Transitioning from Vendor Central (1P) to Seller Central (3P)
As a direct result of the COVID-19 virus and the increase in orders for products such as household staples and medical supplies, as well as other high-demand products, Amazon announced on March 16, 2020, that they will be temporarily prioritizing products coming into their fulfillment centers through April 5, 2020, to more quickly receive, restock, and ship these products to customers.
For all non-essential brands, Amazon has temporarily disabled shipment creation. With all the rapid changes this is the ideal time for these brands to reposition on the platform and consider making a transition from Vendor Central (1P) to Seller Central (3P). Amazon has stopped or will be stopping PO’s for all non-essential products possibly until the middle of April.
In simple terms, Amazon has stopped non-essential item replenishment (ingestion) into their FBA centers, as well as prioritized only essential items shipping out to the customer (fulfillment) for the next several weeks if not longer. Transitioning will enable a Fulfillment by Merchant (FBM) strategy.
This will allow non-essential businesses to still be operational on Amazon during a time when Amazon has deprioritized your products and on top of that, be able to hit the ground running and be fully optimized once the economy has stabilized and customer habits have returned to normal. During peak seasons, this will be helpful. It is important to keep in mind that it could take up to two months for Amazon to start shipping non-essential products. As a brand it is crucial to utilize this time to reposition on Amazon and take back control of fulfillment as well as retail margins.
Over the years the number of 3rd party sellers on Amazon has increased significantly. Brand control is one of the main reasons why companies are choosing to transition from 1P to 3P. In the long run, the benefits of switching to 3P are increased profit margins, pricing control and brings a higher probability of opportunities.
Amazon 1st Party (1P)
In this model, you choose to sell your assortment to Amazon at wholesale pricing and allow them to be your retailer. This follows a traditional 2 tier distribution model where you negotiate pricing and terms with your Amazon buyer, sign a Vendor Agreement and ship your product to Amazon when sent weekly replenishment PO’s. This business is run either through the Vendor Central portal.
Amazon 3rd Party (3P)
In this model, you set up your own Amazon storefront and choose to sell your assortment direct to consumers becoming the Retailer. This business is managed through the Seller Central portal. Sellers on Amazon have full brand authority which gives them the freedom to control their products while 1P vendors give Amazon the authority to sell and manage their products. For more information click here.
Conclusion
These are certainly some challenging times and it is very easy to get fixated on the ominous short term circumstances presented by the coronavirus but, there is light at the end of the tunnel and non-essential brands can still make the most out of an unfortunate situation by focusing on long term opportunities in the present.
If you need a winning Amazon strategy or have any additional questions, please don’t hesitate to contact one of our Channel Key Amazon consultants. As a Full-Service Amazon Agency, we are dedicated to helping you increase your sales. Talk to our Channel Key team.
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