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Selling online is already synonymous with selling on Amazon. Brands that sell on the platform experience more than 20% sales growth, with 60% of Amazon sales coming from independent sellers. If you’re looking for a guaranteed way to grow your business online, you must be on Amazon.
There are two ways to join the platform—as a first-party (1P) seller (Amazon Vendors) or as a third-party (3P) seller (Amazon Sellers). Both have advantages and disadvantages; choosing the best path is crucial for maximizing your opportunities with Amazon. Alternatively, you can choose a hybrid model where you are both a 1P and 3P seller.
In this article, we’ll explore which model may be better for your business and how you can start using it to generate more sales and profits.
Most vendors are familiar with Amazon Third-Party (3P), where you sign up to sell your products directly to customers using the Amazon marketplace. Almost everyone starts with this model, and it’s also the easiest method to start selling on Amazon.
As a third-party seller, you’re responsible for controlling your prices and presenting your products. You build your listings, write the product copies, upload photos, and handle all other aspects contributing to a successful listing.
You can accomplish all of this via the Amazon Seller Portal. Here, you can access seller optimization tools to maximize the effectiveness of your listings, so they rise above the competition. You can also control your shipments (or enroll them in Fulfillment by Amazon for a fee), manage customer tickets, and resolve complaints.
Unlike Amazon 3P selling, being an Amazon 1P seller is on an invite-only basis. To join the 1P program, an Amazon brand manager will contact you if they deem your products suitable. As an Amazon First-Party (1P) seller, Amazon purchases your goods at wholesale prices and takes care of inventory, pricing, order fulfillment, customer service, and returns. Amazon also has the option to white label your products under the Amazon brand (such as Amazon Basics).
Instead of a Seller Central, you have access to a Vendor Central where you can view purchase orders (POs), manage product information, and run promotions to advertise your brand. While Amazon controls the pricing and product listing optimization, you can still promote your products so that they sell faster and you get more POs from Amazon.
If you’re interested in moving out inventory and would rather focus on manufacturing than selling, then this is a great program to work towards. You produce the items, sell them in bulk, and Amazon takes care of the rest.
If you’re fortunate enough to have both options available for your business, you should consider the following aspects before making a decision.
Have you built a name for your brand? Do you have your own website or presence in other marketplaces? If so, you’re better off selling as a 3P seller. Sign up for your own storefront at Amazon and optimize your listings so customers can easily find your product when they search for it.
While growing your business as a 3P seller is mostly a self-initiated endeavor, Amazon offers several programs that can help your business establish a strong brand. Take Lillie’s of Charleston, for example. They’re a family-owned business selling specialty barbeque sauces and spice mixes that signed up as a 3P Amazon seller. By fully utilizing Amazon’s support and signing up with FBA, as well as enrolling in the Black Business Accelerator, they saw a 3x increase in sales and significantly expanded their business.
If you haven’t built a dedicated follower base yet or your products can be sold as white-label items, consider being a 1P seller instead. Letting Amazon handle everything can give your brand the boost it needs, increasing your sales while you focus on other aspects of your business, like product development.
Do you have a logistics system or a dedicated logistics partner in place? If you’re already fulfilling orders via your website or other marketplaces, adding sales from Amazon to the mix will be easy. You can also take advantage of Amazon’s FBA program as long as you prepare your items according to their specifications.
If you’re struggling with logistics and order fulfillment, then 1P selling is a safe bet. By working with only one customer—Amazon—you eliminate operational challenges that come with seasonal highs and lows since Amazon can provide a predictable buying schedule.
Being a 1P seller might also be preferable if you’d rather not deal directly with end users and customers. Conversely, you’re responsible for customer support and handling customer returns and complaints as a 3P seller. If you already have an existing customer service platform, however, then it’ll be easier to provide support to your customers.
If you have bulky or heavy items, expect to pay higher storage and delivery fees as a 3P seller using FBA. Take note, however, that even if you’re handling your own storage and logistics, you’d still incur higher expenses due to the nature of your products.
On the other hand, Amazon takes over these costs if you are a 1P seller. You can even justify having lower product margins from these saved costs.
Choosing between 3P vs. 1P selling significantly impacts your product margins. With 1P selling, you’re compelled to offer your goods at wholesale prices since Amazon will buy them in bulk. You can expect a huge sales volume for each PO despite the lower margins per piece. If you have a high-demand product that moves quickly, or if your business operates better with periodic or predictable sales in higher volumes, then 1P selling is ideal for you.
With 3P selling, you can control your prices and potentially profit more from accumulated sales. To remain competitive, you can use automated repricing tools to adjust your products’ prices in real time.
However, note that unless you already have a high-selling item, you’re not guaranteed huge sales volumes right away. You might also face unpredictable sales and idle inventory. If you can plan around seasonal highs and lows, take advantage of trends, or have diverse product lines to make consistent sales, then 3P selling is a good fit for your business.
If your customers already purchase in bulk from your store, it’s optimal to remain a 3P seller. You’re already getting the sales volume for the prices and margins you can control. Conversely, if you only get sporadic single-item orders, becoming a 1P seller can help boost your listing and credibility.
Do you have plans to build a high-revenue, high-volume eCommerce empire with a strong presence across multiple channels? If you do, consider staying as a 3P seller. As a 1P seller, your growth plans are limited by factors such as price match agreements, so you can’t price your products higher on other platforms, not even on your website. As such, you’re limited to low prices regardless of the channel you choose to sell on.
On the other hand, being a 1P seller affords you the luxury of having a lucrative business without too many logistical headaches. It’s also ideal if your growth plans are limited to growing as a manufacturer versus a distributor.
Anyone can become an Amazon Third-Party Seller. You simply have to register for a seller account, complete your business details, and start listing your products. Our guide on How to Sell on Amazon for Free will walk you through the steps to get started.
As a third-party seller, you can select from an individual or a professional selling plan and decide if you want to be an Amazon FBA Seller. An individual selling plan is best for low-volume sellers since you’ll only pay a fixed $0.99 per sale. It’s great if you’re still experimenting with various items to find which ones would become your best sellers on the platform.
A professional selling plan costs a fixed $39.99 monthly, regardless of the number of units you sell per month. It has advanced seller tools like business reports, bulk product listing, and inventory management. You can also enroll in optional Amazon programs like FBA, Amazon Ads, and Amazon Global Logistics.
This plan is ideal if you’ve already determined the products you’d sell on Amazon and you’re ready to grow them. Learn more about the difference between individual and professional selling plans in our comprehensive guide.
The Amazon Vendor Central is an invite-only platform, and you can’t sign up for it like you would in the Amazon Seller Central. You also can’t apply for the program; instead, Amazon will reach out to you directly.
Amazon hasn’t released any set requirements or guidelines, so the best we can do is make assumptions about what will draw their attention and earn you that exclusive invite. Here are some tips to help increase your chances of getting invited as an Amazon 1P seller:
Remember that even if you follow all the tips above, you won’t be guaranteed an invitation to become an Amazon 1P seller. The lack of an invitation shouldn’t stop you from selling on Amazon, though. Also, carefully consider the advantages and drawbacks of 1P selling and determine whether they match your business plans.
Being an Amazon 1P seller may sound like a dream for most because Amazon becomes your direct customer, and you’re promised huge sales volumes. However, with the exclusivity and limited control, it may be better to pursue Amazon 3P selling first to get a better feel of the platform.
Being an Amazon 3P seller gives you better control over your brand, price, and margins. You can also potentially scale your company more effectively if you have direct control of these aspects of your business. By taking the extra step of registering your brand in the Amazon Brand Registry, which can potentially be easier than being invited as a 1P seller, you can still gain access to features and tools that Amazon Vendors have. These tools include A+ Content, Amazon Live, Amazon Vine, Brand Analytics, and more.
If you’re new to Amazon, navigating the platform and promoting your products may feel challenging. But with the right tools, like the ones Threecolts offers, you can eventually grow your traffic and revenue.
Browse through our blog and read our other posts and data-driven insights from our very own proprietary data. Learn more about Mother's Day trends and best practices, Easter sales, price elasticity of demand, Amazon FBA fee changes, Amazon product title optimization, winter seasonal products, Amazon end-of-year sales, Valentine’s Day trends and best Amazon fulfillment centers by location, and throughput.
