When it comes to selling on Amazon, you may have come across the terms 1P and 3P. But what do these terms mean, and how do they describe your relationship with Amazon? 1P refers to a first-party relationship, while 3P is a third-party relationship. This article will cover everything you need to know about Amazon 1P versus 3P and what it means for you as an Amazon seller.
First-Party Relationship: Amazon 1P and Vendor Central
A first-party relationship with Amazon means that you sell your products directly to Amazon. Amazon then sells those products to customers. As the vendor, you fulfill purchase orders (PO) sent by Amazon and ship the product to Amazon. Amazon takes control of the product by pricing it on the marketplace, selling it to customers, and shipping it themselves. To be a 1P seller, you must be directly invited by Amazon.
Selling on Amazon via 1P gives you access to Vendor Central, a portal to manage information about your products and gain access to POs. Although you don’t have control over how Amazon prices your product, you can update the product listings, run promotions, and advertise your products, so they sell faster and so Amazon buys more from you. Amazon will charge you fees like chargebacks, co-ops, and more.
Third-Party Relationship: Amazon 3P and Seller Central
A third-party relationship with Amazon gives you much more control over selling your products on Amazon. In this arrangement, you sell your products directly to consumers on the Amazon marketplace. You have control over your products’ advertising, marketing, and other logistics, including shipping. However, if you wish, you can still use Amazon’s fulfillment by Amazon (FBA) shipping program to send your products to customers.
Selling on Amazon via 3P gives you access to Seller Central, a portal that allows you to manage every aspect of your product listing and marketing. Seller Central allows you to create product detail pages, manage and monitor inventory levels, view the status of your orders, and adjust your pricing and all other details.
Pros and Cons of These Selling Options
When it comes to Amazon 1P and 3P selling, there are pros and cons to each option.
Amazon 1P (Vendor Central) Advantages
- You receive POs from Amazon regularly, which eliminates the need for inventory forecasting.
- The “Ships From and Sold by Amazon” Prime badge on your product builds customer trust and helps you stand out from other sellers.
- You are offered a consolidated fee structure instead of paying multiple fees for features like Fulfillment By Amazon (FBA) and Amazon referrals.
Amazon 1P (Vendor Central) Disadvantages
- You don’t have control over your product prices, which may lead you to break your minimum advertised price (MAP) policy.
- Amazon can change your product descriptions and visual listing elements without your approval.
Amazon 3P (Seller Central) Advantages
- You have control of your retail prices, which allows you to change them accordingly to remain competitive on Amazon. This also allows you to maintain consistent pricing across all your branded items.
- You have control of your brand, which can be an essential part of establishing your identity in the eyes of your customers.
- You can edit your listings, product detail pages, and promotions without Amazon’s approval to make changes.
Amazon 3P (Seller Central) Disadvantages
- It requires a great deal of time and overhead to manage all the marketing aspects on your own.
- You’ll have to be well-versed in optimizing your listing for the platform as well as running advertising campaigns.
- You’ll have to pay marketplace fees for variable FBA fees, referral fees, and more.
In conclusion, the most significant difference between Amazon 1P and Amazon 3P comes down to control. If you’re in a first-party relationship with Amazon, you’ll act primarily as a wholesale supplier and have limited control over pricing and branding elements. However, if you’re in a third-party relationship, you will have more control over pricing, marketing, and operations.
It is essential to weigh both options’ pros and cons and determine which aligns best with your business goals and capabilities. Ultimately, both 1P and 3P have unique advantages and disadvantages, and it is up to the seller to decide which is best for their business.
At TripleShot, we provide expert assistance in launching, growing, and scaling brands on Amazon. Both established and emerging brands benefit from our services.
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