Amazon’s Hybrid Model Embraces the Best of Sellers’ Options
Earlier this year, Amazon stopped buying products from many of its vendors, requiring many suppliers to adjust their order fulfillment operations on the marketplace. Amazon also recently changed its compliance standards and regulations for third-party sellers, requiring many merchants to adjust their operations as necessary.
For sellers, unexpected changes can be concerning. Nevertheless, there are opportunities for sellers on the Amazon marketplace, and flexible solutions are available so your supply chain can quickly adapt to Amazon’s evolving structure.
The Amazon marketplace currently provides two platforms for sellers: Vendor Central (1P) and selling directly to Amazon shoppers through Seller Central (3P). Both platforms have their pros and cons. It’s important to understand how to optimize each of them to ensure your supply chain is prepared for any new Amazon initiatives.
Utilizing Vendor Central is much more hands-off because Amazon handles all individual order fulfillment and customer service. Sellers are only responsible for managing purchase orders and advertising initiatives. Vendor Central is a great vertical for merchants to market their products and obtain legitimacy with shoppers. Products sold on this platform are automatically labeled with the “Shipped and Sold by Amazon” tag which can enhance the customer’s confidence in your product. Combine this with having access to unique advertising features such Amazon’s Marketing Services and selling 1P can have a huge impact on your business.
While selling on Vendor Central can have many advantages, sellers have less autonomy over their business. Amazon can set and adjust any price on your products based on internal data. Amazon also maintains high standards for keeping inventory stocked in their warehouses: Suppliers are required to keep four weeks of inventory on hand for one order at all times.
Seller Central looks like the preferred platform Amazon wants its sellers to utilize on the marketplace. In addition to the platform’s simple functionality, Amazon merchants have more control over their business such as product pricing, inventory management and access to quality analytics. With data such as page views, sessions and conversion rates at your fingertips, merchants have the power to utilize this information to generate additional sales. Being a third-party seller on this platform can be extremely beneficial as this heightened autonomy can be a powerful way to enhance business.
There are two options to fulfill orders on Seller Central. Sellers can handle the prepping and shipping themselves, or they can choose Fulfillment by Amazon (FBA). FBA fulfilment involves storing your products in an Amazon warehouse where they handle all of your logistics. This approach is more costly due to the additional fees for storage, fulfillment and service. Sellers may turn down this option and choose to handle all fulfillment themselves, but doing so will require an investment of time and resources (i.e., additional costs).
Selling on this platform can be risky because shoppers tend to trust items on Vendor Central more due to the “Shipped and Sold by Amazon” product labels. Vendor Central page rankings are also the highest on the marketplace, which can result in Seller Central products drowning in a sea of other purchase options.
Outsource and Benefit from a Hybrid Approach
While selling on Amazon is essential to grow your business, it may make sense to outsource to a full-service supply chain company to alleviate the challenges of managing both platforms.
Using the Amazon hybrid model is a great strategy to optimize your listed products on each vertical. For example, because Amazon’s Vendor Central algorithm focuses on a product’s sales history, utilizing Seller Central to generate initial sales could be a great way to launch your product. Once your product has gained traction and has enough sales history, it may be worthwhile to start selling on Vendor Central. Selling 1P can then enhance your product’s visibility, and shoppers may be more inclined to trust the quality of your product because of the “Shipped and Sold by Amazon” label.
Exploiting features on both platforms can be a powerful way to grow your business on the Amazon marketplace. Seasoned Amazon experts can help you develop and implement this strategy in your supply chain to prepare you for any obstacle you may face with Amazon.
If you need assistance with your Amazon business and want to implement a hybrid strategy, visit www.casestack.com.