Choosing Your Selling Model: Amazon 1P vs 3P Selling
When it comes to Amazon, sellers face a pivotal decision: engage with Amazon as a 1P (first party) Vendor through Vendor Central or take the reins as a 3P (third party) Seller. Understanding the nuances of each model is crucial for making an informed choice that aligns with your business’ Amazon marketing goals.
1P Vendor Central: Streamlined, but Surrendered Control
In the 1P model, you sell your products directly to Amazon, relinquishing control over warehousing, pricing, and promotions. The pros include simplicity—Amazon handles logistics—and a prominent place in the buy box. However, your pricing and inventory are subject to Amazon’s decisions, potentially impacting your margins and product visibility.
Pros of Utilizing Amazon 1P
- Hands-off logistics: Amazon manages warehousing, inventory, and customer service.
- Prime perks: Products listed as 1P enjoy prime shipping benefits, and therefore greater visibility with customers.
- Buy box dominance: When all else is equal, 1P offers will win the buy box.
Cons of Utilizing Amazon 1P
- Control trade-off: Amazon controls pricing, promotions, and inventory decisions.
- Margin squeeze: Amazon commands a huge market segment of e-commerce and leverages that to require discounts below wholesale price. This can eat into margins.
- Operational challenges: Issues like special inbound instructions can put a strain on operations, while chargebacks for unfulfilled or partially fulfilled orders cost time and money.
Amazon 3P Selling: Empowered, but Hands-On
As a 3P Seller you control your destiny, managing listings, inventory, and customer interactions. While it demands more effort, the control over pricing, margins, and branding can be a powerful advantage.
Pros of Being an Amazon 3P Seller
- Control galore: Manage pricing, inventory, and the customer experience directly.
- Margins in your hands: Make your own pricing and promotions. Set it and forget it, or use automated pricing to maximize both sales and profitability.
- Branding freedom: Retain control over your brand’s presentation.
Cons of Being an Amazon 3P Seller
- More workload: Direct management means more responsibility.
- Buy box: 1P offers will often win the buy box over a 3P offer if they are competing on the same product.
- Ranking hierarchy: 1P contributions such as title, images, and product descriptions will take precedence in the contributions rank, even if you are Brand Registered.
- Prime considerations: Achieving prime status requires utilizing FBA or enrolling in SFP.
Amazon Programs Available to both 1P and 3P Sellers
Many tools on the Amazon marketplace are available to sellers regardless of which selling model they choose to use. For example, sellers can leverage Amazon advertising, A+ Content, and Brand Story no matter whether you’re using 1P or 3P.
The Hybrid Approach: Best of Both Worlds?
Some sellers adopt a hybrid strategy, using both 1P and 3P models. This model can supercharge Amazon success for sellers who often introduce new products, have a deep catalog, or who offer seasonal additions to their core products. Amazon 1P will dominate sales on the core products, but 3P offers for new, seasonal, or lower selling products can bolster sales and generate momentum on these items.
Caution is key though, as Amazon mandates that items available via 3P must also be offered via 1P. Employing a hybrid approach while staying compliant with Amazon’s 1P Terms of Service is a difficult balance act, and the consequences of non-compliance with the TOS can be devastating. However, the benefits of a hybrid model can be huge for some brands.
Should our Brand use 1P, 3P, or a Hybrid Approach to Sell on Amazon?
Whether you’re considering 1P, 3P, or a hybrid model, there’s no one-size-fits-all solution. Your business’s intricacies should guide your choice. This blog is by no means a complete review of the 1P and 3P selling models. To navigate the complexities of Amazon selling and to maximize your growth, reach out to the experienced team at Accelerazon. Let’s discuss which model aligns best with your goals and how we can elevate your Amazon presence. Contact us today to embark on a tailored Amazon success journey.
