Free cookie consent management tool by TermsFeed

Transitioning from 1P to 3P model on Amazon: What Amazon Vendors Need to Know?

amazon1p3p 2

Amazon has recently sent shockwaves through its vendor community. The ecommerce giant has informed thousands of brands that their Vendor Central program agreements will be terminated in early November 2024. 

The news has left SMBs scrambling for a solution that would allow them to continue their operations on Amazon without interruption. 

If your business was affected by the Vendor Central update, we have an end-to-end solution. Read on to learn more about transitioning from 1P to 3P on Amazon and how Webinterpret can guide your business through this transition.

LAST UPDATED ON
BY Zeljko Drazovic

A single email from Amazon has turned the worlds of thousands of vendors on its head. 

The ecommerce giant has recently informed some of its vendors that it no longer intends to source products from them, urging them to become third-party sellers on Amazon Seller Central

The update affects EU-based businesses generating under €5 million as well as US-based suppliers with annual revenues below the $10 million threshold. 

Amazon’s decision to terminate the Vendor Central program agreements with the affected sellers by November 9, 2024, leaves them with a short time window to plan and execute the transition to Seller Central. 

Let’s examine what Amazon’s decision to shake up the vendor program means for businesses and the most efficient ways to transition from Vendor Central to Seller Central.

Key considerations

  • Affected Amazon Vendors must evaluate whether becoming a third-party seller on an Amazon marketplace fits their business model. 
  • Setting up a Seller Central account takes around two months and involves several steps that could prolong the process.
  • Sellers must revise their accounting and logistics processes to adjust to the 3P model. 
  • Businesses transitioning from Vendor to Seller Central must act before the November deadline to avoid potential account suspensions. 
  • Vendors must prepare to cover the upfront costs of creating an account on Seller Central.

The implications of Amazon’s vendor program changes

3pseller amazon 1

Even though Amazon never released an official explanation for terminating its agreements with some of its vendors, reducing the number of vendors in its network allows Amazon to allocate resources better and boost the efficiency of its operations. 

The decision to reduce the number of vendors it collaborates with results from a larger strategy shift. Amazon is moving toward streamlining its operations, focusing on vendors with high revenue volumes and pointing smaller vendors toward the self-serve model or Seller Central. 

The shake-up indicates that some SMBs can no longer rely on the vendor program and have to decide whether they want to continue offering their products through Amazon. 

The timing and the way this decision was communicated to vendors are far from ideal. 

After being informed that their agreements would be terminated in November, sellers were left without further clarification. With Q4 and the holiday season approaching, Amazon failed to leave enough time for its former vendors to plan and execute the transition to Seller Central. 

Suppliers who follow Amazon’s advice and switch to the 3P model will be forced to change their business models and become retailers. Although the transition to Seller Central may initially seem scary, adopting the 3P model presents SMBs with a plethora of opportunities.

The differences between 1P and 3P models

3pseller amazon 2

The transition from a supplier to a retailer can be bumpy if you don’t have a plan in place that will guide your business through this process. 

Understanding the differences between these business models and Amazon’s Vendor Central and Seller Central platforms makes the transition smoother. Let’s go through some of the adjustments an Amazon business must make to adapt to the 3P model. 

  • Accounting: Instead of invoicing Amazon for wholesale purchases, SMBs switching to Seller Central must manage their invoices and reports on their own. 
  • Logistics and inventory management: Switching to Amazon Seller Central can disrupt your logistics process if you don’t want to deliver products to your customers through FBA. Opting for the Fulfilled by Merchant option means you’ll also have to handle the inventory or find a reliable logistics partner and ensure each item is in stock. 
  • Inventory ownership: Once your business transitions to the 3P model, you’ll assume all risk of holding the inventory until you sell it. 

Moreover, choosing to deliver products you sell in your Amazon stores on your own or through a third-party logistics provider enables you to use your company’s branding on the packaging, but only if you can meet Amazon’s shipping requirements. 

Creating and optimizing listings, managing your company’s advertising efforts on Amazon, and handling returns are among the challenges your business could face if you decide to switch to the 3P model.

The benefits of adopting the 3P business model on Amazon

3pseller amazon 3

Independent sellers on Amazon enjoy the full support of Amazon’s infrastructure, which makes it easy to launch new products, sell items internationally, or monitor performance data. 

Although it can be quite an adjustment for businesses that are used to the hands-off approach, joining Seller Central can be a great solution for suppliers who can no longer participate in Amazon’s Vendor program. 

Here’s an overview of the benefits of switching from Vendor Central to Seller Central: 

  • Complete control of the sales process and pricing.
  • Access to a broader range of analytics tools. 
  • Sellers can choose how much inventory they want to list and share inventory on multiple markets. 
  • More opportunities to improve brand recognition. 
  • Option to combine FBA and FBM models. 
  • Creative control over the store’s layout, listings, and content
  • The freedom to choose the brand’s marketing approach. 

Third-party sellers also benefit from Amazon Seller Central’s higher degree of control over all aspects of their operations. Still, choosing to sell directly on Amazon’s marketplace requires much more involvement than acting as one of Amazon’s suppliers.

The challenges businesses transitioning from Vendor Central to Seller Central are facing

3pseller amazon 4

Brands that have operated as vendors for years might initially find selling on Amazon instead of selling to Amazon demanding.

Entering the world of Amazon retail entails thorough preparation and gathering information that will enable your company to avoid the common pitfalls in the process of setting up a new store.

Despite all the advantages Seller Central offers, Amazon vendors affected by the recent changes might struggle to meet all the requirements of running a store on Amazon.  

The reason why switching from 1P to 3P in just a couple of months can be challenging for brands is the lack of resources and infrastructure necessary to list, advertise, sell, and distribute their products. 

Additionally, the costs of Selling Plans, referral fees and additional fees can affect a brand’s decision to start selling their products as independent sellers.

Still, investing in the Professional Selling Plan unlocks access to a wide range of tools, including bulk listing, setting dynamic prices, or tracking orders, inventory, and sales, to name a few. 

The plan also enables brands to register for programs such as FBA, Amazon Ads, and Amazon Currency Converter. 

However, despite having access to a broad range of tools and programs, businesses transitioning to this Amazon platform might find it much more difficult to secure a Buy Box spot for items listed in their stores than before. 

Unlike vendors, Amazon’s independent sellers must provide customer service to their customers, which can be challenging for brands intending to offer products on multiple markets. 

Suppliers affected by Amazon’s vendor clean-up will almost certainly sustain losses during the transition from the 1P to the 3P model, especially if they haven’t used the Seller Central platform before.

How can Webinterpret help your brand adopt the Amazon 3P model?

Webinterpret offers an end-to-end solution tailored to the needs of vendors intending to start operating as independent sellers on Amazon’s domestic or global marketplaces. 

Our solution smoothes the transition from 1P to 3P and increases a brand’s chances of successfully transitioning from Amazon Vendor Central to Seller Central before the November deadline. 

Hence, partnering with Webinterpret can help a brand minimize the losses and avoid a potential account suspension. Here’s how Webinterpret can assist brands with adopting Amazon’s 3P model: 

  • We collaborate with brands as an extension of their teams and don’t place limits on sold inventory quantities or international product pricing. 
  • We guide domestic or international businesses through the transition from 1P to 3P. 
  • We provide support with listing optimization and content creation. 
  • We create and manage Amazon Ads (Sponsor Products, Display and Brands)
  • We help brands increase international sales by up to 30% on average. 

 

Schedule a call to learn more about our end-to-end solution and how our team can help you switch from 1P to 3P without missing a beat.  

About Webinterpret

Webinterpret supports merchants selling on big, international ecommerce platforms, such as eBay and Amazon.

Our AI-based solution enables more effective selling through automated listing localization, advertising, and logistics (shipping and returns).

By giving your international customers a complete end-to-end local shopping experience, Webinterpret improves your conversion and helps establish your business globally.

Zeljko Drazovic
Zeljko is a versatile copywriter dedicated to the task of delivering informative content to Webinterpret's readers. He's also an avid researcher who's always on the lookout for the latest ecommerce trends.
Sign up for our newsletter