Amazon is a massively influential and useful sales channel for manufacturers and brands. However, to get the most out of it, it’s vital to understand the different potential approaches to selling through Amazon. This is your one-stop guide to Amazon Retail.
To kick off, it might be a good idea to check out our Amazon Glossary. It's a quick guide to some of the terms and acronyms commonly used with regard to Amazon.
To make things simple, we’ve divided the guide up into three main sections. We’ll be diving deeper into these bullet points over time, so be sure to bookmark and check back as we continue to build the resource library.
Branding and Control
- Brand Control
- Pricing Control
- Sales velocity
- Customer Service
- Amazon support
To kick things off, we’ve got a high-level overview of each main section.
Brand and Pricing Control
For many brands and manufacturers, their first business interaction with Amazon comes in the form of a negotiation as Amazon looks to sign them up to its Vendor Central service. Through this service, Amazon makes wholesale orders of their products.
Clearly, harnessing the power of Amazon’s audience size and the convenience of its platform should be an opportunity that manufacturers take seriously. However, too often there is a lack of attention and focus on the follow-up to a wholesale agreement with Amazon. This can result in a loss of control, over pricing and brand image.
Ex-Amazon employees say that Amazon’s primary concern is selling units, and that to achieve this, the retail arm may price lower than your Minimum Advertising Price. Brands are more or less powerless to stop this. The ecommerce giant’s leverage and negotiation practices are such that they can afford to play hardball with all but the biggest brands.
The result is that your brand can be damaged as customers see the lower price and perceive the item to be of lower value, because of the discount.
This is by no means an inevitable result of selling through Vendor Central – it’s just an example of a scenario which has negative consequences for your brand. The core issue is that you relinquish control over the customer’s experience of your product and brand as soon as it’s shipped out to Amazon, moreso than with most distributors or retailer.
On the plus side, selling through Vendor Central gives brands and manufacturers access to Amazon Marketing Services (AMS). This is a set of marketing tools to drive engagement and brand awareness through Amazon. With more than half of consumer product searches beginning on Amazon, the ability to put the brand in front of shoppers at their purchase destination is highly valuable. Perhaps most importantly, it enables them to create a store page where their products are collected under one branded page.
When evaluating a wholesale Vendor Central presence, it’s important to consider the alternatives. Of course, you could decline to sell to Amazon in the first place, or stop the existing sales. Alternatively, brands and manufacturers can set up third-party Seller Central accounts, which gives them direct control of their presence on the channel. A hybrid approach is often recommended, which gives businesses the access to the AMS tools as well as the ability to directly manage their image, pricing and presence.
Being approached by Amazon to sell through Vendor Central can be a solid source of reliable income for manufacturers and brands, as they tend to order large quantities of product. When compared to the margin available through direct sales on Seller Central, clearly the wholesale margin is lower, but it may surprise manufacturers to know that they could make twice as much margin on a Seller Central sale. Of course, this route requires significantly more active management.
In terms of costs, therefore, Seller Central generally requires either an internal resource or a managed service, which naturally adds cost on top of Amazon’s fee, which varies by category. However, Vendor also comes with extra costs – with packaging fees, Market Development Funds, freight and damage allowances all adding up to a not insignificant cut of your margin. Of course, that margin is also smaller in the first place than with Seller Central.
Products sold to Amazon through Vendor are automatically eligible for Prime, and are more likely to win the Buy Box than a third-party listing for the same product. This effect can be replicated by a third party to some extent by using either Seller-Fulfilled Prime or Fulfilment by Amazon, both of which enable third-party listings to receive Prime status.
With Vendor Central, you have no ability to scale inventory up or down to match demand – so regardless of the marketing and reach you have outside of Amazon, you can’t allocate more inventory to Amazon, or re-allocate it from the marketplace to another sales channel. Seller Central enables brands to switch inventory levels on-the-fly to match demand and prevent sell-outs or dead stock. Amazon will charge for warehousing if the product is not selling as fast as it would like.
In the US, a single Seller Central account gives the business access to amazon.com, amazon.ca and amazon.mx all in one – something Vendor cannot do. To get products available in all three marketplaces would require three Vendor accounts. This isn’t impossible by any means, but it is more time consuming. In the EU, the same applies to the five main Amazon sites - .es, .de, .co.uk, .fr, and .it.
A business selling through Seller Central is quite likely to compete against Amazon in at least some way – though this is not as universal as sometimes suggested. The algorithms that determine buy box share favour products sold by Amazon, which can make this an uphill struggle. Manufacturers have some advantage here however if they can avoid competing directly with Amazon on price thanks to having dedicated brand control – so that they own the listing. Optimised content to improve conversion can be accessed by Seller Central businesses through Enhanced Brand Content templates, which are currently free to use.
Ease of Use
It’s important to know how the experience differs between Seller and Vendor. If cash flow is a priority, Amazon’s net 60 policy for Vendor sales might be an issue – Seller Central delivers payments in 7-14 days.
Seller Central also gives businesses access for free to significantly improved reporting tools compared to the basics available with Vendor – though you can pay for access to retail reports within Vendor.
In terms of customer support, Vendor businesses are tied to Amazon’s own customer support as Amazon is the seller of record, and passes no data back to the brand or manufacturer. This means that the brand is in Amazon’s hands, and while their customer service is often excellent, this may be an uncomfortable situation for some brands. Of course, the alternative is to outsource or in-house customer service and sell through Seller Central. This also has drawbacks in terms of cost, but ultimately puts control of the customer experience back within the business.