¬Amazon implicitly is starting to suggest to many US suppliers, on the Vendor Central platform, to explore the world of the Marketplace. In Italy and Europe, the sensation is also reinforced by the Amazon Seller team which is helping in the transition from one model to another, even Brands and manufacturers already present as Vendors.

At the beginning of March [1], in fact, many have no longer received orders from amazon ungating service with the communication that at the moment no new orders are expected. Amazon Retail appears to be choosing a small number of more profitable ASINs to work on. On the other hand, in the same period Amazon communicated to some Sellers that they will no longer be able to sell on the marketplace but will have to switch to Retail mode. Recode reports, in this regard, the Amazon program that would go by the name of “One Vendor” [2], which would unify the Vendor & Seller back-end platforms, which will decide how to sell on Amazon. It is not clear how much the limitation of these marketplace sellers is due to individual reprisals to brands by Amazon teams and how much it is due to a strategy.

This has sparked a discussion about what these signals imply: speculation as to why and how to act right now. Amazon responded to Digiday to say that there is currently no program called “One Vendor”. The official statement is that, as a practice, relationships with sales partners are regularly reviewed and changes are made when there is an opportunity to provide customers with better service in terms of selection and convenience. Amazon therefore remains vague as to what is happening and gives no indications on how to move. At this time, Brands can participate in the Vendor Central program, only if they have been invited, which offers benefits such as the Prime program in addition to the content and marketing supported by Amazon, or they can independently land on Seller Central, which offers Brands a ‘ clearer image of customer information, but requires more effort to manage demand and inventory.[3] of Amazon, One Vendor would give e-commerce greater control over the items sold and the methods, would guarantee a higher quality service for its customer and, at the same time, would increase its margins.

One Vendor would guarantee Amazon the benefit deriving from both models, unifying them into a single platform. High-turnover brands such as LG, Dyson and L’Oreal would be automatically introduced as Vendors, without the possibility of choosing, and this would guarantee Besoz e-commerce to always have offers for the most requested products and have safe and agreed revenues. advertising side. But the colossus would continue to allow the sale of other products, earning the Seller fee for all those brands that do not have high-rotating products with great demand, with a minimum effort.

But let’s go in order…

Why does Amazon seem to suggest to some Vendors to switch to a Marketplace management mode?

The Vendor Central model is generally more expensive for Amazon in a medium and long-term logic. It provides for higher Amazon management costs, starting from personnel costs, Vendor Managers and Brand Managers. The algorithm that stopped the orders calculated profitability and speed of sale to determine which orders to continue placing.

The marketplace model also makes warehouse management more profitable: shipments must comply with fees and there are logistics management fees, which can be changed faster and with more certainty than the sales forecasting algorithm, as happens in Vendor model. Furthermore, on products that are loaded into the catalog from scratch, the Amazon algorithm is not reliable, and therefore the marketplace model allows not to share the risk with the merchant.

The margins per product, in the case of a Vendor, are often reduced: Amazon does everything to win the ‘buy box’ and offer the product at the most competitive price, even going into negative margins. This implies that Amazon sometimes dumps prices with respect to the lists, even at the expense of its margin. The marketplace model, on the other hand, provides for a constant connection that on average is equal to 15%, canceling both positive and negative hype.

But what are really the pros and cons of the two models?

Moving from retail logic to a marketplace implies changes, especially in having to interface with the end customer. On Seller Central, decisions are delegated to sellers and not to Amazon and receiving weekly POs. While it is positive for all those brands that have suffered from Amazon’s buying logic, on the other hand it scares those who do not have a structure that allows granular management of the Amazon sales strategy.

Seller logic allows pricing control, which is why many Brands have already started an autonomous transition, even in the face of active Vendor accounts. Active control allows to avoid conflicts between channels, and with physical distribution, often intolerant of the Brand’s active entry on the channel.

Also on the Promotions side, Seller Central accounts are more autonomous and go live in a few hours: they do not depend on the approval of the Vendor Manager or Amazon.

On the subject of Analytics, on the Vendor side, there are Amazon’s own paid tools which, however, are not exhaustive and on the Seller Central side they cannot be activated. On the other hand, on the Seller Central side, you have much more free data on the last mile of the sale, and a series of more or less valid third-party tools.

Furthermore, on the Seller side, the relationship with customers is entirely delegated to the Brands, who can thus respond directly to requests, questions and answers and interact with customers also for returns and possible compensations.

The business model of the two modes is also different: in Vendor Central, the products are purchased by Amazon with an agreed wholesale price to which is added through a contract that also includes marketing costs, among others. On the Seller side, however, the main commissions are: Referral Fee: charged as a percentage of the sale price or at least the price paid by a customer minus any discounts. The percentage depends on the category (15% for most categories); Fulfillment by Amazon (FBA) fee and filing fee.

What to do now?

Opening a Seller Account is seemingly simple: simply provide your corporate tax information, presented in W-9 or W8-BEN, contact information, payment information. But the more complex part comes later: making the decisions. Calculating the profitability of the channel and of each single SKU is to be managed and the scenarios must be built on the two models. Furthermore, with the Seller channel the operations to be managed are much greater and in the face of possible higher margins, the Brand is often forced to face higher costs of specialized personnel.

In our opinion, the transition from Vendor Central to Seller Central, even if imposed, must be managed and not immediately and we must take advantage of this opportunity to develop and test a model that ultimately allows the Brand to acquire greater autonomy in making choices.