As brands invest more in Amazon and begin to develop a strategic presence in the marketplace, a growing number of Vendors are exploring the utilization of Seller Central. Using a combination of Vendor Central and Seller Central – an Amazon “hybrid model” – allows brands to reap the benefits of both.
The advantages and disadvantages of each platform vs. the others an often-discussed topic, and for good reason. There is a long list of considerations when choosing which platform is best for a brand.
To keep a very long story short, the Amazon Seller Central platform allows a brand to be more agile and have greater control. But, this doesn’t highlight some of the situations in which the hybrid model can be leveraged to grow sales and profitability. Let’s look at a few of those use cases below.
Hybrid Model Use Cases
1) New Product Launches
When launching a product on Vendor Central, Amazon Retail typically orders in small quantities, as it is difficult for them to predict near-future demand. Therefore, as a 1P, it is challenging to launch products and quickly increase the sales velocity due to inevitable stock-outs.
As a 3P, a brand could add a new product, providing complete control over inventory, and allowing them to handle quick increases in demand In Seller Central. Users also have more sales acceleration tools at their disposal, including:
- Launching the product at a reduced price
- Reaching out to customers post-purchase via email follow up campaigns to elicit product reviews, seller feedback, and to encourage future purchases
- Creating promotional coupon campaigns to drive traffic from social, email, and other off-Amazon channels to a product detail page
2) Inventory Coverage for 1P Stockouts
As advanced as Amazon Retail’s inventory forecasting algorithms are, Vendors still experience stock outs frequently, and also may struggle to persuade Amazon to order an adequate or greater quantity of product to meet demand.
To combat this potential issue, a brand may offer the same ASIN in Seller Central, providing a safety net for potential stock outs of important ASINs.
3) Higher Profitability ASINs as a 3P
It is no secret Amazon’s wholesale pricing can cause headaches. Depending on the size of the Vendor and demand on a particular ASIN, Amazon Retail may try to negotiate lower wholesale pricing, cutting into profits.
3P profit margins are much more predictable. A brand that feels they should be commanding a higher wholesale price for a specific ASIN could move that product to Seller Central and pause it on Vendor Central. Moving an ASIN to being sold as a 3P via Fulfillment By Amazon will maintain sales velocity and also could be more profitable, given the right situation. Here is a Seller Central profit calculator that can be used to determine 3P profit, which then can be compared to 1P profit.
While it is traditional for 1Ps to solely utilize the Vendor Central platform, a brand is by no means limited to a singular path. For any company determining or reevaluating its Amazon approach, it’s vital to consider the potential upside of a hybrid model.
With careful thought and analysis of the pros and cons of each, brands can create a custom strategy that allows for maximum agility and profit by incorporating both platforms.