Back to blog

Learn with Threecolts

Small group workshops to help you learn, optimize, and grow.

Learn About Coaching

Amazon 1P vs 3P: Which is Better for Your 2024 Business?

Threecolts
Geri Mileva
Published
March 11, 2024
Modified
May 7, 2024
amazon 1p vs amazon 3p

Selling online is already synonymous with selling on Amazon. Brands that sell on the platform experience more than 20% sales growth, with 60% of Amazon sales coming from independent sellers. If you’re looking for a guaranteed way to grow your business online, you must be on Amazon. 

There are two ways to join the platform—as a first-party (1P) seller (Amazon Vendors) or as a third-party (3P) seller (Amazon Sellers). Both have advantages and disadvantages; choosing the best path is crucial for maximizing your opportunities with Amazon. Alternatively, you can choose a hybrid model where you are both a 1P and 3P seller. 

In this article, we’ll explore which model may be better for your business and how you can start using it to generate more sales and profits. 

What is Amazon 3P selling?

Most vendors are familiar with Amazon Third-Party (3P), where you sign up to sell your products directly to customers using the Amazon marketplace. Almost everyone starts with this model, and it’s also the easiest method to start selling on Amazon. 

As a third-party seller, you’re responsible for controlling your prices and presenting your products. You build your listings, write the product copies, upload photos, and handle all other aspects contributing to a successful listing. 

You can accomplish all of this via the Amazon Seller Portal. Here, you can access seller optimization tools to maximize the effectiveness of your listings, so they rise above the competition. You can also control your shipments (or enroll them in Fulfillment by Amazon for a fee), manage customer tickets, and resolve complaints. 

Sold by Brand – A product from a 3P Seller
Sold by “Brand” – A product from a 3P Seller

Advantages of 3P Selling:

  • You have more control over your products, prices, advertising, inventory, deliveries, etc.
  • Because you control your pricing, you can maintain better brand consistency across multiple sales channels.
  • You can edit your listings without waiting for Amazon’s approval. 
  • You can grow your brand using advanced selling tools. 
  • Amazon’s predictable fees and your control over your pricing also let you control your profit margins.
  • You can sell to a global audience by listing them via other global Amazon marketplaces.
  • There’s no limit to the number of products you can sell on Amazon.

Drawbacks of 3P Selling:

  • Depending on the size and weight of your product, Amazon fees can still be potentially high, especially when using their Fulfillment by Amazon (FBA) service.
  • New sellers might find it challenging to handle all the aspects of running an Amazon business, especially if you don’t have existing systems for inventory, logistics, and customer service.
  • Managing your own Amazon store requires a significant investment in both time and effort.
  • Optimizing listings so they appear in product searches and stand out in a competitive marketplace requires considerable skill.
  • Managing inventory can prove challenging, especially for new products prone to overstocking or long turnovers.

What is Amazon 1P selling?

Unlike Amazon 3P selling, being an Amazon 1P seller is on an invite-only basis. To join the 1P program, an Amazon brand manager will contact you if they deem your products suitable. As an Amazon First-Party (1P) seller, Amazon purchases your goods at wholesale prices and takes care of inventory, pricing, order fulfillment, customer service, and returns. Amazon also has the option to white label your products under the Amazon brand (such as Amazon Basics).  

Sold by Amazon – the indicator of a product that’s from an Amazon 1P Seller
“Sold by Amazon” – the indicator of a product that’s from an Amazon 1P Seller

Instead of a Seller Central, you have access to a Vendor Central where you can view purchase orders (POs), manage product information, and run promotions to advertise your brand. While Amazon controls the pricing and product listing optimization, you can still promote your products so that they sell faster and you get more POs from Amazon.

If you’re interested in moving out inventory and would rather focus on manufacturing than selling, then this is a great program to work towards. You produce the items, sell them in bulk, and Amazon takes care of the rest. 

Advantages of 1P Selling:

  • Amazon buys your product directly, and you’ll receive POs regularly. 
  • Customers are more likely to trust a “Sold by Amazon.com” label compared to most 3P sellers. 
  • Your products will get better placements—getting priority in search results and other marketing initiatives—since Amazon will prioritize moving out its inventory.
  • Your products are automatically eligible for Amazon Prime and two-day shipping.
  • You don’t have to worry about inventory, listing optimization, customer service, or sales tax, as Amazon takes care of these details for you. 
  • You don’t need inventory forecasting since you only have to fulfill Amazon’s PO, and they’ll be responsible for handling any unsold or out-of-stock inventory.
  • You’re free from inventory risks and listing disciplinary measures.
  • You will have access to advanced selling tools in Vendor Central, which are not available to 3P sellers not enrolled in the Amazon Brand Registry

Drawbacks of 1P Selling:

  • Amazon controls your products’ prices, shipping, and inventory, and they might not always follow your Minimum Advertised Price (MAP). 
  • Amazon has the option to change your product listing, such as descriptions and photos, without your approval.
  • You’ll receive lower profit margins since Amazon purchases your products at wholesale prices. 
  • Amazon takes 30, 60, or even 90 days to pay for your goods, which can impact your cash flow. 
  • Using Vendor Central incurs extra fees such as co-op fees, remittance fees, marketing fees, freight allowance fees, and chargebacks. 
  • It’s not guaranteed that you’ll have a best-selling product. 
  • Amazon can drop you anytime for various reasons. 

Factors to Consider Before Choosing Between 3P vs 1P

If you’re fortunate enough to have both options available for your business, you should consider the following aspects before making a decision. 

  1. Brand Recognition

Have you built a name for your brand? Do you have your own website or presence in other marketplaces? If so, you’re better off selling as a 3P seller. Sign up for your own storefront at Amazon and optimize your listings so customers can easily find your product when they search for it. 

While growing your business as a 3P seller is mostly a self-initiated endeavor, Amazon offers several programs that can help your business establish a strong brand. Take Lillie’s of Charleston, for example. They’re a family-owned business selling specialty barbeque sauces and spice mixes that signed up as a 3P Amazon seller. By fully utilizing Amazon’s support and signing up with FBA, as well as enrolling in the Black Business Accelerator, they saw a 3x increase in sales and significantly expanded their business.

If you haven’t built a dedicated follower base yet or your products can be sold as white-label items, consider being a 1P seller instead. Letting Amazon handle everything can give your brand the boost it needs, increasing your sales while you focus on other aspects of your business, like product development. 

  1. Logistical and Operational Capabilities

Do you have a logistics system or a dedicated logistics partner in place? If you’re already fulfilling orders via your website or other marketplaces, adding sales from Amazon to the mix will be easy. You can also take advantage of Amazon’s FBA program as long as you prepare your items according to their specifications. 

If you’re struggling with logistics and order fulfillment, then 1P selling is a safe bet. By working with only one customer—Amazon—you eliminate operational challenges that come with seasonal highs and lows since Amazon can provide a predictable buying schedule.

Being a 1P seller might also be preferable if you’d rather not deal directly with end users and customers. Conversely, you’re responsible for customer support and handling customer returns and complaints as a 3P seller. If you already have an existing customer service platform, however, then it’ll be easier to provide support to your customers. 

  1. Size Dimensions and Weight

If you have bulky or heavy items, expect to pay higher storage and delivery fees as a 3P seller using FBA. Take note, however, that even if you’re handling your own storage and logistics, you’d still incur higher expenses due to the nature of your products.

On the other hand, Amazon takes over these costs if you are a 1P seller. You can even justify having lower product margins from these saved costs. 

  1. Product Margins and Sales Velocity

Choosing between 3P vs. 1P selling significantly impacts your product margins. With 1P selling, you’re compelled to offer your goods at wholesale prices since Amazon will buy them in bulk. You can expect a huge sales volume for each PO despite the lower margins per piece. If you have a high-demand product that moves quickly, or if your business operates better with periodic or predictable sales in higher volumes, then 1P selling is ideal for you.

With 3P selling, you can control your prices and potentially profit more from accumulated sales. To remain competitive, you can use automated repricing tools to adjust your products’ prices in real time. 

However, note that unless you already have a high-selling item, you’re not guaranteed huge sales volumes right away. You might also face unpredictable sales and idle inventory. If you can plan around seasonal highs and lows, take advantage of trends, or have diverse product lines to make consistent sales, then 3P selling is a good fit for your business.

  1. Average cart size

If your customers already purchase in bulk from your store, it’s optimal to remain a 3P seller. You’re already getting the sales volume for the prices and margins you can control. Conversely, if you only get sporadic single-item orders, becoming a 1P seller can help boost your listing and credibility. 

  1. Growth plans

Do you have plans to build a high-revenue, high-volume eCommerce empire with a strong presence across multiple channels? If you do, consider staying as a 3P seller. As a 1P seller, your growth plans are limited by factors such as price match agreements, so you can’t price your products higher on other platforms, not even on your website. As such, you’re limited to low prices regardless of the channel you choose to sell on. 

On the other hand, being a 1P seller affords you the luxury of having a lucrative business without too many logistical headaches. It’s also ideal if your growth plans are limited to growing as a manufacturer versus a distributor. 

Getting Started as an Amazon 3P Seller

Anyone can become an Amazon Third-Party Seller. You simply have to register for a seller account, complete your business details, and start listing your products. Our guide on How to Sell on Amazon for Free will walk you through the steps to get started. 

As a third-party seller, you can select from an individual or a professional selling plan and decide if you want to be an Amazon FBA Seller. An individual selling plan is best for low-volume sellers since you’ll only pay a fixed $0.99 per sale. It’s great if you’re still experimenting with various items to find which ones would become your best sellers on the platform. 

A professional selling plan costs a fixed $39.99 monthly, regardless of the number of units you sell per month. It has advanced seller tools like business reports, bulk product listing, and inventory management. You can also enroll in optional Amazon programs like FBA, Amazon Ads, and Amazon Global Logistics. 

This plan is ideal if you’ve already determined the products you’d sell on Amazon and you’re ready to grow them. Learn more about the difference between individual and professional selling plans in our comprehensive guide. 

Getting Started as an Amazon 1P Seller

The Amazon Vendor Central is an invite-only platform, and you can’t sign up for it like you would in the Amazon Seller Central. You also can’t apply for the program; instead, Amazon will reach out to you directly. 

Amazon hasn’t released any set requirements or guidelines, so the best we can do is make assumptions about what will draw their attention and earn you that exclusive invite. Here are some tips to help increase your chances of getting invited as an Amazon 1P seller:

  • Join the Amazon FBA program and have a well-stocked inventory. When Amazon sees that your products are selling well and that you have a steady and well-managed inventory, then it sends a strong signal that you can meet Amazon’s rigorous PO requirements. 
  • Be an excellent Amazon Seller by complying with all the rules. While it’s unclear whether compliance infractions will hamper your chances of being invited to the program, maintaining a good seller reputation that shows your commitment to your brand can't hurt. 
  • Get lots of 5-star reviews. The more reviews your product has, the more it will be shown to other customers. Amazon keeps track of well-reviewed products, and it signals that you have a product that customers love. You can use automated feedback tools that ask for reviews from ideal customers who are likely to provide positive reviews to increase your product’s rating. 
  • Run sponsored ads on Amazon. Boosting your product’s visibility will help you gain sales and signal to Amazon that you’re committed to your brand’s growth. It will also help your brand gain exposure, which Amazon can capitalize on if they choose to sell your goods directly. 
  • Attend Amazon trade shows to catch the attention of Amazon brand managers. These recruiters are actively seeking brands to add to the platform. This is a great avenue if you’re not a 3P seller but have a winning product you want to sell via Amazon. 

Remember that even if you follow all the tips above, you won’t be guaranteed an invitation to become an Amazon 1P seller. The lack of an invitation shouldn’t stop you from selling on Amazon, though. Also, carefully consider the advantages and drawbacks of 1P selling and determine whether they match your business plans. 

Amazon 1P vs. 3P Seller: Which is Better for You?

Being an Amazon 1P seller may sound like a dream for most because Amazon becomes your direct customer, and you’re promised huge sales volumes. However, with the exclusivity and limited control, it may be better to pursue Amazon 3P selling first to get a better feel of the platform. 

Being an Amazon 3P seller gives you better control over your brand, price, and margins. You can also potentially scale your company more effectively if you have direct control of these aspects of your business. By taking the extra step of registering your brand in the Amazon Brand Registry, which can potentially be easier than being invited as a 1P seller, you can still gain access to features and tools that Amazon Vendors have. These tools include A+ Content, Amazon Live, Amazon Vine, Brand Analytics, and more.

If you’re new to Amazon, navigating the platform and promoting your products may feel challenging. But with the right tools, like the ones Threecolts offers, you can eventually grow your traffic and revenue.

Browse through and read our other blog posts that are data-driven insights with our very own proprietary data and learn more on Mother's Day trends and best practices, Easter sales, price elasticity of demand, Amazon FBA fee changes, Amazon product title optimization, winter seasonal products, Amazon end of year sales, Valentine’s Day trends and best Amazon fulfillment centers by location and throughput.

Learn with Threecolts

Small group workshops to help you learn, optimize, and grow.