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 (6th September 2022)
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Global Ecommerce Weekly News: 6th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon announces new inventory and distribution service, AWD Amazon has launched Amazon Warehousing and Distribution (AWD), providing inventory and distribution services to its sellers as a means of addressing current supply chain issues. AWD is now available for sellers using Fulfilment by Amazon (FBA), i.e. outsourcing their fulfilment to the platform. Amazon has plans to expand the service outside the platform in 2023. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/02/amazon-introduces-new-service-to-help-solve-supply-chain-challenges/) Amazon Web Services (AWS) launches in the UAE AWS, Amazon’s cloud-computing platform offering, has launched its second region in the Middle East and now provides its services in the UAE. The move will now allow anyone in the UAE who utilises cloud technologies to harness AWS’s advanced platforms and APIs. An estimated $11 billion USD is expected to be added to the UAE’s GDP thanks to the implementation, with an average of 6,000 external vendor jobs to be created annually. AWS is now available in 87 zones across 27 regions, with sights set on expanding further across Australia, Canada, India, Israel, New Zealand, Spain, and Switzerland. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/30/amazon-web-services-launches-region-in-uae/) --- Other Marketplace News --- Lazada to launch in Europe Alibaba-owned ecommerce platform Lazada is set to launch in Europe, marking a refreshed internationalisation push from the company. The move follows toughening economic conditions and performance in Southeast Asia, advancing the need to tap overseas markets. In Europe, Lazada will face tough competition from giants like Amazon and Zalando. Lazada’s exact entry strategy is to be confirmed and will be reliant on macroeconomic and market conditions, according to Lazada CEO James Dong. [Read more on DigitalCommerce360](https://www.digitalcommerce360.com/2022/09/01/alibabas-lazada-to-take-on-amazon-zalando-in-europe-push/) Chinese ecommerce giant Pinduoduo to launch cross-border platform in the United States Pinduoduo, a Chinese ecommerce giant rivalling Alibaba and JD, has announced it will be launching a new cross-border ecommerce platform. The marketplace is set to launch in the United States next month, as part of the company’s larger push into new markets. Pinduoduo found success in China thanks to its rock-bottom price offerings and harnessing of social commerce marketing, emulating strategies similar to fast-fashion giant Shein. [Read more on Yahoo Finance](https://uk.finance.yahoo.com/news/pinduoduo-launch-international-e-commerce-034129263.html) Alibaba launches its biggest B2B sales event, ‘Super September’ China ecommerce giant, Alibaba, has now launched its month-long B2B sales event ‘Super September’. The event provides 40 million buyers and 200,000 suppliers with the ability to connect on the platform, showcasing a ‘virtually unlimited’ number of products. The event hopes to foster new cross-border business relationships to tackle supply chain challenges currently faced by businesses. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/01/alibaba-launches-super-september-b2b-sales-event/) --- Other Ecommerce News --- Klarna’s losses quadruple in first half of 2022 BNPL provider, Klarna, has reported losses of $581 million USD for the first half of 2022. This figure is almost four times larger than a year earlier, where $129 million USD in losses were reported. The company attributes the losses to employee costs, technology investments, and rising credit losses. Klarna’s figure reporting comes amidst worsening economic conditions, fresh legal and regulatory scrutiny, and pressure from Big Tech competitors. [Read more on The Financial Times](https://www.ft.com/content/483451db-9221-4ca4-83a6-b4ddc6bfcfbb) [Read more on the Guardian](https://www.theguardian.com/business/2022/aug/31/klarna-losses-more-than-triple-as-consumer-spending-slows) One fifth of Snap employees to be laid off amidst poor financial performance Social media platform Snap (‘Snapchat’) has announced it will be laying off 20% of its employees and closing out a number of projects following a year of poor financial results.The move will see 1,200 employees globally lose their jobs, saving the company an estimated $500 million USD in costs. Snap is currently valued at $20 billion, an 84% decrease from its valuation of $130 billion last year. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/01/snap-to-lay-off-20-of-its-workforce-and-wind-down-a-number-of-projects/)

Global Ecommerce: Weekly News (30th August 2022)
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Global Ecommerce Weekly News: 30th August 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon set to shut down Amazon Care Amazon is closing its telehealth service, Amazon Care, which launched in 2019 as a trial program for its headquartered employees. Later the service was rolled out nationwide for employees and other companies. The ecommerce giant has now made the decision to move away from the healthcare space, believing it was not the right long-term solution for its enterprise customers. [Read more on CNBC](https://www.cnbc.com/2022/08/24/amazon-is-shutting-down-amazon-care-telehealth-service.html) Peloton closes new deal to sell on Amazon Following a recent deal, Amazon customers will soon be able to buy Peloton fitness equipment on the marketplace, marking Peleton’s first move outside a direct-to-consumer model. According to Peloton’s CCO, there are already around half a million searches on Amazon for Peloton products every month, despite having no presence on the marketplace. Some key products include the original Peloton Bike, retailing for $1,445 and Peloton Guide for $295. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/24/peloton-strikes-deal-to-sell-fitness-equipment-on-amazon/) --- Other Marketplace News --- 60% of Malaysians are buying from local sellers on Shopee A recent survey of nearly 3,500 respondents found that nearly half of the shoppers prefer to purchase from local sellers due to shorter delivery times. Other shoppers decide to shop locally due to the quality of the products made in Malaysia and an interest in keeping the economy running. As a result, smaller local merchants have been able to grow their businesses, and shoppers benefit from shorter delivery times, products of high quality and supporting local businesses. [Read more on The Malaysian Reserve](https://themalaysianreserve.com/2022/08/25/around-60-malaysians-are-buying-from-local-sellers-on-shopee/) Flipkart’s social commerce platform Shopsy crosses 100 million users Flipkart launched a social commerce arm, Shopsy, in July of last year, which has now surpassed 100 million users, ahead of its target timeline being the end of 2022. This acquisition of new users has made Shopsy one of the largest platforms of its kind in the country, and is expected to onboard a further 100 million by the end of 2023. The platform is centred around boosting local entrepreneurship and powering ecommerce for consumers across tier 2+ regions where users face challenges around trust and navigation when shopping online. [Read more on Business Standard](https://www.business-standard.com/article/companies/flipkart-s-social-commerce-platform-shopsy-hits-100-million-users-1220828006851.html) Meta joins Amazon and Walmart in bid for Indian ecommerce market Amazon mentioned earlier in the year that it would be building a logistics division in-house through its purchase of a 51% stake in Ecom Express, an end-to-end logistics firm, to make ecommerce deliveries more efficient in the country. Walmart operates Flipkart in India and is set to continue its investment in the marketplace. In an effort to compete in the Indian ecommerce market, Meta has partnered with Indian ecommerce company, JioMart, to offer customers a grocery shopping platform within its WhatsApp chat feature. [Read more on Pymnts](https://www.pymnts.com/news/retail/2022/meta-joins-amazon-walmart-indian-ecommerce-market/) --- Other Ecommerce News --- Ecommerce in Spain worth €57.7 billion in 2021 Spanish ecommerce saw 11.7% growth compared to last year, largely attributed to cross-border sales. In the final quarter of 2021, ecommerce sales in Spain were at €16.9 billion euros, at least 60% of which came from cross-border sales. Transactions from foreign locations to Spain generated a turnover of €1.56 billion in Q4, a growth of 27.7% compared to Q4 a year before. [Read more on Ecommerce News](https://ecommercenews.eu/ecommerce-in-spain-was-worth-e57-7-billion-in-2021/)

Global Ecommerce: Weekly News (23rd August 2022)
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Global Ecommerce Weekly News: 23rd August 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon to add mental health support to primary-care service Amazon is set to move into mental health therapy with its primary-care division, following its recent acquisition deal of One Medical. The plan is to partner with virtual behavioural therapy service, Ginger, to offer its Amazon Care users with on-demand access to mental health services, licensed therapists and psychiatrists. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/11/amazon-plans-to-add-mental-health-support-to-primary-care-service/) GMB union calls for £15 an hour minimum pay at UK Amazon warehouses Amazon recently offered its warehouse workers a 3% pay rise, which in comparison to the June inflation rate of 9.4% left employees disappointed. Following this, hundreds of Amazon warehouse workers stopped work last week, protesting against the minimal pay increase, seeking a minimum of £15 an hour. Recent protests consisting of employee walkouts and sit-ins aim to get a better offer out of Amazon. [Read more on The Guardian](https://www.theguardian.com/technology/2022/aug/09/gmb-calls-for-15-an-hour-minimum-pay-at-amazon-warehouses-in-uk) Amazon third-party sellers have received their first-ever holiday fee hike Amazon’s third-party marketplaces account for close to half of the company’s online sales. The company introduced a 5% fuel and inflation charge to its third-party sellers earlier this year, and has now implemented another inflation increase charge. Commencing 14 October, any seller who uses Amazon’s fulfilment service is subject to the price hike, which is set to be an additional 35 cents per item for products sold in the US and Canada. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/17/amazon-third-party-sellers-have-received-their-first-ever-holiday-fee-hike/) Amazon puts a pause on UK grocery shop roll-out as the cost of living increases Amazon has slowed down on its UK roll-out of till-free Amazon Fresh grocery stores following disappointing sales and the rise in cost of living. Allegedly, the company is no longer looking for potential sites to expand and if more stores are opened, they will likely no longer use a till-free system, as consumers become more cautious about spending. [Read more on The Telegraph](https://www.telegraph.co.uk/business/2022/08/21/amazon-pauses-uk-grocery-shop-roll-out-following-disappointing/) --- Other Marketplace News --- Shopee overtakes Alibaba across international markets Shopee has surpassed Alibaba and taken the top spot for sales outside of China. Singapore-based marketplace saw a year-on-year increase of 51.4% at the end of Q2 of this year, while Alibaba saw a 3% drop during the same time period. This can be seen as a promising development for start-ups and their ability to compete with some of the largest ecommerce giants in the market. [Read more on Exchange Wire](https://www.exchangewire.com/blog/2022/08/18/shopee-surpasses-alibaba-in-international-sales-amazon-searches-for-entertainment-exec/) H&M reopens its official store to Alibaba’s Tmall ecommerce platform It has been nearly 18 months since Alibaba removed H&M from its Tmall platform, following H&M’s criticism of human rights abuses in Xinjiang. It is estimated that over a million people, predominantly minorities in the area, have been unlawfully detained in camps across the city. Brands including Nike, Adidas, Burberry and Converse were swept up in the controversy, however H&M was one of the first to be targeted for speaking out about the issue. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/16/hm-returns-to-alibabas-tmall-platform-16-months-after-xinjiang-controversy/) Klarna launches new feature allowing UK consumers to view full online order history Buy-now-pay-later company, Klarna, has launched a new feature on its shopping app, which allows UK consumers to view their full online order history, regardless of whether they purchased the product using Klarna. The feature also shows delivery tracking and aids consumers in managing their online purchases more conveniently. [Read more on The Industry](https://www.theindustry.fashion/klarna-launches-new-feature-allowing-uk-consumers-to-view-full-online-order-history/) --- Other Ecommerce News --- Online marketplaces responsible for £280 billion business turnover in the UK Nearly 900,000 UK businesses are currently selling on online marketplaces, generating an estimated £282 billion worth of sales each year. This figure represents 6% of the UK’s annual business turnover, highlighting the notable contribution that marketplaces make to the UK economy, along with the potential for further growth in this area. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/09/online-marketplaces-responsible-for-280-billion-business-turnover-in-uk/)