14 Feb 2023
Amazon – Seller Vs. Vendor
The world of online sales keeps evolving and offers consumers new ways to discover their next favorite product. It also helps retailers new avenues to insert their ads into the daily lives of potential buyers. Nevertheless, Amazon is and remains a fantastic tool that is easily accessible and a great way for sellers to develop their business.
In fact, the e-commerce giant is still as dominant today as it was a few years ago. In 2019, Reprise Digital surveyed Canadian customers and found that 63% of them discovered a new product because of Amazon. Furthermore, 88% discovered the Prime service, and 42% subscribed to it. Knowing all this, I think it’s safe to say that there’s no better time to jump in.
Why should you sell your product on Amazon?
Amazon is a gateway to your customer’s daily life. It’s a huge pool of potential customers that could remain untapped. For most companies, Amazon is a great place to promote your offering and let people, across the country, know about your products.
Other than the density of shoppers, the American company also lets you establish an online presence rather quickly and without any major investment when compared to the development of your own private website. Shifting to an e-commerce-based business model usually involves a lot of fees if you don’t have the talent in-house. So, the use of online Marketplaces is an efficient way to start.
Seller Central & Vendor Central have both evolved & changed over the past few years. They now offer more ways than ever for sellers to show their products as often as possible and under the best conditions you could ask for. All you have to do is use these tools as best you can.
We just mentioned Seller Central & Vendor Central. Amazon offers businesses two main ways of joining their ranks to try to make it big online. Seller Central offers you a more customizable experience where you choose your main way of selling, while Vendor is more similar to a business relationship between a supplier and distributor.
Portal Used: Amazon Seller Central
This Online Hub, called Seller Central, let’s any user create & allow their products to be sold online through Amazon. Of course, this would be within the confines of the country you’ve selected to sell your products. Being a member of Amazon Seller means you’ll have the right to sell directly to the customer in two main ways.
FBA – Fulfillment By Amazon
The easiest way to get your products out there! Sadly, it’s often the most expensive one also. As the name suggests, this service means Amazon will be handling most of the daily operations. This means that you won’t have to handle your products, manage customer service, take care of returns or refunds. You’ll also get the well known Prime Badge next to your products as Amazon will usually offer 2-Day free shipping for members.
You should opt for this service if you want to limit your interactions with the customers because you don’t have the ability to handle it on a daily basis. Furthermore, using FBA involves a cut in profits as Amazon will charge an additional fee to handle everything from shipping to customer service. So, if you can slash your margin without suffering too much and want to keep things simple, then FBA could be for you.
We’ve insisted that Fulfillment by Amazon was often the most expensive option for the seller and we’d like to shed some light on the fees that you would have to pay. As stated previously, each unit sold will have a handling fee applied that will cut into your profits. This is based on the product’s weight & size. This is added on top of the referral fee (15% of the total price) that is always applied to any sale.
Par contre, nous précisons qu’elle est souvent la plus coûteuse puisque des frais additionnels de manutention seront attribués à chacun de vos produits. Ces frais sont établis en fonction du type de produit, le poids ainsi que les mesures du contenant. Cela s’ajoute aux frais de référencement qu’Amazon applique toujours sur les ventes (environ 15% du prix total). Si vos produits se vendent à moins de 15,00$ votre marge de profit peut disparaître rapidement. Il est alors important de vérifier si cela est envisageable.
FBM – Fulfillment by Merchant
You prefer to be in charge of everything around your online store? Then FBM is the option for you. Offered at no additional cost, you’ll be able to sell & ship to your customers. This lets you handle your products how you see fit as you won’t be submitted to as much oversight from Amazon.
Although, this freedom comes at a price. You will be in charge of all orders, shipping, customer service, refunds, return and inventory management. Believe us when we say these daily tasks quickly add up. You need to be ready for it. Amazon has also put in place a few account-wide metrics to make sure your performances are up to their expectations. Upholding their reputation for quick delivery is a priority for Amazon and they won’t hesitate to remove the selling rights of a seller failing to reach their standards.
What does it entail? You’ll generally have to treat your orders under 72 hours unless your products have a longer, already specified, order preparation phase. If a customer gets in touch with you, you have 48 hours to reply and a quick resolution of any issue is preferred. Finally, once you ship an order, attention to detail is a must as you need to submit a valid tracking number and make sure your product is delivered in a timely manner.
Now, you may look at this and think that FBM actually seems more restrictive than FBA. As the freedom of managing your products comes with so many metrics to pay attention to. You need to keep in mind that your profit margin will, generally, be much better when opting for FBM as you avoid any additional fees. Furthermore, you still have access to all the selling & promotion tools you would normally. As your margins get better, you can then invest more in ad campaigns & programs to gain the upper hand on your competition. Finally, the famous & coveted Prime Badge is still accessible when selling through FBM. While it is harder to get and the program can be closed at times, if your sales history is satisfactory, you can submit your account for consideration. Amazon will review your metrics and let you know if your products can be added to the Seller Fulfilled Prime program.
Portal used: Amazon Vendor Central
The second approach to sell on Amazon is the Vendor formula. This is the closest you can get to be a supplier for Amazon. Basically, you’ll create your account, your product listings and indicate your cost. The rest is up to Amazon. If they’re interested in your products they’ll send you purchasing orders to obtain these items for resale. Once Amazon has the product in hand, a note on the listing will show that your company is the supplier but the customer is buying the item from Amazon.
A major part of this relationship is that Amazon will pay you the cost of the item that you’ve declared and will then sell them to the customer at the price they deem to be ideal. You can suggest a retail price but you do not have control over it. Amazon’s algorithm will keep track of the market and adjust the price in real-time based on the current state of the category. The Amazon purchasing team is greedy and will do their best to get the lowest cost to sell at the highest price and get the best profit margin possible. We highly recommend keeping an eye on your products and the prices shown.
Why would you opt for this method? This is a very different way of doing business on Amazon. Here, you are a supplier for Amazon & you avoid most contact with the customers apart from a few questions here and there. It’s a good approach for teams who have an already established assembly line and are able to ship big orders via skids on a regular basis but lack the manpower to handle a full online store and the customer experience side of things.
It’s important to understand that this program is mainly available via invitation. Amazon regularly scouts for new products to acquire and you might be on their list. If you haven’t been invited, you always have the possibility to get in touch with them to get an audit.
Vous comprendrez alors qu’il n’y a pas de recette miracle et que la méthode idéale pour afficher vos produits dépend complètement de votre modèle d’affaires et des ressources à votre disposition. Si vous optez pour la méthode Seller, vous aurez un contrôle total sur le prix de vente de vos produits. À moins de payer un supplément, vous aurez plus de tâches à effectuer au quotidien. La formule Vendor est plus passive, mais cela vient au détriment de remettre le contrôle de vos prix à l’entreprise américaine.
Chez Novatize, nous avons vu des entreprises avoir un grand succès via Amazon Seller et Vendor. Nous sommes confiants que de nombreux commerçants québécois seraient gagnants d’ajouter Amazon à leurs canaux de ventes. Cependant, une analyse complète est essentielle afin de bien identifier vos besoins ainsi que les défis auxquels vous ferez face. Un travail d’implantation se doit d’être bien établi afin d’éviter de mauvaises surprises.
Notre équipe est toujours disponible pour discuter avec vous afin de vous accompagner. N’hésitez pas à nous contacter, ce sera un plaisir pour nous de vous conseiller.
As you can see, there is no miracle solution when it comes to selling your products on Amazon. It all depends on your current business model and the resources you have on-hand.
If you opt-in for Amazon Seller Central, you will have full control over your pricing but, unless you’re willing to pay a little extra, you have to handle some daily or weekly tasks to stay on top of your business.
Amazon Vendor is a more passive approach to selling online as you don’t handle the sales directly. Although this comes at the expense of price control over your own merchandise.
Here at Novatize, we have helped businesses grow and scale on both platforms. We are confident that adding Amazon to your current sales channels is a great decision that will benefit you in the long run. To reach that point, we highly recommend having a full analysis done so that you can make the right call. Success on Amazon is built off of good foundations and we can help you make sure you don’t miss the mark.
As always, our team is available to answer any questions you might have. Don’t hesitate to get in touch with us, it would be our pleasure to discuss your business needs.