The preeminent question most sellers ask when considering whether they should sell their products on Amazon or not is if selling 1P or 3P works better—that is, whether they want Amazon to be the face of their brand or sell, distribute, and handle customer interface for themselves. Selling through the proper channels can make the difference between whether or not your brand finds success on Amazon.
What is 1P?
The first-party selling option (or 1P) is the Individual Plan that allows Amazon to control inventory, pricing, customer interaction, listings, and just about everything regarding the brand’s sales. In this case, the brand sells their products to Amazon, who then sells them to the consumer. With this option, Amazon acts as the face of the brand, and products show as ‘sold by Amazon’ on the listing.
This is also a pay-per-item option, meaning that Amazon charges the buyer for every item purchased as opposed to having a set monthly fee. Buyers pay $0.99 for every item sold. 1P sellers use the Vendor Central portal to provide initial listing content and work out pricing with Amazon. This option is ideal for smaller companies that do not have the manpower to handle things like packaging, SEO research, and navigating Seller Central. 1P is typically for vendors that sell less than 40 units a month. This option is only available by direct invitation from Amazon.
What is 3P?
The 3rd-party selling option (3P) is the Professional Plan, and allows the brand control of its own inventory, listings, and customer interface. This means that the brand is in charge of how much products cost, along with packaging and what the content page consists of. Third-party selling charges a set fee of $39.99 a month. This option typically works better for larger companies, who often outsource these duties to an intermediary to handle the many tasks that come with selling on Amazon. The brand or its third-party company will show up in the ‘sold by’ and ‘shipped by’ fields.
Cons of 1P:
Amazon Controls Your Price Points:
1P vending offers buyers the opportunity to take a backseat approach to selling on Amazon, which is, again, great for small businesses that prefer not to deal with the complicated selling process. However, the 1st party vending option does not allow buyers to control their own prices. Amazon often lowers prices in order to make the sale, which can undercut buyers.
- Listings/ Products Can Change Without Brand Approval:
It can also change the listing without express permission of the brand. Additionally, Amazon retains the option to drop certain products when it sees fit, and buyers do not have sole control of purchase orders. That, coupled with the fact that Amazon purchases products from the buyer at wholesale prices, can increase the chances that the buyer may come up short.
- Payments are Inconsistent
Amazon makes payments to the buyer at inconsistent intervals, meaning that you may not receive payment on the same day every month or couple of months. Because the brand’s PO is ever-changing, and determined by Amazon, this process can stagnate profits even further.
Cons of 3P:
The Process Can Be Overwhelming:
Third-party selling is great for buyers who like an autonomous selling platform that enables them to sell products at their own set price and to be charged a fixed price every month. However, it can be overwhelming trying to handle all of the things that go along with selling on Amazon, including: customer interaction, shipping, navigating Seller Central, managing POs, storing and packaging inventory, and pricing among other things.
Also, Amazon’s guidelines are forever changing, and they retain the option to suspend listings if brands do not adhere to them. Without an entire team to handle all aspects of selling, it can be a very arduous process.
Selling on Amazon at any capacity can be a feat, but success is found in using the proper selling techniques. Projected sales, manpower, and marketing are things to consider when deciding whether to sell 1P or 3P.
Not sure how to begin the switch from 1P to 3P?
Start with our experts at WishingUWell!