumer, then you may not feel "forced" into a vendor relationship with Amazon to protect you brand.

Watch Out for Amazon’s Global Strategy

One other thing that needs to be taken into consideration is Amazon’s global strategy. If they can’t source the product in their own marketplace but that brand is available in another country, they might end up sourcing the product from another marketplace and importing the product themselves. This is very common in Europe, with Amazon’s European Fulfillment Network (EFN) and Amazon has now launched a similar program in North America, known as the North American Fulfillment Network (NAFN). Amazon also has their global store and are incentivizing vendors to offer their products through direct import to other countries.

If you are a global brand with affiliates or exclusive distributors in different countries, you will need to review your global strategy. If there is risk of Amazon getting hold of the brand and then selling it on your marketplace and competing with you on the Buy Box, you will need to manage this and investigate strategies to reduce this risk.

Many manufacturers are now taking the hybrid approach, selling on both platforms, Seller Central and Vendor Central, and managing their product assortment and distribution across the two. For more information on this approach and deciding the best route to sale on Amazon, take a look at our whitepaper on Seller, Vendor or Hybrid.

If that is not for you and you decide to become a vendor, you don’t have to do this all in one go. Transition slowly, offer Amazon a few lines in the range on the vendor side to start with and then once you familiarize yourself with Vendor Central and the ways of working as a vendor, you can move more listings over. For more tips on transitioning over from seller to vendor, make sure you watch our webinar on this topic.