Third party vendors sell on Amazon through Seller Central and sell their goods directly to their customers. Amazon merely plays the role of a marketplace. Over time, promising sellers often receive an invitation to join the vendor program. Vendors no longer sell their goods to end customers, but to Amazon. With this step, the vendor takes on the role of a provider, because after the goods have been sold to Amazon, Amazon is the owner and sells the products on the marketplace. But what advantages do vendors have compared to sellers? The following article highlights the advantages and disadvantages of both programs and gives an insight into which program can be worthwhile for whom.
What is Seller Central?
Seller Central is used by third-party vendors to sell products on the Amazon Marketplace. By posting their products there, merchants control the sale of these products as far as possible by themselves. They set the prices of their products, manage storage and shipping, customer service, returns and refunds. The use of Seller Central currently costs 39 Euros per month (as of January 2019: Professional rate).
One of the options open to every Seller is to use Amazon FBA (shipping through Amazon) for an additional fee. In this case the goods can be stored in Amazon’s warehouses. Amazon also handles the dispatch of the goods upon receipt of the order, customer service, returns management and, if necessary, other optional services. You can find more detailed information on this topic in the article about Amazon FBA. It is important to remember that even when FBA is used, the goods always belong to the merchant until they are sold to the end customer, and the merchant remains the seller of the goods.
What is Vendor Central?
Access to the Vendor Program is only available upon invitation from Amazon. High potential third party vendors, often manufacturers of well-known brands, are invited to join the program and move up from being a third party vendor to being an initial vendor. By accepting the invitation, the vendor assumes the role of a provider and regularly supplies Amazon with its own goods. Amazon buys these from the supplier and sells them themselves on Amazon. Through the purchase, Amazon becomes the owner of the goods and the supplier can no longer access the corresponding products. Amazon is listed as the seller and sender of the goods. Similar to the FBA programme, the entire sales process is also regulated by Amazon. Additionally, Vendor Central users can benefit from several advantages that are not available to sellers.
Advantages and disadvantages of the programs
Of course both of these models have advantages and disadvantages. Especially the vendor program, which can be quite tempting at first sight, involves a number of aspects that one should be aware of before accepting the invitation hastily. Especially since the step back to Seller Central is not possible without further ado. In the following you will find a detailed explanation of the advantages and disadvantages of both programs.
Advantages of Seller Central
Simplicity: Anyone can register at Seller Central, list their own products and start selling for a monthly fee
Control: The retailer has full control over his inventory, pricing, shipping and customer service
Customer contact: The seller can establish contact with his customers and thus gain customer data and direct feedback on the products
Prompt payment: The merchant receives payment for the products sold promptly (usually within 7 to 14 days)
Shipping through Amazon: With FBA, even a seller can have storage and shipping handled by Amazon on request
Statistics: Sellers have free access to analyses of their sales and the demand for their products
Service: Amazon offers comprehensive service and support for Seller Central users
Disadvantages of Seller Central
Costs: If you decide not to use FBA, you may have to deal with storage, shipping, returns management, invoicing, etc.
Pricing: On the one hand, having your own pricing is an advantage for sellers, but can be very costly, especially when it involves a place in the Buy Box. In this case, additional re-pricing tools are often necessary to adjust prices regularly
Amazon-Prime: As a seller, your own products can only be qualified as prime if FBA is used
Limited marketing: Only limited marketing activities are possible as a seller on Amazon
Advantages of Vendor Central
Customer trust: Customers often have more trust in Amazon than they do in unknown third parties, which means that the likelihood of purchase is often higher when Amazon products are sold and shipped
A+ Content: The A+ Content is available to vendors, which enables a significant expansion of the product description with additional text, videos and zoomable images
Expanded marketing: Vendors have access to additional marketing measures, such as participation in the Vine program
Amazon Prime: If the vendor participates in the vendor program, the products are automatically prime-qualified
Storage and shipping by Amazon: From storage to sale and delivery of the goods, Amazon takes care of the entire shipping process. The supplier only has to send the goods to Amazon regularly
Disadvantages of Vendor Central
Analyses cost money: In order to get similar analyses and statistics on sales and demand as those provided free of charge to sellers, vendors have to pay extra
No customer contact: Customer contact is completely out of hands. This means that no feedback can be obtained, no customer data collected and no customer relationship established
Pricing through Amazon: The control over the price of their own products is also transferred to Amazon, which often leads to very competitive (and correspondingly lower) pricing
Frequent deliveries: Amazon usually needs to be supplied with new goods to different warehouses twice a week
Dependence: The vendor program requires a high level of discipline, as Amazon charges penalties for even minor violations of the delivery and packaging guidelines. Withdrawal from the Seller Central is not possible without further ado.
Late payouts: It can take up to 90 days before the vendor is paid out by Amazon
Hardly any service: Amazon offers vendors nowhere near the comprehensive service and help that sellers are offered
Which program is beneficial for whom?
After the explanations of the two programs you have to decide which one is best suited for whom. First of all, it can be stated that Seller Central is more suitable for retailers, while Vendor Central is more suitable for manufacturers. The Vendor Program can certainly lead to a significant increase in sales for large manufacturers, if there is no problem with the aspect that control is completely transferred to Amazon and the role of a supplier is taken over.
Seller Central, on the other hand, is suitable for small and medium-sized companies. Amazon FBA also not only has its advantages, but those who wish to have Amazon’s shipping processing and thus the prime qualification can choose this as an alternative. Anyone who sells their own brand on Amazon can already benefit as a Seller from the possibility of EBC (Enhanced Brand Content) and a Brand Store.
The comparison shows that the invitation to join the vendor program should not be accepted in a hurry. The fact that Amazon is inviting a vendor to join the program does not necessarily mean that Vendor Central is the best option for them. It is important to be aware of the benefits as well as the downsides and the commitment that comes with the decision. It can be said that Seller Central is a great option for anyone who wants to sell products on Amazon. While there are no exclusive advantages such as A+ content or special marketing measures available to sellers, there are no serious disadvantages. If you use Amazon Shipping (FBA), you can also take advantage of Amazon’s storage and shipping services as a Seller. However, large manufacturers who do not have a problem with the control transfer to Amazon can often further increase their sales and turnover on Amazon by taking the step towards the Vendor Central.