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For many brands and manufacturers, selling on Amazon is a no-brainer. However, there are different ways to sell. Choosing to handle everything 1P in single, seamless transactions with Amazon.com can be tempting. But, for many, delivering products directly to the consumer with 3P sales offers greater freedom, can be more profitable, and lays the groundwork for diversifying into other marketplaces.
Amazon 1P vs. 3P is therefore a question of logistics, infrastructure, and processes. Deciding between selling on Vendor Central (1P) or Seller Central (3P) depends on how involved you want to be, how you set up your logistics, and what infrastructure you establish.
1P is often considered the easiest and fastest way to sell on marketplaces like Amazon or Walmart.com. It’s also the most traditional.
Rather than creating listings on Amazon, you sell directly to the company. Amazon negotiates a wholesale price for your goods, picks them up, and lists them for you. It then sets the pricing, controls the listings, and decides whether or not to make another purchase and when.
1P has several surface benefits for manufacturers:
Unfortunately, selling 1P also means:
1P works well for manufacturers that want nothing to do with direct-to-consumer sales. However, 3P is increasingly attractive to many, especially with outsourced fulfillment partners and Amazon’s own FBA service.
3P selling is selling directly to the customer via the marketplace.
3P involves taking your goods to Seller Central and listing them directly for consumers to buy. While you can earn more, you also have to expand infrastructure to handle logistics. 3P marketplaces are extremely large, and today’s manufacturers often sell directly.
Brands like Anker, which sold almost exclusively on Amazon.com until 2017, are prime examples of this model’s success. And marketplaces like AliExpress are entirely built around manufacturers making direct-to-consumer sales.
3P sales have much to offer manufacturers:
Conversely, 3P requires a significantly more hands-on approach, which is why many brands have avoided direct sales. Some of the challenges of 3P include:
Essentially, moving to Seller Central from Vendor Central brings new costs and challenges. It’s important to consider both and assess how you intend to mitigate logistical issues, such as with Amazon FBA or another fulfillment-as-a-service solution.
Of course, FBA and third-party logistics (3PL) have their own associated fees, which you can calculate as part of your margins. For most, they’re cheaper and easier than building your own warehousing networks, delivery infrastructure, and packing plants – but that also depends on your volume of sales and existing network.
Amazon 1P vs. 3P largely depends on your organization and how involved you’re willing to be. 3P sellers have to deal with considerably more in terms of logistics, customer service, and direct marketing. This can add complexity and require greater business investment, even if it results in larger profits in the long term.
Selling 3P ups the time expenditure per sale, but also increases profit per sale. Conversely, 1P greatly reduces hassle, but can significantly cut into margins.
Even if you sell through a 3PL like Amazon FBA (which you probably should be), you’ll still have to invest significant resources into building infrastructure to prep and ready packages for FBA.
Tip: Sellers can use the nationwide MyFBAPrep network to handle all prep work, including bundling, kitting, labeling, and more.
1P sellers may find themselves bound to a single marketplace, because you risk being delisted elsewhere if you’re selling for a lower price on Amazon (or another site).
Selling 3P means you control pricing and avoid being delisted (for example, if Amazon notices you’re selling the same product on Walmart at a cheaper price).
Diversifying across marketplaces offers greater business security, because if issues arise on one account or marketplace, you’re still secure in other sales channels. Furthermore, diversifying across different marketplaces across the globe offers even more opportunity for growth and security for your eCommerce brand.
If you sell directly to Amazon, you normally can provide product descriptions, marketing material, etc., up front. From there, it’s in Amazon’s hands. They’ll still charge you for merchandising, and you’ll have no control over product presentation, listing updates, or other alterations, even as your products change.
On the other hand, selling 3P means you have to handle all of this, which requires investing in merchandising, creating listings, and keeping everything up to date.
For many brands and manufacturers, 3P sales provide more profit, especially with the use of third-party logistics and prep solutions. Therefore, 3P Seller Central is the clear choice, if you can manage the infrastructure.
Plan listings and launch them. This should involve investing in high-quality merchandising (photos, descriptions, Amazon Vine reviews, etc.). The higher quality your listings, the more likely they are to make sales.
Performing Amazon keyword research, SEO, and creating a marketing budget for PPC will help to drive sales. This also helps you work around potential sales dips, in case Amazon stops featuring your products once they no longer sell them directly.
Fulfilled by Amazon (FBA) simplifies logistics, giving you access to worldwide distribution without the expense or complexity of building a distribution network. FBA is convenient, affordable, and delivers purchases on platforms like Walmart.com through multi-channel fulfilment. So, when you move to other marketplaces, you won’t necessarily have to choose another fulfilment partner right away (although you may want to).
Partnering with an FBA prep center + FBA means packaging, labeling, inspection, pick and pack, etc., are all taken off your hands. You have the convenience of 1P sales without losing the profit margin to Amazon. It’s still important to assess total costs, but everything will be handled for you while protecting your margins.
While you can accomplish much of this through Amazon’s Seller Central, it’s important to have software and resources in place to:
While customer service can be as simple as having someone on hand to answer inquiries, you’ll have to ramp it up as sales increase. Maintaining a direct relationship with customers means handling returns, dealing with questions, and resolving complaints in a timely and professional manner. Doing so will produce additional benefits, in that you’ll garner more positive reviews, and eventually make more sales.
3P sales introduce new complexity in terms of overhead, infrastructure, and logistics. While some of this, like listing setup, marketing, and long-term listing management, will likely remain your responsibility, most other aspects including prep, fulfilment, and even customer service can be outsourced, and more affordably than simply selling directly to Amazon.
If you’re ready to make the switch to selling 3P, get started with Fulfilled by Amazon by enrolling with MyFBAPrep. We handle every aspect of inspecting, preparing, and packaging your products for Amazon so distribution remains as simple as 1P wholesale.