Before we jump into the pro’s and con’s, lets revise the difference between Amazon Vendor, Amazon Seller and the Hybrid approach:

Amazon Vendor 

Brands that operate under this model are considered a first-party seller (or 1P). This is much like a wholesale relationship whereby Amazon purchases your product at a discount via Purchase Order, and then sells the product to the consumer on your behalf. Products sold through this model are “Sold and Fulfilled by Amazon”.

Amazon Seller 

Under this model, your brand is considered a third-party seller (or 3P). This is a direct-to-consumer relationship; you sell your products directly to customers and pay Amazon a referral fee for the privilege of selling on their platform. Through Seller Central, you’re able to control what products you stock and sell on the platform, your inventory levels, and your pricing.

Hybrid 

This is a model we often recommend at This is Unicorn. Taking a hybrid approach allows a seller to maintain the hands-on control of a Seller Central channel while reaping the promotional advantages of a Vendor Central channel. 

Now let’s take a look at the pros and cons of each platform:

Vendor Pros:

• Higher algorithm prioritisation
  The Amazon algorithm tends to prioritise itself in the search result.
• Greater chance of winning the Buy Box
  When several sellers are on a listing, Amazon tends to win the Buy Box.

• No customer service is necessary
  Amazon controls all customer messages and complaints.
• Amazon brand trust
  Customers are more likely to buy from Amazon directly than a seller.
• Avoid Fees
  Vendors avoid typical Amz seller fees, which include costs for referrals, fulfilment or storage.

Cons: 

• Limited Brand control
  The wholesaler is unable to directly contact consumers if there is a quality control issue or to prevent a negative experience.
• No pricing control
  Amazon has complete control over product pricing. Vendors may not see the profit margins they were hoping for on certain products. It is also very difficult to implement prices increases.
• No stock control
  The wholesaler has no control over how much stock Amz has at any given moment or how large their POs will be.
• Amazon makes the rules
  Amazon has Chargeback & Shortage fines and can withhold POs if negotiation terms are not agreed favourably. Amazon can also end their Vendor agreement at any time with no notice.
• Difficult to update the catalogue
  Brands must apply to sell new products and can not control how much or if Amz will buy.

Seller Pros:

• Increased Brand control
  The brand has direct contact with its Amazon customers. Brands can email customers after purchases to follow up and ensure they’ve had a positive experience thereby increasing the number of positive customer reviews. It is also easier to perform listing optimisation.

• Complete pricing control
  The brand can control the price being offered.
• Complete stock control
  The brand can choose how much of each product will be available and ensure shipment is up to quality standards.
• Easy to add new products
  Adding new products to the catalogue is quick and easy.
• Better Analytics
  Get access to more detailed analytics (e.g. buy box percentage)

Cons 

• Less brand trust
  Customers are more likely to buy from Amz directly than a seller – however, if Amazon is not on a listing the buyer is most likely to buy from the brand directly.
• Lower algorithm prioritisation
  The Amazon algorithm tends to prioritise itself in the search results – once again this is relevant if Amazon is on the listing.
• Lower chance of winning the Buy Box
  When several sellers are on a listing, Amazon tends to prefer the brand owner unless a distributor has a lower price.
• Complete stock and customer service responsibility
  The seller is responsible for shipping items – this stress can be reduced by using FBA and also responds to all customer messages and complaints.

Hybrid Pros:

• Maximize sales opportunity
  Offering some products via a Seller account and others via a Vendor account, creates the most selection for customers for the highest sales opportunity.
• Widen customer reach
  Access to Amazon Marketing Services is the premier method for gaining visibility on Amazon.
• Spread your risk
  If Amazon suspends the account on one side, there is still business on the other to fall back on.
• Brand awareness and credibility
  Amazon deciding to sell products equates to a stamp of approval from a global, trusted marketplace. Some of that trust and credibility then extends to the brand.
• Access to all tools
  Access to the full range of marketing, merchandising, and promotional tools that Amazon has to offer.

Cons:

• Loss of control over listing
  The content used on Vendor listing pages is “locked” into Amazon’s retail catalogue. Even if the Vendor account is closed, the content remains and is almost impossible to override.
• Loss of buy box
  Amazon will do everything it can to win the buy box. The only way to compete with a Seller account is to drop the price point so low that Amazon would no longer be making a profit.
• Slow initial sales velocity
  Moving some of the inventory from the Seller side to the Vendor side may cause a temporary lull in sales. Amazon needs some time to learn about your product to show and advertise it to the right customers.
• Impacts on profit margin
  Amazon requires certain allowances when accepting products on Vendor Central. A damage allowance accounts for any damaged products they are unable to sell. A freight allowance covers the cost of shipping so Amazon can offer free shipping to customers. Both of these are small percentages that will be agreed upon in the initial contract.

Are you still wondering which option is best suited for your brand? Our brand strategists at This is Unicorn will help you navigate the ins and outs of both platforms and put together a personalized strategy that suits your business.

We’ll ensure you avoid any pitfalls that arise and take advantage of everything a hybrid-model solution has to offer. Get in touch with us today to see how we can help you jump Amazon’s hurdles and sparkle on the platform.