More than 1 million U.S. small businesses sell their goods through Amazon, and for good reason. Amazon has enormous reach. It claims almost 50% of the U.S. e-commerce market, which equals 5% of all retail sales in the country. An enterprising individual with a compelling product can earn money on the platform without the usual start-up costs of opening a brick-and-mortar store or even creating their own website.
Amazon offers business owners two options for selling through the site:
- Amazon Seller Central
- Amazon Vendor Central
Which channel should a small business owner choose? What’s the difference between the two? What are the pros and cons? And how much control do you maintain over your brand and products?
We’ll walk you through the answers to those questions in this article.
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What is Amazon Seller Central?
Amazon Seller Central, also known as Amazon Marketplace, is the easiest way for business owners to get started on Amazon. Business owners using Amazon Seller Central are considered third-party sellers. A few of the benefits of using Amazon Seller Central include:
- Reach a larger customer base. Amazon puts your products in front of its tens of millions of customers. In addition, there aren’t any “per item” listing fees, so businesses only pay once they sell an item.
- Access Amazon advertising. You can use Amazon’s advertising service. Plus, you’re only charged when someone clicks on your ads.
- Access Amazon Pay. Your customers can quickly pay for your products with the information already saved in their account. This is great news for companies since conversion rates go up when it’s easy to pay.
- Use Fulfillment by Amazon. Instead of fulfilling your orders yourself, you can take advantage of Amazon’s first-class logistics capabilities to get your goods to your customers.
- Enter International Markets. U.S. small business owners can expand into international markets without incurring out-of-this-world costs. Amazon users in the U.S. can sell their goods into Europe and Japan.
In addition, sellers benefit from payment fraud protection when selling through Amazon Seller Central.
How Much Does Amazon Seller Central Cost?
Amazon Seller Central offers two plans to business owners:
- Individual Plan
- Professional Plan
Under Amazon’s Individual Plan, business owners don’t pay a monthly subscription fee and they don’t have to pay a listing fee per item. Instead, they pay Amazon $0.99 for every unit sold. Amazon recommends this plan for users selling less than 40 items per month. There are also applicable referral fees and variable closing fees.
Under the Professional Plan, retailers pay a monthly subscription fee of $39.99. There’s no per item listing fee, but there are applicable referrals fees and variable closing fees.
With a Professional Plan, business owners reap the following benefits that Individual Plan members don’t enjoy:
- Use of spreadsheets, feeds, and other tools to load inventory
- Access to order reports
- Earn top placement on product detail pages
- Apply to sell in more than 10 categories that aren’t open to Individual Sellers
- Customized shipping rate options
As you can see, running a high-volume sales channel on an Individual Amazon Seller account would be very difficult, given the limited features. You’d have to be incredibly organized and resourceful.
What is Fulfillment by Amazon?
If you want a hassle-free approach to using Amazon as a sales channel, Fulfillment by Amazon (FBA) might be for you. FBA takes over functions like storage, shipment, and customer service for retailers selling on the site. For FBA users, Amazon:
- Stores the seller’s inventory at an Amazon warehouse location
- Expertly packs each order
- Ship orders to customers with its two-day shipping process
- Communicates with customers through its customer service center
- Processes returns on the seller’s behalf
When businesses list products using the FBA, those product listings boast Amazon’s Prime branding, which lets customers know that Amazon itself handles the picking, packing, and shipping of the product.
It’s pretty easy for business to get set up on FBA. Businesses:
- Create an account on Amazon Seller Central (either Individual or Professional)
- List items
- Assign inventory based on either the manufacturer's barcodes or the business’s own barcodes
- Indicate shipping preferences
What Does Fulfillment by Amazon (FBA) Cost?
Amazon recommends two ways to estimate your FBA fees.
- For items you’ve never sold on FBA, you can compare your fulfillment costs
- For items you’ve already added to your FBA inventory, you can view a preview of your estimated fees
How Does Your Inventory Get To Amazon?
Once you have your Amazon Seller account set up and are enrolled in FBA, you can easily ship your inventory to an Amazon facility where they’ll take care of the rest. To get this rolling, businesses must:
- Create a shipping plan
- Include the product, quantity, and shipping method
- Prep and label materials
- Package items properly to prevent damage and in accordance with Amazon’s guidelines to avoid delays
What is Amazon Vendor Central?
While anyone can sign up for Amazon Seller Central, Amazon Vendor Central is an invitation-only club. With this service, Amazon provides full-time distribution of a brand or manufacturer’s product.
When you work through Amazon Vendor Central, you’re considered a “first party” instead of a “third party” like through Amazon Seller Central. Instead of selling your goods directly to customers, you sell your goods in bulk (wholesale) to Amazon and then Amazon takes on the work of selling them.
Through Amazon Seller Central, you’re essentially a B2C (business-to-consumer) company selling directly to people. Through Amazon Vendor Central, you operate as a B2B (business-to-business) company selling to another business--Amazon.
How does this work?
It’s rather simple: Once you’ve been invited into the club, you wait for Amazon to need your goods. When it does, it will send you a purchase order. You fulfill the purchase order and then your work is done. You don’t play a role in selling those goods to Amazon’s customers.
Who Gets Invited to Amazon Vendor Central?
Amazon employs recruiters who sniff out products that are in demand by Amazon consumers, look interesting at trade shows, or that are doing well on the Marketplace/Seller channel. Once a vendor is invited to the platform, they either accept or deny Amazon’s terms. Unless you’re a large brand with influence, there usually isn’t much room for negotiation.
What Is the Amazon Vendor Central Portal?
Vendors manage their wholesale businesses through the Amazon Vendor Central portal. There, vendors can:
- View new orders
- Update product information including photos, prices, written product descriptions
- Manage the marketing of their products
- View invoices and remittances
- Manage advertising campaigns
- Access analytics and view reports
How Does Amazon Place Orders From Vendors?
Typically, Amazon puts in orders from its vendors once a week. When demand is high, it can be more frequent. But, it’s important to note that these orders are triggered by Amazon’s data. For instance, if you put up a new product, you may not see a request unless Amazon’s customer data indicates there’s demand for your goods. The higher the demand, the higher the volume of orders.
Are Vendors Penalize If Orders Aren’t Fulfilled?
Amazon vendors who can’t fulfill an order can either cancel it or put it in a backorder, if permitted by Amazon. Best practice is to stay on top of your inventory. You should mark items as either temporarily or permanently unavailable if they’re out of stock, before Amazon includes them in a purchase order.
Why? Well, if you overdo the backorders or cancellations, Amazon might issue a chargeback to your business.
What Is The Difference Between Amazon Vendor Central and Fulfillment by Amazon?
As you’re reading this, you may think, “What’s the difference between Amazon Vendor Central and Fulfillment by Amazon?”
In fairness, they kind of sound like the same thing.
In reality, they’re two completely different programs. The key difference is who serves as the retailer.
In an FBA relationship, you’re still the retailer selling products directly to consumers. Yes, Amazon provides support in terms of warehousing, packing, shipping, returns, and customer service, but it isn’t responsible for actually selling those products.
On the other hand, in an Amazon Vendor Central scenario, you’re the wholesaler or distributor, not the retailer--Amazon is the retailer. Once you’ve honored their purchase order for your goods, actually selling those goods to shoppers is Amazon’s business.
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What Are The Pros And Cons of Amazon Seller Central?
Amazon Seller Central presents both advantages and disadvantages for business owners.
Pros of Amazon Seller Central
The biggest advantage of Amazon Seller Central is the amount of control you have over your products. Through Amazon Seller Central you can do the following:
- View customer analytics. Selling your goods through Amazon provides access to rich consumer data so you can understand your customers better.
- Control and tweak your pricing. You have control over your prices, enabling you to raise them when demand is high or lower them in response to competitor pricing.
- Maintain control over messaging. As a registered Amazon seller, you’re part of Amazon’s brand registry program. This gives you the authority to crackdown on unauthorized resellers of your products.
Cons of Amazon Seller Central
The biggest disadvantage of Amazon Seller Central is the amount of work involved. Yes, you keep a lot of control over your business, but that’s because Amazon expects you to take a hands-on approach to sales. Fulfillment by Amazon (FBA) is a way to lessen the load, but there’s still work involved in getting your products to Amazon and tracking them after the fact. Some of the main disadvantages of using Amazon Seller Central are:
- Managing the fulfillment costs. It’s difficult to sell low-priced products on Amazon because of the shipping fees and the fees charged by Amazon. Even if you use FBA, you’ll have to pay for the service.
- Lower sales compared to Amazon Vendor Central. Amazon Vendor Central products have the words “Ships from and sold by Amazon” next to them, giving them more clout on the website. These products routinely outdo Amazon Seller Central goods, even if Seller goods are sold through FBA.
What Are The Pros and Cons of Amazon Vendor Central?
While it may seem like Amazon Vendor Central is mostly pros, there are still a few cons you should understand, in case you’re ever invited.
Pros of Amazon Vendor Central
Perhaps the biggest advantages of Amazon Vendor Central are the added credibility it gives you on the website, which can translate to more sales, and the straightforward operation of your business.
- Higher perceived value of your products. Since your products are advertised as “sold by Amazon,” consumers believe the products have gone through a more rigorous screening process and, as a result, are higher quality. Plus, shoppers generally trust Amazon’s fulfillment practices and may be more confident their orders will be fulfilled as expected.
- Streamlined business operations. Through Amazon Seller Central, you’re managing sales, inventory, taxes, and more. Through Amazon Vendor Central, your primary responsibility is to fulfill regular bulk orders, streamlining your overall business model and operations.
Cons of Amazon Vendor Central
There are a few disadvantages of participating in the Amazon Vendor Central program:
- Lack of control over pricing. Amazon uses customer data to determine pricing. As a result, they don’t follow Minimum Advertised Pricing (MAP) guidelines from manufacturers. If you manufacture your product and you want to protect your brand from being diluted by ridiculously low pricing, you won’t find that protection through the Amazon Vendor Central program.
- Rigid fulfillment requirements. Amazon is very particular about how its vendors fill purchase orders and some vendors may struggle to meet these expectations, leaving them vulnerable to possible chargebacks.
There have been reported issues with the Amazon Vendor Central program as well as rumors that Amazon plans to completely overhaul both programs and create a unified version. In any case, some vendors are moving to the Amazon Seller Central program. There have even been instances where smaller vendors have been asked to move over to the seller channel instead.
Three Good Options for Tapping Into Amazon’s Marketplace as a Sales Channel
Given Amazon’s status in the U.S. e-commerce market, it makes sense to sell on their marketplace, and using Amazon Seller Central is a great way to get started.
That said, if you’re ever offered a place in the Amazon Vendor Central program, carefully consider your options before jumping in. Don’t just leap at the first offer because of its exclusivity.
When it comes to Amazon Vendor Central, you’ll want to assess your negotiating power, whether you’ll receive the help you need, and whether you have the resources to manage Amazon’s demand (or a potential decrease in demand). If you don’t think it’s the right sales channel for your business, a suitable middle ground may be Fulfillment by Amazon through the Professional Amazon Seller Central account.
Take time to choose the right channel so you can sustainably grow your business through Amazon.
Written by Ruthie Bowles
Ruthie is a content marketing consultant for Logiwa. Her specialties include small business development and inventory management.