Hooking up with Amazon is pretty much always a wise business decision in the modern day.
They’re the largest retailer in the world, after all, which puts them in a class of their own when it comes to reaching out and getting more customers than you ever thought possible before.
When you’re selling physical products there are a couple of different options for selling through Amazon and deciding which is the best for you and your business can be somewhat difficult.
A Brief Overview
If you’re planning on using Amazon, I’m going to assume that you’re also familiar with using Amazon.
If not, go buy something. Don’t worry, I’ll wait.
Now, chances are that you’ve noticed a few things while you’re on Amazon. One of the first things you want to take note of when looking at a product is the “shipped and sold by Amazon” label which is on a lot of products.
These people are using Vendor Central in order to sell their products to the site, which in turn sells them for a higher profit.
On the other hand, many people don’t go through with that sort of thing and they sell their products themselves.
These people are using Seller Central.
Easy enough, right.
Basically, those who are selling through Vendor Central are acting as a third party, while those who opt to use Seller Central are selling things themselves as the first party.
Now here’s one thing to keep in mind: you can still use FBA services if you’re selling through Seller Central which minimizes the work on your end.
Of course, there’s a number of different factors which will help you decide which of the services you plan on using.
Differences in Pricing Schemes
Amazon has become huge through offering superior prices to pretty much everyone.
More than a few of us have taken advantage of their minimum pricing: if a product is sold by Amazon then they’ll match any lower price you can find with a legitimate vendor. Amazon pinky promises that they won’t sell anything under your set minimum advertised price.
Their fingers are crossed behind their back when they do so. More than one person working through Vendor Central has found themselves the victim of a price war in which Amazon has lowered the price of the item they’re selling under the MAP.
War is hell, price wars are hell on your business.
One of the unintended side effects of this broken promise: it can be hard to get the price back up to at least your MAP.
Great for consumers, but bad for you.
On the other hand, working through Seller Central you’ll be able to set the price however you want. And it’ll stay there.
This makes a wider range of pricing strategies available, including the time honored favorite of jacking up the price in order to increase the perceived quality of an item.
This gives a clear advantage to those using Seller Central, since they’ll be able to ensure that their prices remain where they want them instead of relying on a frequently broken agreement to maintain pricing at a profitable level.
When you go through Vendor Central, you’re going to be doing straight business. Amazon buys the products directly.
This can be either good or bad for you, depending on how well you can negotiate prices. You’ll also end up paying a fee on top of it.
Basically, when you’re using Vendor Central you’re going to be dealing directly with the company as a business associate instead of it being a service. It’s all on you to make sure you can make money.
Seller Central, on the other hand, has a structured fee plan which is actually pretty minimal considering the massive amounts of outreach you’ll gain by having your product on Amazon.
The fee structure breaks down as $39.99/month if you’re selling over forty items a month, or no monthly fee if you sell under that amount.
You’ll also end up paying about 20% per item sold, or $0.99 for those who aren’t doing a huge volume of things.
If you opt to use FBA you’ll end up paying more, of course, but the convenience is worth it for people trying to automate their business if they have sufficient volume.
The real question is this: what does all of this mean for your profit margins?
Vendor Central is going to actively work to maximize their profit margin… which means you’ll have to actively work against them in order to maintain your profit margin.
Of course, you’re selling wholesale when you do this so your margins are going to be a bit less than Seller Central’s retail margin anyways.
With Seller Central… you set your own prices. That pretty much means you’re setting your own margins which is a clear win for the seller at the cost of having to handle their end of the business.
Marketing Advantages and Disadvantages
So far it’s pretty clear that Seller Central has most of the advantage, especially for smaller companies or entrepreneurs.
With Vendor Central you have a wide range of different marketing options which aren’t available to anyone not working with Amazon in that way.
You can have your own brand, your own store, coupons, more detailed content, etc.
You’re not completely on your own with a Seller Central account, however, you can still create pricing promotions and ads that appear in a few places.
For the most part, however, Seller Central users are going to have to rely on their own marketing efforts off of Amazon to generate the traffic and conversions they need.
Vendor Central, ideally, should let you know when inventory runs low so you can sell them more items.
In practice, there are a lot of people complaining they never received any notice about their inventory.
Seller Central, on the other hand, allows you nearly complete control over your inventory. If you’re not using FBA, you actually have 100% control over your inventory of course.
The clear advantage here goes to those using Seller Central.
This is the big one for most people: making money is the only reason to go with either of course.
Vendor Central has some pretty bad terms when it comes down to it. You’re stuck with 2% Net 30, Net 60, or Net 90 options and there are plenty of horror stories.
While it might not be a make or break proposition for larger companies, for small businesses and people working alone it can spell absolute disaster.
On the other hand, Seller Central pays every week or two minus commissions and possible FBA fees. This leaves you in pretty good shape and keeps your capital flowing smoothly instead of having to rely on large chunks.
This may be the biggest deciding factor for most people.
The Final Verdict
Both of your options are pretty good here, despite how much we’ve talked about the downsides of using Vendor Central.
Comparing these services side by side is kind of hard for one reason: they’re geared for different business types.
This means that choosing the wrong one could land you in some pretty bad straits.
The following people should go with Seller Central:
- Solo entreupeneurs
- Small businesses
- People who need a constant cash flow
- Anyone who’s unsure about which category they fit into
On the other hand, Vendor Central is ideal for those with larger businesses that can take the cash flow problems that might arise due to the payment method, pricing problems, and other difficulties.
The reason for using Vendor Central is pretty clear: it allows you to be a bit more hands-off and increase outreach significantly through the superior marketing options available.
The problem is getting your money tied up with Amazon.
Seller Central is probably ideal for most of the readers of this blog.
Chances are, if you’re big enough to use Vendor Central you already knew it.
Seller Central, on the other hand, is much friendlier for smaller businesses and individuals since the payments come in a lot faster.
Of course, you’ll still need to do a significant amount of outreach on your own. Since you can still use FBA with a Seller Central account you can also make things a bit more hands-off if you’re willing to pay the extra fees.
Great for those who are automating, and it’ll keep your business’ reputation sterling since Amazon is famous for shipping on time and quickly.
If you have to manage things yourself you’ll really need to be on top of it. Amazon’s reputation, by extension, will be hanging over your shipping efforts simply because your product is on the site, so go with FBA if you forsee any problems.
I hope I’ve illustrated the difference between Amazon’s options clearly for you. The amazing part about the site is simply this: the fact that they really do have something to work with businesses of any site. Just make sure that you use the option which is best for your business, lean back, and enjoy the extra outreach.