If you sell on Vendor Central, you might have received an alarming message that Amazon is canceling your vendor relationship and inviting you to join Seller Central. Below is the message in full:
Hello,
We’ve made the decision to stop sourcing products from your company as part of our regular review of product offerings, and a strategic realignment to optimize our operations and better serve our customers.
Effective November 9, 2024, our vendor relationship will be terminated. We won’t enter into any new agreements, or extend current ones, beyond this termination date.
If you’d like to continue selling your products on Amazon, we welcome you to list your items as an independent seller. As a seller, you’d maintain access to the same customer base. You could also choose from fulfillment options, as well as a range of tools and services designed to fit your business needs and support your continued success.
If you don’t have a seller account, you can sign up today. We appreciate your support during this transition, and thank you for your understanding. Contact us if you have any questions.
The Amazon Vendor Central Team
Why Is Amazon Canceling Vendor Central Agreements?
Receiving notice that your Vendor Central agreement will not be renewed can feel like a sudden and unsettling shift. However, it’s important to understand this is part of Amazon’s long-term strategy. It doesn’t mean your business is in jeopardy.
“In my opinion, this is another step in Amazon’s ongoing strategy to shift smaller VC accounts – especially those under $10M – toward a self-serve model or Seller Central,” said Dan Brownsher, President and CEO of Channel Key. “This shift allows Amazon to focus its VC resources on larger enterprise brands, while pushing smaller vendors to SC, where Amazon avoids inventory risk. It’s a clear indication of Amazon’s evolving priorities in how they service brands.”
For many brands, this transition can be a huge opportunity. Seller Central offers more control over marketing, fulfillment strategies, and other areas of your Amazon business. That said, it’s important to enter this space with a well-thought-out plan.
Understanding the Key Differences Between Vendor Central and Seller Central
In the 1P model, you are the wholesaler, and Amazon is the 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 replenishment purchase orders. This business is run through the Vendor Central portal.
When you transition to 3P, you become the retailer. In this model, you sell your products directly to consumers. Sellers on Amazon have full brand authority and complete control over how their products are listed and marketed. Unlike 1P Vendors, 3P Sellers set their own pricing, determine which products to list and promote, and manage their own inventory.
Here is a summary of the key differences between Vendor Central and Celler Central:
- Pricing: On Vendor Central, Amazon acts as the retailer and sets the prices of your products. In Seller Central, you become the seller and set your own pricing.
- Inventory Risk: In Vendor Central, Amazon buys your products in bulk, assuming the risk of holding inventory. In Seller Central, you retain ownership of your inventory until it’s sold, either through Fulfilled by Amazon (FBA) or by fulfilling orders yourself (FBM).
- Marketing & Advertising: Seller Central provides more flexibility for advertising, running promotions, and optimizing your listings. This can be a major benefit, but it also requires more time and expertise.
- Logistics & Fulfillment: Vendor Central gives you a hands-off approach when it comes to fulfillment, while in Seller Central, you must decide between FBA and FBM, each with its pros and cons.
Best Practices for Setting Up a Seller Central Account
While the transition to Seller Central may open new doors, setting up your account correctly from the start is critical to long-term success. Here are some best practices to keep in mind:
- Understand the Fees and Profit Margins: In Seller Central, fees are structured differently than in Vendor Central. Consider referral fees, FBA fees, and other charges that may impact your margins. Make sure you’re pricing your products to accommodate these costs.
- Choose the Right Fulfillment Strategy: One of the key decisions you’ll make is whether to use Fulfilled by Amazon (FBA) or Fulfilled by Merchant (FBM). FBA can provide faster delivery times and access to Prime customers, but it comes with additional storage and fulfillment fees. FBM allows you to maintain control over your logistics but requires you to meet Amazon’s stringent shipping requirements.
- Optimize Your Listings: Seller Central allows you to manage your product listings, so ensure your product titles, descriptions, images, and keywords are optimized to rank well in Amazon’s search algorithm. This is a crucial step in driving visibility and sales.
- Invest in Advertising: Seller Central provides a robust suite of advertising tools like Sponsored Products, Sponsored Brands, and Amazon DSP. These tools can significantly boost your visibility, but you’ll need a solid strategy to ensure you’re getting a good return on investment.
- Monitor Account Health and Performance Metrics: Seller Central requires sellers to maintain a high standard of customer service. Keep an eye on key metrics like Order Defect Rate (ODR), cancellation rates, and customer feedback to avoid penalties or account suspensions.
Case Study: How Channel Key Successfully Moved a Client from Seller Central to Vendor Central
Many brands begin their Amazon journey on Vendor Central. When you switch to Seller Central, you will need to build your Amazon storefront and create all-new listings for your products.
One thing to keep in mind is that Amazon might still have items in their warehouse that you sold to them as a vendor. If you list these products on your new 3P storefront, you will essentially be competing with Amazon.
Spoiler alert: they will win every time. Before you sell these SKUs on Seller Central, you will need to wait for Amazon to run out of inventory. This is called the “sell down” period.
After the sell-down period, the next step is to launch your Seller Central business on Amazon. The following is an actual 1P to 3P conversion scenario for a Channel Key client in the pet supplies category.
This brand initially relied on third-party sellers to generate sales on Amazon. Unfortunately, the company faced an influx of counterfeit products and MAP policy violations from resellers, resulting in lost revenue.
Channel Key advised our client to regain control over their brand and maximize profit potential by launching their entire catalog on Seller Central with the following three-pronged approach designed to increase brand visibility, drive traffic and maximize conversions, and remove counterfeit sellers.
After transitioning from Vendor Central to Seller Central, our client surpassed $250K in sales within just six months. By leveraging unique marketing and advertising tools exclusive to 3P brand owners, their conversions saw an 11% year-over-year boost, while sessions surged by 164%. Over twelve months, Channel Key’s tailored 1P to 3P transition strategy drove a remarkable 604% growth in Amazon sales for the client.
View the full case study here.
Channel Key Takeaway
While it’s essential not to dive headfirst into Seller Central without a plan, waiting too long to transition could also put your business at risk. Amazon’s self-serve platform can be incredibly rewarding, but it demands preparation, strategy, and ongoing management. Take the time to assess your readiness, educate yourself on the platform, and build a plan that ensures your success from day one.
At Channel Key, we specialize in helping brands make the leap to Seller Central with confidence. If you need assistance with setting up your account, optimizing your listings, or building an advertising strategy, our team is here to support you through every step of the process.
