Webinar Recap: How to Enact a 3P Strategy on Marketplaces

Emilee Valken

March 3, 2021

2020 was quite the year for ecommerce, particularly for ecommerce brands on Amazon. Close to 60% of Amazon sales came from third-party sellers in 2020, and that number is expected to keep climbing, showing that a 3P strategy can be a real tour-de-force for any brand willing to enter the fray.

Becoming a 3P seller can be a daunting step for your business, but it can also be a great way to increase sales and the best way to take control of your brand online. In this month’s On-Demand Pattern Webinar, ecommerce leaders from Pattern, Vorys eControl, and Megafood sat down to discuss the challenges and benefits of having a 3P on Amazon and how a 3P strategy can help your brand grow.

1P vs. 3P

There are several methods for selling on Amazon, but two of the most common are 1P selling and 3P selling. In the 1P model, your brand operates as a wholesale supplier to Amazon, who handles most of the selling and pricing details. In a 3P model (or third-party relationship), you are an independent seller on Amazon, making your own pricing and shipping decisions. These models work for different brands for different reasons—buyers are more likely to trust 1P sellers because their product comes from Amazon, while 3P sellers have more freedom to customize the purchasing experience.

“The easier entre is 1P,” said Steve Ellis, VP of Sales at Pattern, “but [brands] quickly find that based on some of their business practices, their pricing practices, and how they distribute their product, that 1P is not a good fit for them, and then they have to course correct halfway in.”

According to Ellis, a 1P strategy can be great for a brand that doesn’t care about the price their product is sold for, but for growing brands on the Amazon platform that want to be in control of their own destinies, the 1P model doesn’t quite cut it.

Why sellers are switching from 1P to 3P

“When you’re selling in a 1P model, you ship your product and you have very little control from that point forward,” said Daren Garcia of Vorys eControl.

In a 1P strategy, Amazon can sell your product at any price they want, and you have limited control over how much of your inventory is available at a given time. That can lead to lower margins and endless frustrations.

Nancy Eichler, VP of Ecommerce and International at MegaFood, said she’s worked at companies with 1P and 3P strategies. She said the 1P environment was far more resource-demanding—”I spent more time proving to Amazon that we had shipped something than I did actually working on selling the product and my marketing”—and brand control was continually an issue.

“Pricing always was impacted,” Eichler said. “I felt like it was a fairly frequent issue that I would log on and see our products either dropped down significantly or slightly up. It was kind of all over.”

Lack of control manifests itself in other ways. As a brand gets bigger on Amazon, it tends to experience more channel conflict, like unauthorized sellers interfering with 1P sales. Unauthorized (or gray market) sellers can easily distribute a brand’s products at marked down prices, eroding pricing across every one of that brand’s other channels and negatively impacting their reputation and distributor relationships.

Brands want to be able to tell their offline customers that they’re doing all they can to maintain control, Garcia said. They want to incentivize high quality partners to sell their products, and do everything necessary to promote them. When a brand has no control online, things like marketing initiatives, displays,and pricing in their brick-and-mortar stores become tougher to prioritize and every corner of the business suffers.

Brands are ultimately switching from 1P to 3P or taking a blended 1P/3P approach because they want more control, they want to drive business, and they want a true growth partner in their corner.

The benefits and challenges of 3P

A 3P strategy allows brands to take back the reins in the Amazon space on inventory, pricing, distribution, content, and more. With a 3P strategy, instead of Amazon sending you purchase orders, you can dictate when you’re sending product into the ecosystem, which is a huge shift for most brands, Ellis said. You won’t get turned away during new product launches because of inventory issues.

A 3P strategy can also help brands navigate unexpected policy changes or scenarios that Amazon may throw at them. Eichler gave an example of a time Amazon automatically dropped the prices of authorized resellers without their approval, creating confusion for the brand and its sellers. Having Pattern as a 3P partner in their corner allowed them to navigate this scenario (and a few others) much more easily, Eichler said.

Another benefit of moving to a 3P is that, if you have one seller, you can have that seller distribute your whole catalog, Ellis said, that way your footprint on Amazon becomes more comprehensive. 3P relationships are particularly effective when they’re exclusive, because they maximize your control, leverage the expertise of your partners, and allow you the freedom to personalize the customer experience.

That said, switching to a 3P model can be difficult.

“It takes time, it takes discipline, it takes rigor within the business, and there’s a lot of clean up that has to happen,” said Ellis.

Brands have to identify who their gray-market sellers are and have a coordinated strategy through either multiple authorized sellers or one authorized seller, otherwise a 3P relationship can present some of the same control issues brands deal with in a 1P relationship. Those control issues get worse the wider your distribution is.

Your brand may have done really well in the brick-and-mortar space for several decades, but Amazon has dramatically changed the game in the past 5-10 years. A revenue at all costs strategy no longer works. Unless you adjust and make fundamental changes to how you go to market, you’re going to see massive brand erosion and market share erosion.

How to enact an effective 3P strategy

According to Garcia, the first step to having an effective 3P is to get your authorized sellers under control, meaning you have to make necessary policies and agreements with your distributors, retailers, and co-ops that spell out how and when your product can be sold. You have to really define your channel.

Secondly, Garcia said you have to have an appropriate legal foundation to stop unauthorized sales. This is where brands have things like special quality control programs and differentiating warranties that apply to products purchased from their authorized sellers. With a legal foundation, you can both enforce your policies and support your exclusive sellers.

“Going out with a 3P strategy without those necessary control foundations in place is a losing proposition, because your designated seller will become lost in a sea of resellers that aren’t invested in your brand,” Garcia said. “You won’t be able to get sales, you won’t be able to begin to approximate your 1P sales, and the strategy may fail.”

Brands need to be willing to put teeth to their policies and, along with weeding out unauthorized sellers, put authorized sellers back into their lanes when they slip up.

Should you try to do 3P by yourself?

While many brands have talented ecommerce teams, they don’t have the internal capabilities, numbers, or tools to get into the 3P space alone. Having a partner like Pattern by your side can not only give you the expertise and tools you need to grow long-term, it can also give you support that can’t be found in a 1P relationship.

You can watch the full webinar, learn how to evaluate a 3P seller, or contact Pattern to talk through your 3P strategy today.

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Sept 20, 2022

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)
Sept 20, 2022

4 Ecommerce 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.

Sept 15, 2022

The 3 Tmall Metrics That Every Brand Needs to Know

If you’re interested in expanding your brand internationally, you’re probably familiar with Tmall. Tmall is Asia-Pacific’s (APAC) largest marketplace, and indisputably the biggest ecommerce powerhouse in the world. It represents a huge opportunity for many brands, but entering the space is also a big challenge to take on.

At Pattern, we recommend brands looking to enter international markets should first focus on dialing in their domestic presence. Once you’re satisfied that your brand is well-represented and optimized locally, you’re ready to think about tackling new regions, like APAC, and launching on marketplaces like Tmall. Our top advice for entering Tmall is to understand and strategize around its three most important metrics: service, delivery, and content.

What is Tmall’s Detailed Seller Rating (DSR)?

Service, delivery, and content ratings are the three elements that make up Tmall’s Detailed Seller Rating (DSR) score. Each component is scored on a scale of 1-5 that is displayed publicly on your brand’s Tmall flagship store page. This is meant to help consumers decide whether or not to purchase your products.

Why DSR Determines Success on Tmall

DSR scores are important because they’re highly influential in driving conversions—customers see DSRs as a way to quickly understand if a brand is trustworthy and worth buying from. They also matter quite a bit to Tmall itself—they monitor these scores and will take action to close flagship stores with low scores.

Let’s go over each element of the DSR score and some steps you’ll need to take to achieve high ratings.

DSR Score Elements

1. Service

Service is a huge ecommerce component in APAC marketplaces. In most other regions, product listings are static, and consumers use content and reviews to make a decision about what to purchase. On Tmall, consumers want to interact with your brand and test its validity before buying—each transaction takes at least one human interaction to convert.

So, to get a great service rating, you’ll need to have a large, established customer service team dedicated to Tmall sales that can offer real, human touchpoints and very fast response times. To get an idea of the speed your agents should be capable of producing, in our Tmall benchmarking exercise, 92.5% of brands’ customer service agents replied to queries via live chat within 30 seconds, 5% replied within one minute and the remaining 2.5% of brands took longer than a minute. So, look for a Trade Partner (TP) that has enough resources to compete with those numbers, support your sales, and maintain a good DSR score.

2. Delivery

Another thing you’ll really want to focus on is a high-quality delivery experience for consumers. As in other regions around the world, Tmall consumers have high expectations for their delivery experience. In our Chinese consumer polling report that targeted consumers buying from Tmall Global, we found that 6% expected same-day delivery, 15% expected next-day delivery, and 46% expected 2-5 day delivery.They want to receive their products fast and they want the products to be undamaged and pristine upon arrival.

So, to achieve a high score for your delivery capabilities, we highly recommend partnering with a TP or ecommerce accelerator like Pattern (which serves as a TP) who has the ability to facilitate your distribution. Make sure your TP has the right infrastructure in place to support high-quality logistics experiences for all of your consumers—they should have an established, well-oiled delivery process in place and the capability to fluidly add you to their current fulfillment system.

3. Content

As in every digital marketplace, content is a huge component of the decision-making process for consumers on Tmall—they can’t touch your product with their hands or see it in person before buying, so it’s important they’re empowered to make a good decision on whether or not to purchase based on the videos, images, and copy.

The goal is to make all of the content and relevant information on your flagship site easily-accessible—consumers should be able to visit your page and make a decision about whether or not to buy without navigating to a new site/page and taking their conversions with them. Images with text and extensive product details are a great way to do this, as well as making sure your service team can speak to all aspects of your product with any consumers (via text or chat).

Expand Internationally With Pattern

As the world’s foremost brand partner for ecommerce acceleration, Pattern truly understands the significance of international expansion. With regional offices around the world, Pattern knows how to successfully launch and grow brands on Tmall and other marketplaces, with the data, insights, and marketplace intelligence to build the metrics that matter. 

It’s important to have a fantastic brand presence, a knowledgeable guide, and a clear go-forward strategy for your best chance at success. With our in-country resources, expert teams, and extensive experience in growing brands around the globe, Pattern can help you get there.

Set up a call to get your international expansion strategy in motion.