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With Amazon holding more than 30% of the total market share in eCommerce, it’s no surprise that sellers would flock to the platform to establish their businesses. Most of the time, Amazon acts as a third party to these transactions—with merchants selling to customers. But this isn’t the only business model you can pursue.
Enter the Amazon Vendor program: where merchants sell or trade their products directly to Amazon. Also known as a first-party (1P) relationship, selling your products directly to Amazon can open up many opportunities that a regular Amazon seller may not be able to enjoy, all the while still earning considerable revenue via Amazon’s massive online presence in eCommerce.
However, becoming an Amazon Vendor isn’t as easy as it sounds. Here’s what you need to know about selling directly to Amazon and the considerations that come with adopting this business model.
The best way to understand the differences between Sellers and Vendors on Amazon is to remember these two things:
Both of these models have some things in common (like following Amazon’s approved list of goods to sell), but there are some significant differences in how heavily Amazon is involved with Vendor merchants’ operations. That’s not to say that Vendors don’t have any freedom at all with how they operate their businesses, but they’ll have to comply with a different set of guidelines once they’re in the program.
The Amazon Vendor program is an invite-only program where the merchant acts as a supplier to Amazon, rather than a seller marketing to specific customers on the platform. Once you’re accepted into the Vendor program, your workflow will look somewhat like this:
You’ll notice that the process is drastically simpler compared to other business models you can run on Amazon. You’ll automatically have access to other features not available to Seller partners. Amazon will even take care of customer concerns and returns on your business’s behalf.
Given that the Amazon Vendor program is invite-only, how exactly do you get invited? While a complete set of requirements or guidelines hasn’t been released by Amazon, there are assumptions we can draw from how the Vendor program works.
Because Amazon will be the one buying your products via Purchase Orders and not actual customers, one of the expectations that Amazon will require from its Vendor partners is that their inventories are always well-stocked. If your products are frequently marked as out of stock even if they’re experiencing high demand (a product performance statistic that Amazon can track), then you may be less likely to be invited to the Vendor program.
Aside from that, being an excellent Amazon Seller will always be a good foundation for building your reputation on Amazon, increasing your chances of being invited into the program. This includes responding to customer feedback, ensuring you comply with Amazon’s fulfillment requirements, and running your storefront well.
Unfortunately, simply being an outstanding Seller on Amazon isn’t enough to guarantee an invite to the Vendor program. While it’s true that outstanding sellers can be noticed by Amazon in terms of rankings, capturing the buy box, or overall Storefront visibility, the selection process doesn’t seem to be automated, though your Storefront statistics may play a role.
This is arguably the biggest drawback of any attempt to get into the Vendor program. You have no way of signing up for consideration, and the invitation requirements are vague at best. It’s very much an approach that relies on being high-performing for most (if not all) of your business lifespan on the Amazon platform. And even then, there’s no guarantee that you’ll get invited into the program.
This isn’t always a bad thing: keep in mind that being in the Amazon Vendor program has its considerations and restrictions, some of which may not work with the overall goals that you want from your business.
Becoming a 1P Amazon Vendor has its considerations that every entrepreneur should keep in mind before trying to qualify for the program. After all, you’ll be cooperating directly with Amazon, which means you’ll need to adapt your operations to theirs.
Here are two of the most significant considerations to keep in mind when you become an Amazon 1P Vendor:
Since your orders will come from Amazon directly, you’ll have very little say in how much you’ll be pricing your products. This can lead to several immediate issues when it comes to profitability:
Something that can further complicate this is Amazon’s control over your listings. This means that they can change your product descriptions and other information about your product without having to run it by you for approval. This can lead to some long-term complications, like:
Overall, Amazon will have more control over your products, branding, and overall Storefront if you become part of its Vendor program. While this may work for those looking to establish a trusted business on Amazon, it may be less agreeable to merchants who want to create their brand on the platform.
Another significant factor to keep in mind with becoming an Amazon Vendor is that Amazon will expect you to keep your inventory stocked and always ready to ship. Fulfillment and inventory management are crucial to keeping your place in the Vendor program, as Amazon relies heavily on your capability to meet its demand.
This can be an issue if:
If your business fails to meet Amazon’s expectations, you could be taken off the Vendor program—or be charged thousands in chargeback fees. These fees and other penalties can drastically take a toll on your business and its bottom line, making it unfeasible to continue being part of the Vendor program or keep pushing forward with considerable losses.
While the considerations discussed above can look like dealbreakers—and they can be, depending on your goals for your Amazon business—being part of the Amazon Vendor program does have some considerable perks.
One of the benefits of being an Amazon Vendor is that you don’t have to worry about inventory forecasting anymore, only inventory management. Your demand won’t come from customers—rather, from Amazon’s Purchase Orders, which follow a consistent schedule.
Since Amazon will do most (if not all) forecasting for you, it becomes relatively simple for you to source your products, manage your inventory, and send them to Amazon when your POs arrive. While it does limit you to a wholesale model when it comes to sales, you’ll just have to focus on matters like billing or avoiding chargeback disputes.
Amazon Sellers will often need to do most of the work for their Storefronts. And while Amazon can help with these concerns via methods like their FBA program, these are often opt-in and can add numerous fees on top of all the other fees that they already need to pay. Vendors don’t need to go through all this, as they’re charged a flat amount by Amazon once they’re in the Vendor program.
Keep in mind that this doesn’t exclude you from other penalties or chargebacks—but you’ll find that the fees that you need to pay drastically simplify once you become a Vendor partner. Since Amazon already takes charge of so many processes that would normally be your responsibility as a Seller, all you need to do is pay for these services upfront and focus on inventory management and fulfillment.
Arguably the most significant benefit to becoming part of the Amazon Vendor program is that your products will appear with the “Ships From and Sold by Amazon” Prime badge. This increases customer trust in the quality and convenience of choosing your products, which can lead to increased profit margins overall.
The other support also offered by Amazon (like taking care of customer concerns and returns on your behalf) can boost your reputation compared to Amazon Sellers in your niche. This can further improve your good standing on the Amazon platform and among your audience, easily making you a preferred option for the goods and products that you sell.
Amazon takes control of product listing and optimization when you’re invited into the Vendor program. This reduces the time spent on creating product lists and trying to optimize your listings for the Buy Box, which is arguably one of the biggest time sinks that Amazon Sellers have to go through.
If your products have easy-to-list technical details, it’s even easier for you to simply focus on inventory management and product sourcing. All you need to do is to ensure that Amazon gets your products, and they’ll do the rest.
The increased control that Amazon has over your product listings also means that your products have a better chance of showing up on Amazon’s algorithms. It’s difficult to say how optimized Amazon’s generated listings are compared to something that you’ll do yourself, but it’s a fair guess to say that since you’re a Vendor partner, your products may be more likely to appear on search results.
When you add the fact that your products will have Amazon’s stamp of approval, you’ll find that you don’t have to do much in terms of marketing and advertising your business on Amazon. You can still consider other channels to promote your products like social media, but as a Vendor, your products will most likely have increased visibility compared to Seller products.
Merchants may ask if it's worth it to become an Amazon first-party vendor given everything that’s been discussed in this article so far. Ultimately, the final answer will depend on their business goals and how they operate their businesses on Amazon.
Some questions you can ask yourself before trying to aim for the Amazon Vendor program include:
At the heart of it all, the one factor that you need to keep in mind is how much control you’re willing to give up on your business. Selling directly to Amazon instead of Amazon customers means that you’ll be more subject to Amazon’s own rules. But that also means that you’ll have to micromanage more areas of your business compared to Amazon taking care of everything.
Once you become an Amazon Vendor, you must optimize your operations. While there are some aspects of sales that you’ll no longer have to think about as an Amazon Vendor, you’ll have to double down on the areas that still need management or oversight.
Because Amazon expects a high level of service from its Vendor partners (and by extension, the customers too), using a marketplace management tool or software can drastically simplify most of the work that you need to do when managing your business.
Some of your options include:
As one of the most comprehensive marketplace management platforms, Threecolts has plenty of solutions that can help any business owner on Amazon improve their operations. Whether you’re trying to apply as a Seller or are already in the Vendor program, Threecolts has a suite of solutions that can address the problems you’ll encounter when you run a business on Amazon.
One of the most useful solutions for Amazon Vendors is SellerBench, which allows robust profit recovery from unoptimized inventory. As an Amazon Vendor, you’ll need to make sure that you have enough stocks to meet the purchase orders given to you by Amazon—which makes managing inventory crucial for ultimately getting the most profit out of your operations.
Another solution that can potentially help boost your marketplace optimization is ExportYourStore. Sync your inventory from other marketplaces with your Amazon Seller listings and use a one-click setup to import your products from places like eBay, Etsy, or Shopify. It’s particularly useful for anyone looking to quickly get started on Amazon who already has a store somewhere else.
Jungle Scout’s capability to support Amazon Sellers at any stage of their operations makes it useful for anyone trying to get into the Vendor program. From product research to listing optimization, the platform has the basic features that can help anyone get started selling on Amazon—with the option to upgrade to advanced features long-term.
Jungle Scout’s array of features is supported by a responsive customer service team, giving you extra support when you run into its more complex features.
Helium10’s emphasis on data-driven insights makes it a useful tool for anyone looking to quickly start as an Amazon Seller and take concrete actions to move toward the Vendor program. It allows sellers to quickly find trending products to sell alongside other optimizations to their business, increasing their reputation on Amazon and making them a more feasible choice to be invited into the Vendor program.
Beginners may need slightly more time to get acquainted with Helium10’s more technical features, but the platform provides all the resources they need to learn. With time and training, Helium10 can become an indispensable tool in your push toward being invited to the Vendor program.
While there are many different factors to consider when becoming a first-party seller on Amazon, many of the concerns that you’ll have as a merchant will still be the same. Plus, considering that the best way to get an invitation into the Vendor Central program is to start from Seller Central, gaining a grasp on at least the basics of online marketplace management is a must.
With tools and platforms like Threecolts, not only can you optimize your inventory and improve your profit margins as a seller, but you’ll also have access to a constantly improving platform full of features to help you succeed. Try the Threecolts platform today and learn which services you can use to supercharge your career as an Amazon seller.
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