Ecommerce Selling Models: Advantages & Risks in an Exclusive Seller Relationship

John LeBaron

October 7, 2020

So you’ve got a product, and you’re trying to sell it on Amazon. You might be wondering, “How many sellers should I have?” Is more truly merrier? Or is being exclusive the better option?

The truth is that bigger isn’t always better in ecommerce. The more sellers you have, the harder it gets to control your brand online. This can lead to price erosion and create other nasty situations that eat into your brand’s profitability and ultimately its growth.

So what about a more exclusive relationship? When successful, an exclusive seller relationship on Amazon and other marketplaces can put all of the cards in your corner, give you maximum control of your brand, and help you offer a stellar customer experience that’s harder to maintain with a bigger pool of sellers. While having an exclusive Amazon seller isn’t for every brand, it may be a great fit for yours.

The most common ecommerce selling models

Before we dive into the advantages and risks of an exclusive seller relationship, it’s helpful to look at the other ecommerce selling models that are available to brands to get a sense of how an exclusive seller compares.

There are seven common ecommerce operating models that brands can look at when deciding their online strategy:

  1. 3P Unmanaged: This is the most chaotic of the models. In a 3P Unmanaged scenario, there’s no active management of your brand, which means you have no control on pricing, inventory, or content.
  2. 1P: This model is when you sell your product directly through a retailer. It gives you listing control, merchandising, and up-front POs but also limits your inventory and gives you no pricing control. It can also be expensive.
  3. 2P: 2P is the Fulfilled by Amazon (FBA) model. You don’t have to negotiate with Amazon with FBA (a big plus) and it requires limited investments, but it also gives you no control on pricing, inventory, listings, or advertising.
  4. 3P: In this model, you are the retailer. You own and ship your products without going through Amazon’s fulfillment centers. In the 3P model, you have a potential for higher margins and better control on inventory, listings, advertising, and merch, but you have limited capabilities and it takes a larger chunk of investment.
  5. Hybrid: This model leverages the 1P and 3P strategies. You have inventory control, lower risks, and better negotiating power, but you also have to navigate Amazon’s buyers and maintain compliance with their policies.
  6. 3P Network: This is the “more the merrier” model we talked about earlier where you work with a network of authorized sellers. A 3P Network gives you pricing control, inventory control, and diversified risk, but it also gives you less control and can eat into your margins.
  7. 3P Partner: When we talk about having an exclusive ecommerce seller, this is what we mean. In the 3P Partner model, you work with one partner to sell your product. We’ll dive into the pros and cons of the 3P Partner model below.

Breaking Down the 7 Common Ecommerce Operating Models on Marketplaces | Pattern

Advantages of a 3P Partnership

There are many notable benefits that come from working with an exclusive Amazon seller rather than the other selling models we reviewed previously.

Simplicity

Instead of dealing with ten different sellers or a big master distributor that sells to these sellers, working with one seller makes directing your strategy much more streamlined.

Concentrated expertise and investments

Working with one partner eliminates the chaos of working with many partners with varying degrees of proficiency in different marketplaces. The right 3P partner is very motivated and well-equipped with the tools to improve the performance of your products and help your brand succeed. They’ll provide focused attention on investments for content, SEO, and customer service.

Buy Box and ad spend consistency

You are guaranteed Buy Box ownership with an exclusive Amazon seller. Pretty exciting, right? In addition to giving you the Buy Box, having a single seller allows you to maintain consistency in your ad performance and ad spend because there aren’t multiple sellers with different advertising strategies vying to win the Buy Box and causing Buy Box suppression.

Price integrity

The risk of price erosion goes up when you’re working with multiple sellers because partners are more incentivized to get ahead of the competition (read more on our eBook about the Profitability Death Spiral). With a 3P partner relationship, competition goes away. You’re able to maintain price integrity and create price sustainability across all distribution channels.

More seller accountability

An exclusive Amazon seller who abides by your policies makes your life significantly easier, because you don’t need to play whack-a-mole to hunt down sellers breaking the rules. Enforcement and accountability are far more linear. Not to mention, this model is available across more marketplaces for brands who have a global presence.

Common Ecommerce Selling Models Available on Marketplaces | Pattern

Risks of a 3P Partnership

Although there are myriad benefits to having an exclusive Amazon seller, there are some risks you should be aware of if you’re considering this model for your brand.

All of your eggs are in one basket

This is the clearest risk of distributing your product through an exclusive Amazon seller. If something happens to that seller, maybe they go out of business or they mess up on their warehouse orders or get shut down by Amazon, that can leave your brand very exposed and even cut off your distribution completely.

Channel stuffing is limited

Some brands do really well by stuffing the channel with lots of inventory, even if it’s unsold inventory (channel stuffing allows distributors to temporarily increase their sales figures and profit measures). By working with a 3P partner, your ability to channel stuff is limited, because the relationship between what you sell to your exclusive seller and what they end up selling to the end customer is very linear.

Your partner has more leverage

By choosing one seller, you’re creating an interdependent relationship where your partner has more leverage. If they decide they aren’t going to sell your product, you’re left scrambling because you don’t have redundancy built into your partnership.

In a 3P relationship, a seller can tell you they need an additional two points of margin to make their business work. You either need to acquiesce to their demands or find a new partner and start over. This can make 3P relationships daunting.

Do the advantages outweigh the risks?

While there are some risks, having an exclusive Amazon seller ultimately gives your brand greater growth and more control (see our case study with Thorne). Brands who have chosen a 3P partnership have streamlined their sales process and seen big successes as a result (browse Pattern success stories here). The key is choosing the right partner.

Profitable Growth and Brand Control Ecommerce Selling Model Spectrum for Exclusive 3P Partner | Pattern

This is where Pattern can help.

Pattern is an exclusive Amazon seller that uses data and technology to help brands optimize their performance on the marketplace. We help your brand thrive in every possible category, including SEO, advertising, product photography, customer service, returns, shipping, and more, at no additional cost.

We operate as an exclusive Amazon seller so that we can provide personalized attention and the best outcomes for your brand. We don’t charge our brand partners anything for our services so that our incentives are exactly aligned with theirs—selling more on marketplaces and growing profitable revenue.

If you’re interested in learning more about having an exclusive Amazon seller, other ecommerce models that may work for your brand, or a partnership with Pattern, contact us in the form below.

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Sept 27, 2022

Global Ecommerce Weekly News: 27th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon drives renewable energy push with 71 new projects Amazon is planning to add 2.7 gigawatts of clean energy capacity through a couple of new projects as the company attempts to use 100% renewable energy by 2025. The ecommerce business will soon have a total of 329 renewable energy projects, generating 50,000 gigawatt hours of clean energy, which is equivalent to powering 4.6 million US homes every year. [Read more on Reuters](https://www.reuters.com/business/sustainable-business/amazon-drives-renewable-energy-push-with-71-new-projects-2022-09-21/) Amazon launches Prime Early Access Sale Amazon is launching a new 2-day shopping event for its Prime members only, beginning on the 11th of October. Across 15 countries, Prime customers will have access to the shopping event, with thousands of deals on offer globall, ranging from fashion to electronics to essentials. The event has the purpose of giving Prime users the chance to spread the cost of items over the winter months, 6 weeks ahead of Black Friday. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/26/prime-early-access-sale/) --- Other Marketplace News --- Shopify unveils new localisation tool Shopify is launching a new localisation tool, called Translate & Adapt, which works with Shopify Markets to offer localisation for sellers who are looking to expand into new markets. The tool translates a user’s online store into different languages, including product pages and information pages. Merchants are also able to create different shipping terms for each market using the new tool, which allows international expansion and offers a more localised consumer experience, unveiling new potential. [Read more on Ecommerce News](https://ecommercenews.eu/shopify-launches-new-localisation-tool/) Etsy is set to invest hundreds of millions into its marketing platform Etsy CEO claims that the company is on route to spend more than $570 million USD on marketing this year. Even during a time of macroeconomic pressure, inflation and rising interest rates, the company is preparing itself and its sellers for the upcoming holiday season and is focused on retaining interest from buyers. [Read more on Yahoo News](https://uk.news.yahoo.com/etsy-600-million-on-marketing-ceo-154054219.html) --- Other Ecommerce News --- Meta looks to cut costs by 10% in the coming months Meta employees are facing job redundancies as the company plans to cut its costs by 10% over the next few months. Meta reported a 22% YoY increase in costs and expenses, totalling over $20 billion USD. The cuts are expected to come in the form of job redundancies as a result of department reorganisations rather than formal layoffs. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/22/meta-to-slash-costs-by-10-over-coming-months/) DHL teams up with Quadient to offer smart locker deliveries in the UK DHL and tech company, Quadient, have partnered to offer smart lockers parcel pick-up throughout the UK. The new contactless, secure locker stations will give recipients more choice and flexibility to receive their parcels at a time and location best suited to them. The partnership plans to install 500 locker stations across the country by the end of 2022. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/21/dhl-partners-with-quadient-to-offer-smart-locker-delivery/) The online fashion market is set to be worth nearly $170 billion USD in 2025 The European online fashion retail market is set to grow 50% by 2025, with an online turnover of $170 billion USD, which is 33% of the retail branch’s total. Cross-border marketplaces prove to be the largest drivers of this growth, with online websites and apps like Vinted largely pushing the market’s online growth. Zalando recently became the largest cross-border fashion retailer/marketplace, responsible for 11.7% of the online market’s share. [Read more on Ecommerce News](https://ecommercenews.eu/online-fashion-market-worth-e175-billion-in-2025/)
Sept 26, 2022

Top 5 Ways to Prepare for Peak with Google Ads

Peak season is almost upon us and with all signs pointing to it starting earlier than ever, with Christmas gifting searches now ramping up in August and September, it’s time to start preparing for peak. In this article, we’re sharing our top five tips for planning and preparing for peak season with Google Ads and the strategies required to get your Paid Search ready so you can drive success over this crucial period.

1. Go Early

In 2021, gifting search terms started increasing in popularity in August. The general trend is that people are looking, researching and weighing their options early, so it’s best to start your Paid activity early to ensure that you’re capturing that early research traffic. This will help drive revenue alongside aiding those consumers who are in their research phase.

From 2020 to 2021, spend during Cyber Week actually only rose 2% but in the weeks leading up to it, it increased by 16%. However, Cyber Week is still the biggest period during the latter half of the year, accounting for 23% of all online spend by consumers over peak. Being prepared and starting early will help you to maximise your time during this period.

2. Get Ready for Privacy Changes

 According to Google, 48% of global consumers have stopped buying or using a service due to privacy concerns. Privacy is front of mind when consumers are shopping online and we know that Google is phasing out 3rd party cookies in 2023. This is going to make it much harder to track users online and it’s something that brands need to think about this now – waiting isn’t an option.

From a Google Ads point of view, you want to ensure you have set up the Google Ads tag across your site and have enabled ‘Enhanced Conversions’, which ensures all conversions are tracked and allows you to monitor other actions such as ‘Add to Cart.’ This is relatively easy to set up, especially if you use ‘Google Tag Manager’.

It’s also vitally important that you build up your first-party data during this time as this is data you own and it can be used when targeting consumers that have provided your brand with their email address. Pattern’s own experience shows that by segmenting and using first-party data, you can see a 10% improvement in revenue and ROI.

3. Ensure Consumers Can Discover your Brand

A full-funnel approach is now more important than ever as consumers become more discerning and have more choices than ever of where to shop.

Pattern has seen success with Google Ads’ ‘Discovery Campaigns’ (image-based ads that appear on Google platforms such as Gmail and the Google app), which have driven success both from a traffic and revenue perspective.

The performance of these campaigns is significantly enhanced by adopting a segmented and nuanced approach to first-party data and incorporating these into your campaigns. Other options for a full-funnel approach include YouTube and testing bidding on keywords that are more representative of the research phase. (e.g. ‘best baby clothes’ for a baby clothes brand)

4. Get Moving with Performance Max

Earlier this year, Google announced that they were moving away from Smart Shopping and launched Performance Max. This is a new campaign type that incorporates features and placements from Smart Shopping but expands them onto other platforms such as Gmail but also alternative creative options, such as images and videos.

Since Google has already started automatically upgrading Smart Shopping campaigns to Performance Max, expect to see some fluctuations in the first 2 weeks following the switch over but results generally seem positive. We recommend upgrading sooner rather than later to limit any potential impact to peak period.

5. Flight Budgets Accordingly

Peak period will be even more competitive than in 2021 and you’ll need your budgets to support this period, we recommend boosting budgets in October to start capturing that early peak traffic. As we enter November and the Cyber Period, start early and make sure you are capturing those consumers looking for early bargains, ensuring you are being nimble in your optimisations and reacting to the data that you are seeing.

Overall, peak period is vital to help drive your sales and by preparing early, you will see strong results and drive success for your brand. If you want to discuss how your brand can navigate this next peak period, contact us to discuss your options with our performance team now.

Sept 20, 2022

4 Ecommerce Marketplace Consultant Must-Haves

Entering the ecommerce landscape is a huge undertaking for any brand—it usually requires a large investment in resources and expertise to really be successful. Any brand can quickly get in over their heads trying to navigate the nuances of SEO, fulfillment and logistics, distribution control, listing optimization, and meeting the numerous other requirements and administrative tasks to show up well on marketplaces. 

Unfortunately, because it’s so easy for third party, gray market, and unauthorized sellers to obtain and sell products online, many brands find themselves pressured to execute an ecommerce plan without the right resources to succeed on marketplaces and their other channels.

So, for brands looking to enter the ecommerce space or improve their current and future performance, it makes sense to partner with an ecommerce consultant.

Pattern’s global presence and proven success with hundreds of brands has allowed us to develop highly effective ecommerce consulting services. We can guide your brand to navigate issues both large and small in marketplaces worldwide. To maximize your ecommerce efforts, you’ll need to understand what an ecommerce consultant does and how to select one who drives the right value for your brand and products. 

What is an Ecommerce Consultant?

An ecommerce consultant is a specialist in the ecommerce space who can give you personalized guidance on how to market your products and grow their presence on digital marketplaces.

An ecommerce consultant should be able to analyze your brand, audience, category, opportunity, and current roadblocks and help you understand how to utilize your resources (or what resources are missing) to be most effective in capturing your opportunities in the ecommerce space.

Not sure how to evaluate a consultant? Here are 4 key attributes to look for as you make your choice.

1. Brand Obsession/Specialization/Passion

At Pattern, we prioritize brand obsession for a reason—we know that a brand-centered mindset makes a crucial difference in the outcomes and results our partners achieve. So in our experience, when you begin your search for an ecommerce consultant, it’s important to look for a partner who is specialized in ecommerce, invested in the product, and passionate about helping brands build and improve their strategies. Typically, this means finding someone that consults exclusively for ecommerce marketplaces, rather than choosing a consultant who offers many different services. 

2. Proven Results

It’s also important to avoid choosing a consulting partner who can’t deliver the right experience for your brand. The best indication of whether your potential consultant can do that is to review their history, data, and results with other brands. Ask if they’ve helped others in your selling category, if they’ve solved specific issues your brand is facing, and why they feel you are a good fit. The key is to leave the conversation feeling confident that you understand your consultants’ capabilities and whether or not they match up with your needs.

3. Wide Range of Marketplace Expertise

It’s best to pick a consultant who knows how to guide a brand onto and through multiple marketplaces worldwide. You’ll want to take a look at your long-term strategy and think about the regions and platforms you’re currently on and where you might want to take your brand in the future. If your consultant is truly great at what they do, they’ll be able to help you perform well enough with your current product roadmap that it’ll be a no-brainer to expand your presence at the right time.

4. Network of Resources

The most effective partnership with an ecommerce consultant will be able to give you both recommendations and point you to solutions for making those changes in your planning, processes, and execution. Your time and money is valuable, so you want to make sure that you’re spending it as efficiently as possible as you follow your consultant’s advice. So, before you commit to an ecommerce consultant, ask about the resources and concrete solutions they typically recommend to the brands they work with.

Achieve Your Ecommerce Goals With Pattern

Finding an ecommerce consultant that checks the boxes can be a difficult task. At Pattern, our entire focus and drive centers around giving brands the tools and resources they need to succeed on domestic and international ecommerce marketplaces. 

With over 100 global ecommerce consultants across 10 global offices, we have the right tools to partner with brands across the world to achieve better ecommerce success. We give specialized advice, then make sure our partners have all the adequate SEO, social media, CRM, Amazon multi-channel fulfillment services, and ecommerce outsourcing services they need.

Interested in ecommerce consulting services? Set up a call here to learn what Pattern can do for your brand on global marketplaces.