Amazon Vendor vs. Seller – Differences and Difficulties for Online Sellers
Amazon provides two different business models for selling on their platform – Amazon Vendor vs. Amazon Seller. Both models have their benefits and drawbacks and it’s not uncommon for sellers to switch to the vendor model and the other way around. In this article, we’ll dive into the differences regarding structure and operations, the difference between Amazon Vendor Central and Seller Central, and also take a closer look at what is motivating vendors to switch to Seller Central.
What Is the Amazon Vendor Model?
As in every marketplace, there are always certain businesses that become leaders in their categories. Whether they are brand-name manufacturers or merchants with a knack for selling, Amazon keeps tabs on these category leaders. In some cases, Amazon asks these businesses to become vendors, or first-party sellers. If the merchants accept, they continue to sell their products not on Amazon, but rather to Amazon. The online giant then proceeds to sell the vendor’s products themselves.
Is Amazon a vendor as well then? No, only the people that sell their products to Amazon (normally in bulk) are called vendors. Amazon is the reseller in this constellation. A reseller that, once the vendor has supplied Amazon with the product, also takes charge of operational tasks. These include marketing, customer service, and, of course, pricing.
Amazon Vendor vs. Seller – How to Become an Amazon Vendor?
In a nutshell, you could say that a vendor is a direct supplier of a superior product for Amazon. Amazon naturally gets to choose their suppliers. This means that you can only become an Amazon vendor by way of invitation.
What Is the Amazon Seller Model?
Central key figures of the Amazon universe are the merchants that sell their products on the digital platforms the online giant provides – so-called third-party sellers. The sellers remain the owners of their goods until they are sold to the end consumer. All other operational tasks we mentioned above also remain with the sellers. Those merchants are also able to dump these operational tasks on Amazon by leveraging Amazon FBA. This is however not comparable to the Amazon Vendor Model at all, since in this case, Amazon is acting as a service provider, not a reseller. Click on the following link if you want to read more about Amazon FBA and who benefits most from it.
Comparing the Concepts – Amazon Vendor vs. Seller
Let’s have a look at the pros and cons of both concepts. There are many relevant factors to take into account when looking at the two models. Also bear in mind that the differences discussed below are also reflected in the amazon seller central vs. vendor central scenario. Both of the two web interfaces are programmed to service the seller or vendor in regard to the requirements and obligations they need to fulfill in their role.
As you can imagine, the comparison Amazon vendor vs. seller with pricing maneuverability clearly falls in favor of the sellers. Amazon merchants have full control over how to price their products and at what time.
Vendors can only negotiate the prices at which they sell to Amazon and the minimum advertised price (MAP) at which Amazon is to sell their products on the platform. Handing over the pricing strategy to Amazon can of course also be seen as a positive aspect – not having to worry about pricing is a very comfortable situation indeed. Especially if you take into account how time-consuming a solid pricing strategy can be on the e-commerce giant’s platform. As long as you are able to strike a good deal with Amazon concerning to your supply, the Vendor Model is the clear winner in our hypothetical Amazon vendor vs. seller standoff.
However, as a vendor, you will have to be a tough negotiator – Amazon is known for driving a tough bargain and constantly aiming for the highest profit margin possible. Another possible strategic goal is the expansion of Amazon’s own assortment. In this case, the attraction of new items is prioritized over profitability. The brands’ representatives and Amazon’s strategic buyers meet once a year to discuss and redefine their agreements. For sellers, in turn, negotiations with Amazon do not exist, and all fees to be paid are strictly defined.
When looking for the differences between these two Amazon business models, you have to mention that vendors can’t benefit from a flexible pricing strategy as sellers do. Sellers are only bound to the maximum and minimum prices that Amazon defines for every product. Apart from that sellers can adjust their prices as they see fit. The only drawback they are constantly facing is investing time in a scalable pricing strategy. If this problem seems familiar to you, a dynamic repricing tool may be an option to free up some time on your schedule.
Logistics and Fulfillment
With marketplaces extending over the whole world, the topic of logistics and fulfillment on Amazon is never straightforward. The same goes when you compare the Amazon vendor vs. the seller model with each other in terms of fulfillment management.
Amazon sellers can choose to either coordinate their fulfillment scheme on their own (Fulfillment by Merchant or FBM) or leverage Amazon to fulfill for them (Fulfillment by Amazon or FBA). When sellers choose FBA, the only thing left to do is send the product to the fulfillment centers and let Amazon handle the shipping, returns and customer service. The management of inventory is still in the hands of the seller though. In the third option – Seller Fulfilled Prime (SFP) – sellers can deliver their products directly to the Prime customers from their own warehouses.
The Amazon vendor model for fulfillment and logistics is a lot simpler in that regard. Amazon makes a purchase order with the vendor, who then has to deliver the agreed upon amount of products to an Amazon fulfillment center. After that, the vendor has no more influence on that process whatsoever.
Amazon Vendor vs. Amazon Seller – Which One Is Better?
Once again, it may seem that in our little Amazon vendor vs. seller “contest”, the vendor model is the more comfortable option of the two here. And why shouldn’t it be? As a vendor you only deal with one client (on Amazon, at least), whereas the seller deals with hundreds, maybe thousands. Vendors, therefore, have to deal with less inventory issues and have less trouble anticipating how many items they have to restock. “All” they have to do is wait for Amazon’s purchase order and see to it that the shipping to the fulfillment center runs smoothly. Where is the downside in this Amazon seller vs. vendor scenario?
The important factor here is “dependence”. Not every vendor is a huge manufacturer like Nike. There are also many individual vendors that bind themselves to Amazon as their single buyer when they decide to switch business models. Sellers, however, are much more flexible and agile when it comes to selling on Amazon. They can build up a network of multiple buyers and thereby secure a steady stream of income for themselves even if one or two of their main buyers cancel their orders.
Vendor Returns on Amazon
From time to time, vendors will receive returns from Amazon because of overstock or damaged items. As a vendor, you can then access Vendor Central and check “purchasing terms”. You will see the reasons for vendor returns listed there. If there are issues with your vendor returns, you can address these with your Vendor Manager.
When it comes to advertising opportunities, there is no clear winner when you look at the Amazon vendor vs. seller scenario. While Amazon vendor central used to be much better for advertising, this changed in 2020 and found its final transformation in 2021. This is when Amazon decided to streamline advertising options for sellers and vendors alike, enabling the same options for sellers in regard to Sponsored Product, Sponsored Brand Ads, and most recently Sponsored Display Ads.
Regarding Sponsored Display Ads, there is still a retargeting feature that is only accessible to vendors. But apart from this, there is very little difference between an Amazon vendor and seller in terms of advertising enablement.
There is one factor in our Amazon vendor vs. seller comparison that is undeniably a benefit for vendors. The availability of an Amazon Vendor Manager. This is an Amazon employee that acts as a contact person for vendors. They support by increasing profitability and sales in a certain category.
But even here, there is a drawback that needs to be mentioned. Vendor managers are notoriously overworked, often taking on 100 – 150 vendor accounts at the same time. They also rotate regularly, meaning that vendors are not able to form long-standing business relationships with them. Moreover, a vendor manager on Amazon is only responsible for a certain category, not for a certain account.
Switching Roles – Amazon Vendor to Seller or a Hybrid Solution
While this has nothing to do with Amazon vendor or seller central in a technical sense, it’s still worth mentioning. Many vendors have recently switched from the vendor model to the seller option. There are two main reasons for this.
The first is Amazon’s pricing policy. Especially when it comes to upholding the minimum advertised price agreed upon with the vendor, Amazon’s algorithms often undercut these prices. This of course leads to a general detriment for the manufacturer, since everyone ends up buying their product on Amazon (and nowhere else) because of the competitive pricing.
The second reason is that being a seller is the simpler option of the two. Especially manufacturers are able to retain more control over their brand positioning and profitability when selling as merchants.
Another exciting option for manufacturers could be a combination of both models. It of course requires a well-wrought strategy. Products, for which it is important to keep a certain price for brand maintenance, are better be included in the seller program. When other channels are involved and it may be necessary to regulate the launch of the products, the seller model is also more suitable. For generic items, however, which should be accessible to as many customers as possible, the vendor model would be definitely the better choice.
If you are interested in finding out more about this topic, have a look at this interview with Jordi Ordonez.
Final Thoughts – Seller Vs. Vendor on Amazon
So, Amazon vendor vs. Amazon seller, which business concept is the better one for you? On the one hand, being a seller gives you more freedom, opportunity, and independence as a businessperson. The reason for this is that you are not bound to one customer but can expand to as many as you like.
On the other hand, this freedom comes at the price of the competition. And competition on Amazon is fierce and plentiful. The benefits of selling as a vendor are that you don’t have to invest as much time into your listings. After all, handling one (well-paying) customer is a lot easier than handling hundreds or even thousands. Finally, depending on your resources and product types, you could consider combining the two models to a hybrid concept, thereby extracting the best out of them.
An Amazon vendor is someone who doesn’t sell his/her products on Amazon, but rather directly to Amazon. Amazon then sells these products from there on out, handling the relevant aspects such as shipping, customer service, and pricing. You can only become an Amazon vendor if you are invited.
Sellers use the digital marketplaces as platforms to find buyers and sell their products. Amazon has a seller central from where sellers can manage their online business. Read this article about selling on Amazon if you want to find out more. Anyone can become a seller on Amazon.
Both concepts have their pros and cons. Amazon vendors may have a more manageable day-to-day due to having only one client. Sellers on the other hand, have much more flexibility in terms of marketing and product management.
Image credits in order of appearance: © Sundry Photography – stock.adobe.com / SellerLogic / © GNTSTUDIO – stock.adobe.com / © Gary L Hider – stock.adobe.com