Amazon 3P: Frequently Asked Questions and Things to Consider

Garrett Bluhm

March 8, 2019

There are two ways to sell your products on the Amazon marketplace. Amazon buys your inventory in what is called a 1P or vendor relationship or you, the Amazon vendor, sell directly to the consumer yourself through Amazon 3P as a third party seller on Amazon. If you've never sold 3P before, you probably have some questions. We'd like to answer them and provide some ecommerce tools. Feel free to click on your question below to jump to the answer, or take time to read the whole post.

How do I start selling with a Seller Central Account?

Factors to consider before starting a Seller Central Account

What are the challenges of selling 1P versus selling 3P?

If I received notice from Amazon Retail that they will no longer be sourcing my products 1P, can I sell 3P?

Are there capabilities that are exclusive to Vendor Central (1P) that are not available on Seller Central (3P), and vice versa

If I have sold my products 1P in the past, can I sell 3P?

Can I sell CRaP products via a 3P account?

Will Amazon allow unauthorized sellers to sell my brand?

What is an Authorized 3rd Party Seller?

What are the advantages of selling through an authorized 3P seller like Pattern versus selling 3P yourself?

If my 1P account was suspended by Amazon, what should I do next?

DroppingBrands

How do I start selling with a Seller Central Account?

If you are interested in setting up your own seller account, Amazon does a great job of providing you details of how to sign up and get going

Factors to consider before starting a Seller Central Account:

1. FBA Tax Nexus: When you use FBA, inventory is sent to multiple warehouses all over the United States.  Since you technically own the inventory, you are now liable to file taxes in each state that you hold and sell inventory in.  Tax Nexus also can make you liable to file taxes on any product sales in these states, even if the products were not sold on Amazon.

2. Account Suspensions: Your account can be suspended!  As a seller, you are liable to meet Amazon’s guidelines for selling including on time shipping, labeling, and proper preparation.

3. Buy Box Re-Pricing: In order to win the BuyBox, you will have to implement a repricing option that will lower your price to win.

4. Customer Service: You are responsible as a seller to respond to customer inquiries within 24 hours - even on weekends and holidays.  You will be responsible for approving and handling customer returns and working with disgruntled customers to ensure they are happy.

5. Store Feedback: You will be starting a new account on Amazon with 0 feedback.  Feedback is a way that customers can rate how well you are doing your job.  If you have too much negative feedback, you will be suspended. Other sellers who have more positive feedback will have a better chance of winning the BuyBox until your account gains traction and positive ratings.

6. Inventory Forecasting: Amazon does not do any forecasting for you.  You are responsible for creating ‘PO’ shipments into Amazon, likely managing them with ecommerce software.  You still own the inventory when it is in FBA up until it sells to a consumer.

7. Inventory Feeds: You will likely need to invest in or develop an inventory feed directly into Amazon Seller Central that automatically adjusts inventory levels and ability to ship. This can be done with Pattern's ecommerce tools.  If you cancel too many orders due to out of stock issues, your account will be at risk of suspension.


What are the challenges of selling 1P versus selling 3P?

Challenges of selling 1P include:

- Limited control over product and brand control forecasting

- Limited control over POs

- Pricing at the discretion of Amazon

- Launching New Products and getting Amazon to order enough inventory

- Limited data provided by Amazon

- Self Service First Platform

 

Challenges of selling 3P include:

- Inventory ownership risk

- Prep & labeling consistent with Amazon shipping standards

- Tax Nexus and Liability

- Customer Service Management

- Returns and Stranded Inventory

- Competing for BuyBox ownership

If I received notice from Amazon Retail that they will no longer be sourcing my products 1P, can I sell 3P?

Yes you can. That being said, Amazon reserves the right to source your products for 1P in the future. [Learn more](https://info.pattern.com/contact-us) with our ecommerce software solutions.

Are there capabilities that are exclusive to Vendor Central (1P) that are not available on Seller Central (3P), and vice versa?

- A+ Content is exclusive to 1P sellers. However, Enhanced Brand Content is available to 3P sellers and functions almost exactly the same with the exception of a couple modules.

- Product Display ads remain 1P Exclusive, but other advertising options are all available to 3P sellers.  Rumors have surfaced that PDA’s will be available to sellers in the near future likely with One Vendor rollout.

- 1P offers ARA and ARAP data for an added % or fee structure.  3P sellers recently were given Brand Analytics which provides very similar data sources and information.  3P sellers also receive a lot more individualized data from purchases.

Amazon Vine Program currently is a Vendor Only program—although there have been beta Vine programs run with Sellers.

 

If I have sold my products 1P in the past, can I sell 3P?

Amazon’s updated Standards for Brands Selling in the Amazon Store states, “we may choose to source products from some Brands for sale by Amazon only. Other Brands can operate as sellers in the Amazon store if they can consistently maintain our standards for customer experience.”

Brands Eligible to Sell on the Amazon Store:

- Brands who have been told by Amazon that they are ineligible for a 1P offer

- Brands who have never sold inventory directly to Amazon

Brands Ineligible to Sell on the Amazon Store:

- Brands who Amazon selects to source products as a 1P Vendor Relationship

- Brands who do not price competitively on the 3P marketplace*

Can I sell CRaP products via a 3P account?

Some Vendor Managers allow hybrid accounts.  Others prohibit having both a 1P and a 3P account, which may impact your ecommerce growth strategy. Several hybrid accounts have been shut down over the last few months by Vendor Managers and several brands have been notified that their Hybrid Seller Accounts will be shut down later this year.

Will Amazon allow unauthorized sellers to sell my brand?

Yes. Amazon will not block unauthorized sellers from distributing and selling your products on the marketplace—even if they are not price competitive. In specific categories such as Luxury Beauty, Amazon will gate a brand from having unauthorized sellers.

What is an Authorized 3rd Party Seller?

An Authorized 3rd Party Seller is a 3P seller that will buy your products directly from you and resell on Amazon’s marketplace.  An Authorized seller should be involved with helping curate and provide content and messaging consistent with your brand’s objectives.  They should adhere to any MAP pricing policies and work directly with you to forecast for a consistent availability of goods on Amazon. Often, a distribution policy can be created to permit certain authorized sellers to sell on your behalf on Amazon, while prohibiting unauthorized sellers.  

amazon seller central

What are the advantages of selling through an authorized 3P seller like Pattern versus selling 3P yourself?

- Wholesale Payment Relationship: Inventory ownership passes to an authorized distributor / reseller, meaning you get paid faster.

- No Tax Implications: Authorized reseller handles all tax implications of FBA.

- No Account Management: You do not have to worry about managing customer service, managing seller central, re-pricing, or developing ways to avoid account suspension.

- No Additional Prep / Shipping: The authorized reseller typically takes care of your distribution efforts.

- Inventory forecasts, POs, Prep, labeling and fulfillment are all included.
- Additional Services: Pattern provides additional services included in the cost of goods.  Services include content creation, advertising management, our ecommerce software, and basket size optimization.  

- FeedbackPattern and other Authorized Sellers already have an established seller account with high amounts of feedback to help win the BuyBox consistently and provide a positive experience to consumers.

If my 1P account was suspended by Amazon, what should I do next?

- Define your business objectives: What is your ultimate goal?

- Define your current capabilities: Do you have the ability to prep, ship, and manage inventory?

- Develop a strategy to be successful

- Determine your current and long term objectives and ways to achieve them.  

- Explore the financial setup and ongoing costs of managing your own 3P seller store vs. partnering with an authorized seller to improve your ecommerce growth strategy.

- Determine the speed at which your organization can move on this initiative initially and develop the capabilities to sell on your own.

- Move quickly!

- The longer you are out of stock after your 1P account is shut down, the lower your rankings and product listing sales will drop.  It is imperative to act quickly and decisively.

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Improve Your Amazon Advertising Strategy With One Simple Metric: True RoAS
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Improve Your Amazon Advertising Strategy With One Simple Metric: True RoAS

The purpose of advertising on Amazon is simple: increase traffic and conversions. But the approach to get those conversions is not always so simple. Your Amazon advertising strategy is based on current ad data and performance results such as your return on ad spend (RoAS). 

At a minimum, your RoAS number tells you how well you’re maximizing your ad spend. The problem is the RoAS you’re getting from Amazon or an advertising agency isn’t always accurate. 

As a top 3P seller on Amazon, Pattern helps brands improve their Amazon advertising strategy and results by providing them with one simple metric: true RoAS.

Understanding True RoAS

To understand why true RoAS is helpful to brands, you need to understand how Amazon and other agencies calculate and present your RoAS.

The key to growing your brand and maximizing your ad spend is to drive incremental traffic, rather than cannibalizing what has already taken place. For example, if you are selling probiotics, and paying for sponsored ads to win the keyword “probiotics for women”, but also organically ranked in the top results with the same keyword, that’s cannibalization. The RoAS score you would receive from Amazon includes that level of cannibalism, which inflates the number, causing you to pay more on ad spend. The best ads drive incremental growth instead of cannibalizing organic sales. 

At Pattern, we’ve created the acceleration software to make sure brands are getting their “true RoAS”. Pattern’s patented tool applies artificial intelligence to advertising to maximize incremental growth or true return on investment. 

Our software helps brands optimize their efforts by providing live and updated information on where your brand is not organically ranking, and what you should be paying for. If your ranking improves in one area, the ad spend will automatically decrease for those words or phrases until the software detects a drop in ranking, signaling that your ad spend should go up again. This dynamic monitoring of ad spend will help you maximize incremental growth and improve your RoAS.

Improve Your Amazon Ad Strategy with Pattern

Knowing your true RoAS is key to improving your Amazon performance. Advertising agencies and marketplace account managers often give you an inaccurate RoAS ratio or value, which only incentivizes you to spend more on advertising, ultimately increasing revenue for the agencies and/or marketplaces.

At Pattern, a 3P partner on Amazon and other marketplaces, we view our brands just as that: a partnership. When you win, we win. You succeed on Amazon by maximizing your ad spend and we have the data and resources to help you do just that. Accurate, transparent data and reporting will help improve your advertising strategy to drive more traffic to and conversions on your products. 

Ready to finally get your true RoAS? Contact us.   

Slowing Inflation is Music to Consumers’ Ears
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Slowing Inflation is Music to Consumers’ Ears

**Instrument Pricing Changes Tune Amid Record Inflation** Compared to 2022, consumers should expect to pay more for musical instruments, but the rate of inflation shows signs of slowing. **The backstory:** America’s most popular musical instruments saw a notable price increase in 2022 compared to 2021, but the rate of inflation eased in Q4 ’22. **Why it matters:** Slowing inflation within this product category could indicate economic pressures like increased demand, rising labor costs, and supply chain disruptions are easing across the consumer landscape. **What we’re seeing:** The average cost of musical instruments increased 7.5% from 2021 – 2022; however, when analyzing individual increases year over year, some instruments saw price increases as high as 21%. <iframe title="YOY Price Change for Instruments — 2022 vs. 2021" aria-label="Bar Chart" id="datawrapper-chart-02Lwk" src="https://datawrapper.dwcdn.net/02Lwk/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="379" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * Trombones experienced a 21.73% increase compared to 2021 * Trumpets +20.08% * Flutes +18.6% * Recorders +16.13% * Saxophones +13.63% * Clarinets +10.55% * Drums +5.41% * Ukuleles +5.17% **However:** Inflation among these same instruments was significantly less in Q4 ’22 compared to Q4 ’21. In some cases, prices decreased from Q4 ’21 – Q4 ‘22: <iframe title="Price Change for Instruments — Q4 2022 vs. Q4 2021" aria-label="Bar Chart" id="datawrapper-chart-6X6GZ" src="https://datawrapper.dwcdn.net/6X6GZ/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="379" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * Trombones +11.23% * Flutes +10.41% * Saxophones +5.94% * Clarinets +5.59% * Trumpets +3.10% * Recorders +2.85% * Drums -2.59% * Ukuleles -8.46% **Moreover:** Certain instruments saw inflation reverse in 2022. On average, prices for melodicas, guitars, and violas saw their prices decrease by 4.41%, 3.19%, and 0.97%, respectively. <iframe title="YOY Price Change for Instruments — 2022 vs. 2021" aria-label="Bar Chart" id="datawrapper-chart-0Tefk" src="https://datawrapper.dwcdn.net/0Tefk/3/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="259" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> **Diving Deeper:** Inflation was more significant when comparing Q4 ’21 to Q4 ’20 than when comparing Q4 ’22 to Q4 ’21, indicating a slowing down of price increases for consumers. <iframe title="YOY Q4 Price Change for Instruments — 2020 – 2022" aria-label="Stacked Bars" id="datawrapper-chart-p6iqt" src="https://datawrapper.dwcdn.net/p6iqt/1/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="206" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * In Q4 ’21, average prices for all instruments were up 8.89% compared to Q4 ’20. * When comparing Q4 ’22 to Q4 ’21, the average price for all instruments only increased by 2.65%. **The takeaway:** While consumers should expect to pay higher prices for instruments this year, overall inflation impact within this product category appears to be slowing down. With National Ukulele Day coming up on February 2, now is a great time for ecommerce brands to take advantage of slowing economic worries and reach new consumers. * Want Pattern’s data science team to power your brand with consumer insights like these? Contact us to [request more information](https://pattern.com/contact-us/) today.

Slowing Inflation? What Musical Instrument Pricing Tells Us
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Slowing Inflation? What Musical Instrument Pricing Tells Us

It’s safe to say consumers and brands alike are eager for a change to the pattern of rising inflation, steadily increasing in many ecommerce categories . Pattern’s internal team’s data scientists analysis of instrument pricing shows a glimmer of hope that inflation may be slowing, which would be great news for brands selling online.

At Pattern, we’re interested in and monitoring trends and news related to pricing since price is a key factor in a brand’s profitability (as explained in the Ecommerce Equation). When brands are able to optimize their price, conversions, and traffic, they can optimize their profitability. And profitability leads to better allocation of resources, better brand control, and gives leaders the ability to expand their presence to new markets worldwide.

YoY Instrument Pricing Increased at a Slower Pace

When analyzing the pricing changes of instruments from 2021 to 2022, our teams found that prices increased, but at a slower rate than from 2020 to 2021.

As shown below, the year over year Q4 changes show quite a lower rate of increase.

Inflation Improvements Raise Profitability

Because inflation impacts online shopping behaviors, lower inflation can lead to better overall profitability for brands. This idea, of course, is nuanced, but Pattern’s Ecommerce Equation can help illustrate the general principle.

When inflation rises, consumers change their spending habits. Shoppers spend more time researching products, forego premium, higher-priced brands, and buy more in bulk. Brands tend to see a loss of loyalty as they’re forced to raise prices.

Price is a key variable in the Ecommerce Equation: price x conversion x traffic = profitability. As inflation lowers, brands can expect better performance in all of these areas—more traffic as spending habits return to normal, higher conversion from returning customers, and price that better fits consumer demand. As inflation lowers and these variables stabilize, brands will see profitability increase.

Raise Your Profitability with Pattern

As an ecommerce accelerator, Pattern is obsessed with gathering data that helps our brand partners succeed. We’ve created best-in-class technology, models, and analytics to understand changes on the horizon and inform our decisions. With an incredible team of data obsessed Pattern employees, we see what makes the difference in truly great ecommerce performance and apply those learnings for brand partners. 

Ready to improve your profitability? Contact us here.