There’s much to take in when it comes to the two most important business models on Amazon: Vendor Central and Seller Central. These are two Amazon platforms that can be utilized efficiently to work well for your brand.
Today, we’ll break down Amazon Vendor Central and Amazon Seller Central. We’ll also introduce a third business model: the Amazon Hybrid Model. This combines selling in both platforms instead of just one.
The Amazon Hybrid Model is a business model composed of two strategies: selling as a first-party vendor on Vendor Central and selling as a third-party seller on Seller Central. It’s a strategy known as the hybrid model because it promotes business for both your own and sponsored goods, optimizing the two ways to sell on Amazon.
What is Amazon Vendor Central?
The first thing to know is Amazon Vendor Central, a web portal for first party-sellers. Vendor Central is also often called Amazon Retail.
If you’re a first party-seller, you’re often referred to as 1P. This means you act as a sales manufacturer or direct supplier to Amazon, giving your first-hand experience and products for the Amazon brand. You directly correspond with the Amazon retail team.
Here are some ways that Vendor Central operates:
IT’S INVITATION ONLY: It’s invitation only because only those with the large market traction and can sell well with large volumes are invited, according to Amazon.
YOU ONLY SELL TO AMAZON: You sell your products in wholesale directly to Amazon, so you have a simplified business model and Amazon takes care of everything.They take charge of prices, shipping rates, inventory, and customer service. As a vendor, your focus will be on purchasing orders and billing.
YOU HAVE ENDLESS ADVERTISING OPTIONS: In terms of advertising, you will be part of Amazon Marketing Services (AMS), a paid digital marketing platform to promote products. Amazon Marketing Services include Sponsored Brands, Headline Search, and Product Display Ads. Vendors can create pay-per-click (PPC) campaigns. Your brand will get more traffic for your listings using these methods.
UNSTOPPABLE GROWTH: Perhaps the #1 reason for selling on Vendor Central is the growth of the revenue acquired from being on Amazon. As a revenue model, it is ideal. Your products are Amazon products, and have the privilege of being branded “sold on Amazon.”
Also, you pay slightly less than Amazon Sellers when you’re a vendor because you sell in bulk and you don’t have internal operations costs. Although you’re selling individual items for less due to Amazon price controls, you sell wholesale. Plus, no internal operations costs. This means increased revenue throughout for vendors than for sellers.
What is Amazon Seller Central?
What if you want to sell and promote directly to Amazon customers? That’s where Seller Central comes in. Seller Central is the web interface used for the various operations of the marketplace or third-party vendors, called 3P.
If you have a brand and know it well, you will most likely already be familiar with the marketplace called Seller Central.
Here are some ways in which Seller Central works:
THE ABILITY TO CONTROL PRICING: Amazon plays no part in pricing here, so you can maximize control over the prices you want to set for your products.
USE DATA TO YOUR ADVANTAGE: There are many Amazon analytics out there to gain data and advertising options to promote your brand. There’s Amazon Web Services (AWS), using cloud computing strategies. On AWS, there’s also Amazon Kinesis Analytics. Amazon Kinesis Analytics is capable of processing big data in real time from high volumes of streaming data from operating logs, financial transactions, and social media feeds.
TAKE STOCK OF THE AMAZON FULFILLMENT PROGRAM: As a seller, make sure your brand takes stock of the Fulfillment by Amazon program (FBA). This paid eCommerce service allows 3P sellers to use Amazon fulfillment or distribution centers. The FBA network has many advantages from a physical products perspective.
EVERYONE’S A COMPETITION: You’re in the marketplace, and often have competitors - a lot of them. This means sales revenue may not be the same compared to an Amazon vendor. You’re also investing more in internal operations that will do much of the back-end procedures.
In comparison to Amazon vendors (1P), sellers (3P) usually do much of the heavy lifting themselves. Their profit goes to internal operations, as well as back-end marketplace costs for being on Amazon, therefore, their profit margin is slightly less than 1P vendors.
Make The Amazon Hybrid Business Model Work For You
WHAT IS THE AMAZON HYBRID MODEL?
The Amazon Hybrid Model is the combination of using Vendor Central and Seller Central at the same time. Instead of limiting to one platform, the brand can grow using this strategy. By using the Amazon Hybrid Model, the brand transitions from Vendor Central to Seller Central as well.
WHY DO YOU NEED THE AMAZON HYBRID MODEL?
This business model takes control of the strengths of both sides of the online business models -- and minimizes the weakness of both. As you know, only selling on one platform limits your brand. Opening it up to two will increase your revenue, your advertising and data analytics tools, and maximize the audience for your inventory.
When you transition from 1P vendor to also being a 3P seller, then you’ll be part of the hybrid model.
HOW DOES IT WORK?
Maximizing Profitability: Most people have trouble setting prices, and in Vendor Central, you can’t set your prices at all, and when Amazon sets the price, it goes for a lower retail value. This is because Amazon controls the prices.
When you utilize the hybrid model, you will use Seller Central, which has no restrictions on prices, for the products that you want a set price for.
Therefore, you can maximize your profitability, by using both models--you gain profit from prices set by Amazon as a 1P vendor, as well as your own prices as a 3P seller. Basically, you have two sites of revenue, using the hybrid model.
Advertising and Reviews: With Vendor Central, Amazon is handling most customer-related services. However, if you transition to being both 1P and 3P, you can control reviews for your product.
On Seller Central, you can use Amazon Vine, the Early Reviewer Program, and a number of other Amazon tools at your disposal. Your customer service team can handle most of the product reviews here.
But of course, because you’re using the hybrid model, your brand will still get the seal of approval from Amazon, which you acquired by using Seller Central. You can use this to your advantage when it comes to content marketing and advertising.
Refurbishing Stock: Vendor Central requires that you have a steady stream of inventory for all of your items. You will be penalized by Amazon if you don’t. You always have to make sure to never run out of products for your 1P brand.
The same is not true for Seller Central.
When using the hybrid model, make sure to refurbish your core items for Vendor Central, and to place your non-core items (that can go out of stock at any time) on Seller Central. Do this by using effective inventory management strategies.
Tips to Keep In Mind:
Keep the seal of approval: When you transition to the Amazon Hybrid Model from being a 1P vendor, make sure you keep your Amazon prime badge. This will reinforce the fact that your products are still certified by Amazon.
With this guarantee, you won’t sacrifice sales, because consumers are more likely to buy products with the Amazon seal.
Don’t mirror your product selection on both sides - You will be penalized by Amazon if you do. Your products may be taken down.
Most companies have the misconception that the hybrid model allows them to both. In order to take full advantage of the hybrid model, you must learn to pick the products that would suit the 1P needs and as well as 3P needs simultaneously.
Whatever you do, don’t put the same products on Vendor Central that you would on Seller Central.
Keep product life cycles alive - By using Seller Central to introduce new products, then transitioning them to Vendor Central when they become household names, you can prolong the life cycle of a product.
Of course, the longer a product is in demand, the more you want to keep in the cycle, but make sure to use both models to do this.
When a product is introduced, you can use more marketing strategies [inbound link] on Seller Central. But when a product has a regular following, you can move it to Vendor Central, and focus on other products that need marketing.
In this article, we’ve gone through three eCommerce business models for you: the Amazon Vendor Central platform, the Amazon Seller Central marketplace, and the combined Amazon Hybrid Model.
There are many advantages to Vendor Central: Amazon is the retailer; many advertising options; and revenue growth is up to par.
In comparison, Seller Central also has advantages: pricing control, data analytics, and fulfillment programs. By using both models in a hybrid mode, your brand maximizes advertising and inventory management to the fullest and increases revenue.
So if you’re ready to transition from a 1P vendor to a 3P seller but are running into problems, MarketplaceOps is here for you. We are a team of online marketplaces and e-Commerce experts who have been in the industry for many years. We’re willing to help you every step of the way. If you have more questions about our article or if you simply need help in starting or handling your Amazon business, just reach out to us by sending an email or clicking the link here: