navigating amazon's ecosystem
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5
minutes
Written by
Guido
Often, we are asked about the difference between Amazon Vendor Central (1P) versus Seller Central (3P), with brands and company owners keen to understand what is best for their business. Amazon has two primary platforms for third-party sellers to sell their products on Amazon's marketplace: Vendor Central (1P) and Seller Central (3P). Both platforms offer self-service models, but there are some key differences between the two that set them apart.
Vendor Central (1P) is Amazon's wholesale platform, where sellers act as vendors to Amazon. In this model, Amazon purchases the products from the vendor at wholesale prices and sells them to customers. This platform is often used by large, established brands and manufacturers who have the resources and capacity to provide Amazon with large quantities of their products and who are prepared to work on low margins (cost plus approach).
Seller Central (3P), on the other hand, is Amazon's marketplace platform, where sellers act as independent third-party sellers. In this model, sellers list their products on Amazon's marketplace and sell them directly to customers. This platform is often used by small and medium-sized businesses who will set the end-user price (top down) and pay a commission to Amazon for using the platform (referral fee). In terms of control, Seller Central (3P) offers more control over the sales process compared to Vendor Central (1P). With Seller Central, sellers have complete control over their product listings, pricing, and customer service. They can also use Amazon's advertising and promotional tools to drive sales and increase their visibility on the platform. Another example is the health and wellness brand Olly, which experienced a valuation increase of more than 50% after launching on Amazon in Europe. The company had previously only sold its products in the US but saw a strong demand for its products on the continent and was able to quickly gain a significant share of the market on Amazon. These examples demonstrate that it is possible for American brands with no previous business activities in Europe to successfully launch on Amazon and see a significant increase in valuation.
Amazon's global sales revenue is generated by both Vendor Central (1P) and Seller Central (3P) platforms. However, most of Amazon's sales revenue comes from third-party sellers using the Seller Central (3P) platform. In recent years, the contribution of third-party sellers to Amazon's overall sales has continued to grow, with third-party sales accounting for over 62% of Amazon's total retail sales in 2020. This highlights the importance of the Seller Central (3P) platform to Amazon's growth and overall success.While Vendor Central (1P) is used by large, established brands and manufacturers, the number of third-party sellers using the Seller Central (3P) platform has increased dramatically in recent years. This increase can be attributed to the greater control and flexibility that Seller Central (3P) offers, as well as Amazon's efforts to make it easier for businesses of all sizes to sell their products on its marketplace. Reach out to us for any questions you have in relation to Vendor Central and Seller Central, including if there is any value in a hybrid strategy between both platforms.
