To Vend Or Not To Vend? The Great Amazon Question

Traditionally, brands have seen Amazon as just another wholesale customer, selling them stock directly through what Amazon refers to as a “Vendor” relationship. With this plan, you sell Amazon bulk stock via Purchase Orders, which is then used to fulfil orders placed directly with Amazon.

Increasingly however, the lack of control that Vendor relationships provides means many brands are opting to switch to a Direct to Customer model – a “Merchant” relationship in Amazon-jargon. This still allows your products to be listed on Amazon, however customer orders are placed with you as a third party seller.

Both options have significant benefits and pitfalls, so it’s worth spending some time to consider what would be the best fit for your brand.

VENDORS

Typically, Amazon approaches brands and invites them to be Vendors. They will usually approach a manufacturer directly, or a distributor. They then ask them to load their entire inventory into the catalogue, and Amazon places POs against this based on their forecasts. Amazon buys products at a negotiated price, which they will regularly try to renegotiate.

BENEFITS

  • More scaleable, as you don’t have to worry about shipping individual orders, and Amazon does all of the forecasting.
  • You don’t have to worry about any form of customer service, this is entirely handled by Amazon. All you have to do is ship the stock to their warehouse.
  • Once you start a Vendor relationship, you immediately get the option to add “A1” content into your listings. This includes content rich descriptions, and product videos.
  • Products will be sold across their entire European Fulfilment Network without any extra planning on your end.
  • They will have a dedicated marketing budget for your products, used for advertising on their own site.
  • This is the only way of selling on Amazon that ensures you get assigned an account manager.

DRAWBACKS

  • Whilst you provide them with an RRP, it’s up to Amazon to decide on the selling price. If they want to drop it by £5, or run a big promo, then they’ll do this without you having a say.
  • Amazon Purchase Orders are placed with 60 day payment terms, so you don’t have the same steady stream of revenue that comes with direct customer orders. Amazon also deducts 7% of the value of the POs to cover the marketing budget for your products.
  • You have NO contact with customers whatsoever, so there’s no opportunity to build a brand relationship with them.
  • Amazon have rather strict requirements for shipping, in particular for goods on pallets. If you send stock packed improperly – for example stacked too high on a pallet – then they can hit you with eye-watering chargebacks.

MERCHANTS

This is a more common model for sellers, but has since become more commonplace for brands as well. Sellers can either dispatch individual orders, or ship in bulk to Amazon’s warehouse, who then handle the shipping (FBA). For either model, there are extremely strict metrics that sellers must adhere to, otherwise Amazon can (and will) suspend your selling privileges. These include on time shipping confirmation rates, and response times to customer messages.

Whilst you get customer information from this, it is still limited, and Amazon doesn’t like you using it for marketing purposes. For example, instead of their actual email address, they provide an anonymised email address, and monitor all communications that go through this.

BENEFITS

  • You get to actually interact with customers (albeit in a limited way), and can provide them with information on things like recommending alternative products, or answering questions. In this way, they can build a personal relationship with your brand, and not just interact with Amazon’s slightly impersonal customer support.
  • You get regular payments every 2 weeks, so it’s a more steady income stream.
  • Using Fulfilled By Amazon (FBA) gives you some of the scalability of a Vendor model, whilst still maintaining communication with individual customers.
  • You have complete control over what lines you offer, at what price and what promotions are running.

DRAWBACKS

  • Amazon’s metrics are very, very strict, and you have to monitor the account like a baby, including during weekends and holidays.
  • If you’re fulfilling orders yourself, then it’s less scaleable.
  • If you want to ship into Europe, they leave most of the admin workload up to you. Depending on what selling plan you want to use, this can mean filing VAT documentation in up to 9 countries.
  • The fees can start to add up, so there’s actually not much profit difference between this and selling as a vendor.
  • A lack of an account manager means you have to rely on Amazon’s Seller Support services, which can often be less than helpful.
  • Whilst you can still create listings with “A1” enhanced content, this option is not provided immediately, and is essentially unlocked once you hit unspecified salesthresholds.

Protecting Your Brand

No matter which method you use to list your products on Amazon, it’s important to take steps to protect your brand. If you have a registered trademark, then filing this with Amazon’s Brand Registry is essential. It unlocks a number of key benefits, including the ability to create a brand storefront page, create brand level PPC ads to display on-site, and even gives limited controls to remove other sellers from your listings – for example if they are selling grey import stock.