Moving from Vendor Central (1P) to Seller Central (3P) is a question that often comes up toward the end of each year. If you sell on Vendor Central, you will need to renegotiate your vendor contract with Amazon every twelve months. As an Amazon Ads partner and channel management marketplace agency that manages over $100 million in GMV, Channel Key has helped brands of all sizes determine whether Seller Central will be more profitable for their business.
Before considering a transition to Seller Central, it’s important to understand how this model differs from Vendor Central. Amazon 1P and 3P both have their advantages and disadvantages. Deciding which is right for your brand depends on many factors including:
- Supply Chain & Logistics
- Funding
- Inventory
- Pricing Strategy
- Distribution
- Assortment
- Goals & Success Metrics
Switching to Seller Central is a major decision that will impact both the short-term and long-term operations of your Amazon business. The good news is: 3P offers an opportunity to significantly increase not just revenue, but net profits. The bad news is: if you don’t transition strategically, it will be much more challenging to succeed on Seller Central.
The Vendor Central (1P) and Seller Central (3P) Models
As an Amazon 1P seller, 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 weekly replenishment purchase orders. This business is run through the Vendor Central portal.
When you transition to Seller Central, you become the retailer. In the 3P model, you build your own Amazon storefront and sell your products directly to consumers. You have full brand authority and complete control over how your products are listed and marketed. You will be able to set your own pricing, determine which products to list and promote, and manage your own inventory. All of this requires much more work than the 1P model, but if done correctly, it can lead to higher profits.
In the video below, Channel Key President & CEO Dan Brownsher summarizes the main differences between Amazon 1P and 3P:
An Example of How Channel Key Successfully Moved a Client from Seller Central to Vendor Central
Many businesses 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. Initially, this brand 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:
- Increase Brand Visibility
Create 171 pages of A+ Content, including optimized Titles, Descriptions, and Images to enhance brand visibility - Drive Traffic and Maximize Conversions
Develop a scalable advertising strategy to increase ranking on high-volume keywords based on predictable traffic patterns - Remove Counterfeit Sellers
Utilize the protection features available in Brand Registry to remove 15 counterfeit sellers from Amazon
Within six months of transitioning from Vendor Central to Seller Central, our client generated over $250K in sales. Using a strategic combination of marketing and advertising levers available only to 3P brand owners, conversions increased by 11% YoY, and sessions increased by 164% YoY. In total, Channel Key’s 1P to 3P transition strategy increased Amazon sales for our client by 604% over the course of twelve months.
Channel Key Takeaway
Transitioning from 1P to 3P is different for every brand. In the above scenario, our client’s primary challenges were regaining control of their brand, neutralizing 3rd party resellers quickly and efficiently. Moving your Amazon business to Seller Central requires a thorough understanding of what hurdles your business might encounter. This is not always easy. There are many challenges that can arise during your transition that can postpone sales, resulting in lost revenue. Partnering with a proven Amazon marketplace agency like Channel Key can help you identify potential challenges and establish preventive strategies to overcome them. These safeguards will help ensure your brand’s switch from 1P to 3P is swift, streamlined, and profitable.
