Amazon 1P VS. 3P: What Is The Difference?
Do you understand the meaning of 1P and 3P on Amazon? These two sales models have different emphases. But they both have to give some operational control to Amazon. If you plan to do business on Amazon you must understand the following information well. In this article, I will discuss the definition and differences between 1P and 3P, as well as their respective advantages and disadvantages, and provide you with strategies to move from 1P to 3P on Amazon. I believe you can choose the sales model that suits you better after reading this article.
What is Amazon 1P?
1. Amazon 1P: Vendor Central
If you are a 1P seller, it means that you are selling products to Amazon. The transaction occurs only between you and Amazon, as a wholesaler and a retailer, respectively. However, to become a 1P seller, you need to be invited directly by Amazon. The process begins with Amazon sending a purchase order, which you fulfill by shipping the product to them.
As a 1P merchant, you will lose ownership of the pricing of your product. You also have partial freedom to promote sales. When it comes to liability, manufacturers need to be responsible for their products to the end. Almost all retailers require their manufacturers to carry liability insurance. Amazon is very strict with merchants when it comes to technology and requires them to have insurance.
2. What are the Pros and Cons of 1P?
- Amazon orders a large volume of products.
- Customer confidence in 1P ASIN is significantly increased due to brand recognition.
- The product detail page made by the Amazon team has been optimized.
- Diversified advertising options
- Logistics issues are guaranteed.
- Inventory risk is almost non-existent.
- You will lose pricing power and branding power over your products.
- Since you are selling wholesale, your profit margin is lower.
- Payments are made at more distant intervals, usually once a month, sometimes at longer intervals.
- Non-compliance with purchase orders may result in the rejection of payment.
- Your inventory is completely dependent on the purchase order.
What is Amazon 3P?
1. Amazon 3P: Seller Central
If you are a 3P seller, Amazon provides you with a platform that will get your products noticed. At the same time, you can freely choose the delivery order, such as FBA, FBM, or SFP.
1P sellers deal with Amazon through Vendor Central, while 3P sellers own Seller Central. 3P Amazon sellers can choose between two seller accounts: Personal and Professional. With a more comprehensive feature set, most sellers choose the latter. You can set up multiple accounts to grow your business within legitimacy.
2. What are the Pros and Cons of 3P?
- You take control of your pricing.
- You have the freedom to define how your brand is presented.
- Better profit margins.
- You can get better protection through brand registration.
- You can use the data to better position your products.
- You will bear all the inventory risk.
- You are responsible for your own order fulfillment and product promotion.
- Using the seller central portal requires a larger expense.
- You need to cover some of the extra costs yourself.
- You need to have your own team of professional customer service professionals.
How does 1P Compare to 3P?
1. Brand Identity
1P sellers do not have the autonomy to build your brands. You can provide your ideas and resources before Amazon makes a decision. You will have no control over your product listings or prices.
The opposite is true for 3P sellers. All product marketing is in their hands. You are responsible for your entire Amazon strategy, considering all aspects of your branding, product optimization, etc.
1P sellers can grow their business in other markets. However, if one store sells for less than another, you may be at risk of being delisted. In other words, 1P sellers can only sell in a single e-commerce store. As a result, you reduce the opportunity to increase your profits.
3P sellers control their pricing. Therefore, they won’t risk delisting because they offer cheaper deals on another site. In addition, they are free to enter new markets.
3. Time and Money
1P sellers can better carry out their new Amazon business. It takes more time and effort. 1P sellers don’t have that hassle, but relying too much on Amazon can reduce profit margins.
3P sellers still need to do a lot of work by themselves with the assistance of FBA. Then there’s inventory management, marketing, and customer service. It sounds complicated, but the more you pay the higher the profit margin.
How to Move from 1P to 3P on Amazon?
- Set up Listings
You should give a list of your plans, which should include photos of your products and reviews, etc.
- Invest in Marketing
Budgeting for your own marketing will help you solve potential sales declines and drive your sales business forward.
- Use FBA
When you plan to grow your business to other online shopping malls, you can still choose FBA, which will make your logistics business more convenient and affordable.
- Partner with a Prep Center
This will reduce your workload. The packaging, labeling, inspection, and picking of your products will be handled by the partner center, so you can enjoy the convenience without reducing your profit margin.
- Set Up eCommerce Management
Have the right software and resources to better track inventory, allowing you to adjust fulfillment strategies in real-time to better meet sales needs.
- Establish Customer Service
You need to have a professional customer service team to handle returns and customer complaints. Doing so will give the product a more three-dimensional positive image.
In short, 1P is more dependent on Amazon to fulfill its business. That is, you give up almost all control over marketing and sales. 3P will deal with pricing, logistics, operations, and customers. But you have control of the business and the freedom to scale. We have now compared the Amazon 1p and 3p sales models. There are pros and cons to both, and ultimately you will have to choose the business model that best suits your needs. If you want to learn more information, you can contact us.
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