The Manufacturer’s Dilemma: Is Vendor Central (1P) or Seller Central (3P) Better on Amazon?

Jason Gerrard

March 12, 2019

So you are a brand, a manufacturer, an inventor of product and experiences. Traditionally brands and manufactures have had one primary objective and mission. That is to develop the products that solve problems, create or enhance experiences and ultimately service your prized audience. This means you know what people want, and more important, you know how to give people what they want. This is irrefutably the most artistic side of product based business development, the ability to take napkin concepts to physical products that are distributed across the world.

In the traditional brick and mortar model, manufacturers focused purely on the art of product development and the logistics associated with large scale pallet distribution. This allows brands to effectively and attentively hone in on consumer demands and efficiently deliver the products we love over and over again. Until 1972 the thought of a digital marketplace servicing all consumers directly was nearly unfathomable. How could manufactures have known that 1972 would mark beginning of the most disruptive force to our “timeless” business model?

Manufacturer's Dilemma

“In 1972, long before eBay or Amazon, students from Stanford University in California and MIT in Massachusetts conducted the first ever online transaction. Using the Arpanet account at their artificial intelligence lab, the Stanford students sold their counterparts a tiny amount of marijuana.”

In researching and discovering what is considered the first online transaction, I chuckled, knowing the hilarity that this was the transaction that marked the impetus for the evolution of the traditional manufacturers model. The internet paved the way for direct to consumer opportunities. It has shifted the entire world of B&M retail and shaped our current commerce environment in its entirety. Some manufactures have embraced D2C models, finding the opportunity too enticing. Others have remained strong in supporting and valuing their “timeless” physical distribution networks. There is no clear answer showing the best approach for any given manufacturer, but one thing is certain. There isn’t a manufacturer or brand out there that can afford to continue neglecting or flat out ignoring the 800 pound gorilla that is Amazon.

Amazon’s Vendor Central - (1P)

Let’s begin with the pros and deal with the cons later.

Amazon’s 1P platform, Vendor Central, reinforces that “timeless” distribution model that enables manufacturers to primarily do what they do best. When dealing with Vendor Central, a brand sells its product directly to Amazon at an established wholesale price. Brands then receive scheduled purchase orders and begin shipping pallets to FBA warehouses across their given marketplaces, whether they are domestic or international. This singular relationship allows brands to adequately forecast sales and thus production.

Amazon Vendor Central

In years past, Vendor Central has offered the smoothest transition for large brands to enter the Amazon Marketplace and use Amazon fulfillment services. Historically it has offered more robust content, marketing and advertising tools that were not available to Seller Central (3P) participants. If your company is currently in a 1P relationship with Amazon, hats off to you. It was likely the best decision for your team at the time. It likely allowed your team to remain focused on what manufactures do best rather than inundating them with what have typically been retail roles.

The cons

While the move to Vendor Central seems simple, many of us are still experiencing internal growing pains. Rather than addressing every potential strain, I will outline three core topics worth consideration when dealing with Amazon.

 

Brand Protection:

- Managing Unauthorized Resellers

- Uniform Brand Representation (MAP)

- Enforcing Minimum Advertising Price Policies (MAP)

- Catalog Presence

 

Brand Growth:

- Content Optimization

- Advertising Optimization

 

Distribution:

- Logistics

- Forecasting

  

Brand protection: the problem

The first frustration most Brands face on Amazon is the inability to manage authorized resellers. Few companies are capable of controlling their distribution in a fashion that eliminates leaky product from entering third-party marketplaces. This may be a distributor who needs to liquidate overstock, it could be a warehouse employee taking product home, a box may fall off a truck. Either way, if you are an established brand with product demand, your products are online. If you didn’t take the time to establish your catalog in its entirety from Amazon’s inception, you are prone to this issue.

Unauthorized resellers result in brand misrepresentation. If you don’t have control of your sellers then anybody can throw up any image or language representing your brand. Listing images and content are often subpar and lead to consumer confusion.

Amazon intends for its marketplace to be price competitive. If multiple sellers are violating MAP policies in an effort to attain buy-box ownership, you will see their pre-programmed re-pricers race to the bottom. Ultimately this deteriorates B&M distributor relations. I cannot count the number of times a brand partner has come to me terrified that Best Buy, Target or Walmart is pulling their purchasing because they simply can’t compete with Amazon. If these conversations haven’t come up, consider yourself lucky, they will.

Catalog presence may seem obvious but many brands on Vendor Central only list the products they currently sell through Amazon directly. Once your brand proves profitable on Amazon, any product in your catalog that doesn't have an associated listing will quickly get one from any 3P seller. It is worth the time, effort and resources to establish your brand catalog in its entirety. That may be a simple task for smaller companies but it quickly proves difficult for brands with thousands of SKUs.

Brand growth: the problem

Content is King while advertising and catalog presence are generally assumed. Your site or catalog images and content may be adequate for your traditional sales model, but Amazon conversion rates are highly sensitive to optimized listings. It is important that your team or Brand Partner pay attention to content, leveraging A+ and Enhanced Brand Content (EBC) tools readily available. Most brands are not accustomed to the platform or developing this type of specialized content. Keep in mind content is ever evolving with the competitive environment.

These days advertising optimization comes down to partnering with a team that offers the most current advertising technology. The best advertising systems are run by algorithmic, rules based machines. If you are still running “Automated Campaigns” then pushing them manually and adding negative keywords, you’re doing it wrong. This manual effort of optimizing Amazon PPC has been dated for at least 2 years and typically results in failed categoric rank efforts. Most traditional brands simply don’t have the tech developed internally to optimize their advertising. Considering the range of tools outside general PPC, it requires a current and experienced specialist to adequately outline the correct strategy for your brand. This typically proves a difficult hire with high turnover. If you have your Amazon wizard and you are meeting all of your goals then treat them well. They are unicorns.

Distribution: the problem

Large brands are typically familiar with large scale pallet shipping. Shipping pallets to Amazon is typically a non-issue. However, the preparation for FBA shipments often proves challenging. While Amazon offers some services in regards to product labeling it is dependent on ASIN categories and your specific product offering. This can create logistical confusion and the consequences for a misstep in this process are high. If you fail to follow Amazons Packing & Prep Requirements your shipment will eventually make it back to you. These processing timelines are unclear and dependent on the FBA facilities current workflow. When a shipment is rejected your listing will most likely face a stock-out scenario. This will route sales to any other sellers on your ASIN but will quickly overwhelm available stock. Worst case scenario is a full ASIN stock-out. Considering sales velocity is the most heavily weighted metric in achieving and maintaining category rank. Stock-outs can take months to recover from and often require heavy advertising spend.

Migrating to Seller Central (3P) or at least to a (3P) Hybrid Model

Having outlined the advantages and liabilities that Vendor Central (1P) present I would like to shift our attention to Seller Central and 3P Hybrid models. As a Seller Central participant you directly sell your product on Amazon under your own seller account. In a (3P) hybrid model you maintain your Vendor Central relations and sales but simultaneously manage your Seller Central account. The advantages to establishing a 3P model for your brand are clear. If executed properly, you can optimally protect, grow and distribute your brand.

Amazon Seller Central

Having a Seller Central presence mitigates stock-out risks, allows you to begin listing your products not sold by Amazon and enables you to promote your catalog in its entirety. For some it will make sense to establish a Hybrid of Vendor and Seller Central presence. For others it will make sense to move away from Vendor Central where possible.

To partner, or not to partner...

The decision tree will eventually lead to a few specific questions that brands and manufactures should honestly consider.

1. Is my team capable of executing an optimized Amazon strategy that adequately manages authorized resellers, uniformly represents my brand, enforces MAP policy, optimizes listing content, technically executes an optimized advertising strategy, presents my catalog in its entirety & logistically executes efficient distribution and forecasting?

2. Even if my team is capable of some or all of this, should we allocate our resources to this as a manufacturer?

3. Who is going to be my key partner to help put all of this together?

 

Having over a decades worth of experience in this specific industry, having witnessed the evolution of this platform and how it has impacted my businesses and those of my clients, here is my two cents.

We all need to understand how powerful the Amazon platform already is and will become. We need to move from an apathetic approach to engaged full solution. It is imperative that we take the time to ensure our brands are adequately represented, protected, optimized and continuously monitored on this platform. If your team does not currently have a comprehensive Amazon Strategy, go get a partner today.

Solution: Pattern as a partner

At Pattern we take a holistic approach to all of the issues I have outlined. We provide the legal tech to fully protect your brand and enforce your policies. We have a proven content team that continuously drives and monitors optimized click through ratios and conversions. We ensure uniform brand representation, instilling buyer confidence when they engage with your brand. We have the most intelligent advertising platform I have found to date. We have global fulfillment facilities that manage all QC and distribution logistics. We have dedicated brand managers who maintain constant contact with your team and act as conduit in disseminating strategic direction.

Pattern

 

Our model is simple. We are the relationship you wish you had with Vendor Central. We offer a wide range of a la carte services but our most successful relationship is our Exclusive Seller Model. In this relationship we become your exclusive seller on Amazon, as such we purchase inventory direct from you and then deploy all of our services on behalf of your brand.

Brand protection:

  • Managing Unauthorized Resellers: We deploy our proprietary monitoring software, TriGuardian, which reports unauthorized sellers to our legal partner.
  • Enforcing Minimum Advertising Price Policies (MAP): We facilitate your relationship with our legal partner and assume all legal costs.
  • Uniform Brand Representation: Full support from our content team in creating & optimizing your listings according to your desired brand image.
  • Catalog Presence: Our team will ensure your catalog is represented in its entirety.

Brand growth:

  • Content Optimization: Your content is continuously tested and improved to optimize Click Through Rations and Conversion Rates.
  • Advertising Optimization: Your current advertising strategy will be reviewed by our team, improved and then deployed by our advertising engine which will ensure your ad spend is optimized.

Distribution:

  • Logistics: You ship your product to our facilities and we run full quality checks, manage FBA preparation and distribute to designated FBA facilities.
  • Forecasting: You will have access to our forecasting tools and brand dashboard. That being said our Brand Managers work closely with your team to ensure production forecasting is communicated and purchase orders are timely.

We have found that establishing a singular line of representation on Amazon offers the strongest path to Brand Control, Growth and Distribution. This removes the burden from your shoulders and allows you to do what you do best, continue creating the products that solve problems, create or enhance experiences and ultimately service your prized audience.

Reach out anytime!

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Global Ecommerce Weekly News: 27th September 2022
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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/)

How an Amazon SEO Agency Should Be Serving Your Brand
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How an Amazon SEO Agency Should Be Serving Your Brand

If you’re in the global ecommerce space, you are most likely aware of Amazon, and probably selling your products on the marketplace. With over $470 billion in sales in 2021 alone, Amazon stands as the third largest company in the world based on revenue. The ecommerce giant is a household name in the U.S. and working hard to grow its market share across five continents worldwide.

Having your products available on Amazon and being competitive there, though, are definitely two different things. If you want to really succeed on Amazon, you’ll need specialized insight into how Amazon works and how to make it work for you. So, for many brands, it’s a great idea to work with an Amazon Search Engine Optimization (SEO) agency.

At Pattern, Amazon SEO optimization service is one of our key competencies. We understand that technology, data-driven insights and expertise  are the most important tools brands can leverage to win top listing spots on digital marketplaces. With expert teams and years of experience, we help brands conquer the Profitability Death Spiral as they compete with other products and sellers online. We offer Amazon SEO agency services as a core solution to brands that need more resources to get ahead. 

What is an Amazon SEO Agency?

An Amazon SEO agency serves brands by improving their products’ rank and listing performance on Amazon. They make strategic decisions about ad spending and placement that lead to higher traffic, conversions, and revenue for ecommerce brands.

A great Amazon SEO Agency partner will:

Prioritize Your Success

Unfortunately, many Amazon SEO agencies profit in unfair ways from your brands’ perceived success based on the ROAS numbers they provide. This is done through including branded search terms in ROAS reports, which naturally skew listing performance

Let’s say, for instance, your brand is called “Annie’s” and you sell lollipops. Your brand has a very high likelihood of winning the top listing spots on Amazon for lollipop search terms that are paired with “Annie’s,” your brand name. So, SEO agencies will spend your ad money on those terms and report a very high ROAS. 

To avoid scenarios like these, it’s best to look for an agency that either calculates their profits on metrics other than your ROAS scores or weighs branded search terms differently in the performance metrics reports. Regardless of your Amazon SEO agency’s cost structure, you should align onbranded search terms before committing to a scope of work.

Provide Detailed Competitive Insight

A great indicator of a high-quality Amazon SEO agency is the level of insight they can provide into your competitors’ listing positioning and how it compares to yours. Data fanaticism is so important at Pattern that we’ve developed proprietary technology to display this exact information with precise detail for every brand we work with. In fact, you can find our free version here to see how you compare to some of your top competitors based on ASIN.

It’s certainly possible to improve your Amazon search performance with blind spending strategies. But a truly great solution will help you to know where your dollars are at their most powerful and competitive.

Reduce Your Ad Spend Over Time

Amazon’s A10 algorithm prioritizes customer satisfaction—it wants to show consumers the best products that align with their search intent to improve conversions and sales. So, the best way to gain momentum on Amazon is to work on incremental wins. 

Improving your performance on more obscure search terms that align with your customers’ search intent is a great way to increase ROAS for the long term. A10 will reward your success with better rankings on higher-volume search terms and the virtuous cycle can help you conquer your most-coveted listing spots. And the best part? This process of gaining momentum, if done right, will naturally decrease your ad spend over time as Amazon recognizes your value and works with you to keep your products at the top of consumers’ search results.

Amazon SEO Optimization and More

As an Amazon SEO specialist, Pattern knows how to help your brand win better success for long-term profitability on Amazon. With our data-driven tools and brilliant teams of ecommerce experts, we help brands with listing management, content optimization, Amazon ad strategies, and more.

Contact us to learn more about our SEO optimization services.

Global Ecommerce: Weekly News (20th September 2022)
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Global Ecommerce Weekly News: 20th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon to raise pay and add extra work benefits for delivery drivers Following the rise in fuel prices and protests by Amazon workers, the ecommerce giant is raising its delivery drivers’ pay and adding more work benefits. Amazon has mentioned that it will be investing $450 million into rate increases along with an education program and a Delivery Service Partners program. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/14/amazon-to-raise-delivery-drivers-pay-and-add-more-work-benefits/) Amazon announces it will give away shipping software to merchants at no cost Amazon has recently announced that it will be giving ecommerce merchants free software to manage shopper orders on and off its platform as it extends its reach. The ecommerce giant will be ending monthly costs for sellers using Veeqo, a shipping software it recently acquired and instead offer to them a new, free shipping software. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/16/amazon-to-give-away-shipping-software-to-merchants/) --- Other Marketplace News --- Walmart unveils new virtual fitting rooms In an effort to drive clothing sales, Walmart has launched virtual fitting rooms while competitors reduce spending amid the cost of living crisis. The virtual try-on tool can be used by Walmart customers to virtually measure the clothing items and see how the products would look on them. Shoppers will now be able to see how over 270,000 clothing items on Walmart’s ecommerce site would look on their bodies. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/15/walmart-launches-virtual-fitting-rooms-to-drive-clothing-sales/?utmsource=Retail+Gazette+Subscribers&utmcampaign=2da7f0f8f8-EMAILCAMPAIGN202209150742&utmmedium=email&utmterm=0d23e2768b6-2da7f0f8f8-61040615) THG slashes sales and profit expectations The Hut Group has slashed its forecasts for 2022 as rising interest rates, inflation and energy costs take a toll on consumers. Previously, THG estimated its sales growth to be between 22-25% but after a recent evaluation, has lowered this prediction to between 10-15%. Initial predictions did not take into account the negative effects of ceasing sales in Russia and Ukraine along with the impact that the cost-of-living has had on consumer spending. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/15/thg-slashes-forecast-as-cost-of-living-crisis-hits-consumers-wallets/) --- Other Ecommerce News --- DHL and Post Office team up to provide click and collect services Through a partnership between delivery company, DHL and Post Office, a new click and collect service is to be tested at Post Offices before rolling out to over 1000 branches across the UK. Online shoppers will now have the option of choosing their local Post Office as a collection point, and DHL will fulfil the delivery aspect, opening up networks for both parties. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/14/post-office-partners-with-dhl-express-to-provide-click-and-collect-services/) US consumer watchdog plans to further regulate the BNPL sector The US Consumer Financial Protection Bureau (CFPB) has raised concerns regarding the collection of consumer data and the fast-growing nature of the BNPL sector, which includes companies such as Affirm and Klarna. The CFPB is worried that these companies could be negatively impacting consumers’ financial health and aims to put better regulations in place to ensure consumers are safe and empowered. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/16/us-consumer-watchdog-to-start-regulating-bnpl-sector/) Japanese ecommerce market estimated to grow by 6.9% in 2022 The ecommerce market in Japan, largely dominated by domestic online retailers including Reakuten and Mercari, is set to reach $194.3 billion USD in 2022, after seeing an annual compound growth rate of 5.2% between 2018 and 2021. This makes Japan the fourth leading ecommerce market globally, following China, the US, and the UK. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/13/japan-ecommerce-market-to-grow-by-6-9-in-2022/) Ecommerce brands are spending more on TikTok ads TikTok may soon be surpassing Facebook and Google as the most lucrative advertising channel, with ecommerce brands spending 60% more on TikTok ads in Q2. Facebook is still ahead as the top choice for ecommerce advertisers but only grew by 5.6% from Q1, while Google grew 20.5% in Q2, and Snap declined 10.8% in Q2. [Read more on SearchEngineLand](https://searchengineland.com/ecommerce-brands-spent-60-more-on-tiktok-ads-in-q2-387876)