Amazon 3P: Frequently Asked Questions and Things to Consider
There are two ways to sell your products on the Amazon marketing place. Amazon buys your inventory in what is called a 1P or Vendor relationship or you sell directly to the consumer yourself through Amazon 3P or a Third Party Seller on Amazon. If you've never sold 3P before, you probably have some questions. We'd like to answer them. Feel free to click on your question below to jump to the answer, or take time to read the whole post.
If you are interested in setting up your own seller account, Amazon does a great job of providing you details of how to sign up and get going.
1. FBA Tax Nexus: When you use FBA, inventory is sent to multiple warehouses all over the United States. Since you technically own the inventory, you are now liable to file taxes in each state that you hold and sell inventory in. Tax Nexus also can make you liable to file taxes on any product sales in these states, even if the products were not sold on Amazon.
2. Account Suspensions: Your account can be suspended! As a seller, you are liable to meet Amazon’s guidelines for selling including on time shipping, labeling, and proper preparation.
3. BuyBox Re-Pricing: In order to win the BuyBox, you will have to implement a repricing option that will lower your price to win.
4. Customer Service: You are responsible as a seller to respond to customer inquiries within 24 hours - even on weekends and holidays. You will be responsible for approving and handling customer returns and working with disgruntled customers to ensure they are happy.
5. Store Feedback: You will be starting a new account on Amazon with 0 feedback. Feedback is a way that customers can rate how well you are doing your job. If you have too much negative feedback, you will be suspended. Other sellers who have more positive feedback will have a better chance of winning the BuyBox until your account gains traction and positive ratings.
6. Inventory Forecasting: Amazon does not do any forecasting for you. You are responsible for creating ‘PO’ shipments into Amazon. You still own the inventory when it is in FBA up until it sells to a consumer.
7. Inventory Feeds: You will likely need to invest in or develop an inventory feed directly into Amazon Seller Central that automatically adjusts inventory levels and ability to ship. If you cancel too many orders due to out of stock issues, your account will be at risk of suspension.
Challenges of selling 1P include:
- Limited control over forecasting
- Limited control over PO’s
- Pricing at the discretion of Amazon
- Launching New Products and getting Amazon to order enough inventory
- Limited data provided by Amazon
- Self Service First Platform
Challenges of selling 3P include:
- Inventory ownership risk
- Prep & labeling consistent with Amazon shipping standards
- Tax Nexus and Liability
- Customer Service Management
- Returns and Stranded Inventory
- Competing for BuyBox ownership
Yes you can. That being said, Amazon reserves the right to source your products for 1P in the future.
- A+ Content is exclusive to 1P sellers. However, Enhanced Brand Content is available to 3P sellers and functions almost exactly the same with the exception of a couple modules.
- Product Display ads remain 1P Exclusive, but other advertising options are all available to 3P sellers. Rumors have surfaced that PDA’s will be available to sellers in the near future likely with One Vendor rollout.
- 1P offers ARA and ARAP data for an added % or fee structure. 3P sellers recently were given Brand Analytics which provides very similar data sources and information. 3P sellers also receive a lot more individualized data from purchases.
Amazon Vine Program currently is a Vendor Only program - although there have been beta Vine programs run with Sellers.
Amazon’s updated Standards for Brands Selling in the Amazon Store states, “we may choose to source products from some Brands for sale by Amazon only. Other Brands can operate as sellers in the Amazon store if they can consistently maintain our standards for customer experience.”
Brands Eligible to Sell on the Amazon Store:
- Brands who have been told by Amazon that they are ineligible for a 1P offer
- Brands who have never sold inventory directly to Amazon
Brands Ineligible to Sell on the Amazon Store:
- Brands who Amazon selects to source products as a 1P Vendor Relationship
- Brands who do not price competitively on the 3P marketplace*
Some Vendor Managers allow hybrid accounts. Others prohibit having both a 1P and a 3P account. Several Hybrid accounts have been shut down over the last few months by Vendor Managers & several brands have been notified that their Hybrid Seller Accounts will be shut down later this year.
Yes. Amazon will not block unauthorized sellers from distributing and selling your products on the marketplace - even if they are not price competitive. In specific categories such as Luxury Beauty, Amazon will gate a brand from having unauthorized sellers.
An Authorized 3rd Party Seller is a 3P seller that will buy your products directly from you and resell on Amazon’s marketplace. An Authorized seller should be involved with helping curate and provide content and messaging consistent with your brand’s objectives. They should adhere to any MAP pricing policies and work directly with you to forecast for a consistent availability of goods on Amazon. Often, a distribution policy can be created to permit certain authorized sellers to sell on your behalf on Amazon, while prohibiting unauthorized sellers.
- Wholesale Payment Relationship: Inventory ownership passes to an authorized distributor / reseller, meaning you get paid faster.
- No Tax Implications: Authorized reseller handles all tax implications of FBA.
- No Account Management: You do not have to worry about managing customer service, managing seller central, re-pricing, or developing ways to avoid account suspension.
- No Additional Prep / Shipping: The authorized reseller typically takes care of your distribution efforts.
- Inventory forecasts, PO’s, Prep, labeling and fulfillment are all included.
- Additional Services: Pattern provides additional services included in the cost of goods. Services include content creation, advertising management, and basket size optimization.
- Feedback: Pattern and other Authorized Sellers already have an established seller account with high amounts of feedback to help win the BuyBox consistently and provide a positive experience to consumers.
- Define your business objectives: What is your ultimate goal?
- Define your current capabilities: Do you have the ability to prep, ship, and manage inventory?
- Develop a strategy to be successful
- Determine your current and long term objectives and ways to achieve them.
- Explore the financial setup and ongoing costs of managing your own seller 3P store vs. partnering with an authorized seller.
- Determine the speed at which your organization can move on this initiative initially and develop the capabilities to sell on your own.
- Move Quickly!
- The longer you are out of stock after your 1P account is shut down, the lower your rankings and product listing sales will drop. It is imperative to act quickly and decisively.