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 6, 2022

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/)
Aug 30, 2022

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/)
Aug 23, 2022

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/)