Amazon Seller Central and Vendor Central may sound like the same thing, but the differences are significant and change the way you do business on Amazon. Amazon Seller Central is an excellent option for third-party sellers that want Amazon shoppers to see their stock on the site. Almost anybody can use Seller Central to sell their products to Amazon customers who are ready to pay a premium. However, the same is not true in the case of Amazon Vendor Central as it’s an invite-only system. To qualify for Amazon Vendor Central, your business needs to be prominent on Amazon’s radar. Popular brands and big companies are usually the kinds of sellers that make it to Vendor Central, which also changes the seller status from being a third-party seller to becoming a first-party seller (in fact Amazon is doing the selling for you).
Using Amazon Seller Central, the ‘third-party’ seller does the math, establishes prices and ensures shipment, etc. However, when it comes to Amazon Vendor Central, Amazon does the pricing and sells the product for ‘first-party’ sellers and pays them accordingly. Amazon Vendor Central sellers are primarily suppliers and Amazon, the buyer, while Amazon Seller Central sellers just exploit Amazon’s huge customer base and do the work themselves (excluding FBA). In order to become an Amazon Vendor Central seller you must demonstrate adequate demand to get considered and receive the special invite your company aspires.
Major Advantages of Amazon Vendor Central
- Sellers don’t have to fulfill individual sales as Amazon buys the inventory upfront in large quantities.
- Better and more customizable product listing pages, allowing adding videos, images and more. Enhanced content pages allow showcasing the product story using interactive product tours and comparison matrices.
- The items automatically become eligible for Amazon Prime. Many customers only purchase Amazon Prime eligible products even if they are more expensive than other non-prime items. Fulfillment by Amazon also automatically qualifies a product for Amazon Prime, but it does come at a cost.
- Items sold through Vendor Central appear as being sold and shipped by Amazon itself, which can result in much higher sales as customers trust the name.
- Vendor Central opens doors to Amazon Marketing Service, Amazon Pantry and Amazon Display Advertising.
- Increased interest from business customers.
- Access to Amazon Vine by paying an extra fee.
- Amazon Seller Central users are not only competing against other market players but also against Amazon and this price war can bring the margins down.
- Sellers using FBA may not be able to make a profit for many items, particularly slow-selling items
- Seller Central users need greater resources for maintaining stock, customer support and shipping, while the overheads are also high. Vendor Central sellers don’t have to worry much about these issues.
- Invoices are easier to factor for sellers tight on cash flows. They can get instant cash for Amazon POs by paying a bank fee (generally 2%/invoice).
- Amazon Vendor Central sellers have a better chance of winning the Buy Box
- Vendor Central is better if a business relies on Electronic Data Interchange
Major Disadvantages of Amazon Vendor Central
- Amazon negotiates up to 90-day payment terms with Vendor Central sellers, which means a longer payment cycle and a cash flow challenge. On the other hand, the payment cycle for Seller Central program is just two weeks. Amazon also gets entitled to a discount if it is paying you within a 30-day period.
- Many Vendor Central sellers feel threatened by Amazon’s complete control over their products and fear that it may directly compete by sourcing its products. In the case of Seller Central, Amazon does not usually get such a deep insight into actual profitability as it’s not buying the items in bulk.
- Vendor Central program is not available to all sellers and Amazons only invites high-volume and popular sellers. Seller Central account, on the other hand, is relatively easy to setup and does not put such restrictions.
- Although Vendor Central listings are more customizable and content-rich, they cannot be edited on-the-fly. Once your listings go live, you need to seek Amazon’s approval to make any changes in them. The Seller Central users have the freedom to make any changes they want without any intervention from Amazon as long as they don’t violate Amazon’s TOS.
- Seller Central users are responsible for their own customer services and have complete control over their inventory. This allows them to make disbursements in days instead of weeks.
- Seller Central users can maximize their profit as they have full control over what they charge for their products. They can increase prices as sales pick-up, which is something Vendor Central users cannot do.
- Amazon chargeback will cost sellers in case of oversight in shipping requirements.
- Investigating a chargeback of revising a charge is also more complicated as customer support is more complex as a vendor. You also cannot make any direct contact with the customers.
- Amazon can edit your listings, which may affect sales.
- Most Vendor Central contracts contain co-op fees, including Market Development Funds ranging from 3-15%, freight allowance ranging from 2-3% and 1-2% damage allowance. Amazon uses co-op fees as a method to make some profit and retrieve some operating costs.
Amazon Vendor Express
Amazon Vendor Express is an intermediary between the Seller Central and Vendor Central. It allows sellers to opt-in, instead of waiting for an invite. VE offers more or less the same features as Vendor Central. Amazon Vendor Express sellers have two options to fulfill orders i.e. a) they can opt for FBA and let Amazon handle inventory and shipping or b) they can opt for drop-ship and Amazon will send a pre-filled form to business owners, allowing vendors to ship directly to the customers.
Advantages of Amazon Vendor Express
- Joining Amazon Vendor Express is free and there is no requirement of monthly, annual or per item referral fee.
- If your product demonstrates potential to sell during the trial period, even the initial purchase will be made in bulk, meaning greater revenues and sales volume.
- Just like Vendor Central, your products will be listed as ‘sold and shipped by Amazon’. This not only increases chances of winning a Buy Box, but also boosts sales due to the trust people have in Amazon.
- Amazon handles the customer service
- Access to Amazon Marketing Services for better sales reports, optimized content and advertisements. However, Vendor Express gets no regular access to A+ content, which allows creating more dynamic and engaging product listing using videos, interactive product tours, and comparison matrices and so on.
- Sponsored products allow vendors to pay Amazon only when their ad is clicked after being featured on Sponsored Products pages.
- Vendor Express allows sellers to familiarize themselves with a vendor-platform without the pressure of coming under ‘usual’ vendor-agreements. VE is a low-commitment option compared to Vendor Central
- Vendor Express sometimes work well for products which haven’t performed well in the past
Disadvantages of Amazon Vendor Express
- A trial period before the initial order requires you to send donation products for testing customer demand and sampling the market. Sellers have to bear the cost of the trial as an investment in the VE platform. This can be a risk, particularly if you are selling high-cost items as there is no guarantee that you’ll be offered a purchase order.
- You’ll lose pricing control once the product is approved as you’ll have very little space for negotiating when selling to Amazon in bulk
- Increase in sales volume does not necessarily mean increased profit as profit margins shrink due to bulk purchase
- Just like Vendor Central, Vendor Express also suffers from longer payment cycles and you may find yourself waiting for payments.
- Opting for Vendor Express may not work well for flagship products as you’ll lose control over them once you hand them over to Amazon
The most important thing that sellers need to realize is the amount of control and customer contact they lose by selling directly to Amazon and becoming its supplier. Sellers also must be ready to accept lower profit margins and longer payment cycles. In return, sellers get more customized listings and access to marketplace trusted by millions. They also commit tiny resources, particularly time, in selling their products to consumers as Amazon does the most work for them.
Sellers need to be realistic and thoughtful before deciding to become a “first-party” seller. Those who are well aware of both pros and cons of the platform are more likely to have a good experience. However, unrealistic expectations can often lead to a drastic experience, which also affects the business. It primarily depends on the kind of business you are running and your strategic goals as a seller.
Amazon Vendor Central can prove to be very efficient for large-scale manufacturers and distributors with limited time for direct-sales. However, customer-oriented businesses having resources and time to handle customers should stick to Seller Central and make use of Fulfillment by Amazon to tap into the large numbers or loyal Amazon Prime customers. In the end, it all boils down to what you are selling, skills, resources, managerial experience and any other competitive advantages your business might have.
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