To become a Vendor on Amazon is no small thing. It takes time, it takes exceptional skill, and it isn’t always for every business. There are many businesses that do absolutely fine working on Seller Central.
But for those who do become an Amazon Vendor – the pay-off is incredible.
Enormous orders, greater market penetration, more accurate financial forecasting and much more. Not to mention that your products (through Amazon) will appear more often in that Amazon Buy Box which consumers and businesses alike love so very much.
So let’s talk through the benefits and drawbacks first, then we’ll discuss what it takes to become a Vendor on Amazon.
The Benefits Of Becoming A Vendor On Amazon
- Less Hassle
- The Amazon Buy Box
- Enhanced Product Reputation
- Qualified Target Audience
- Customer Support Handled
The Drawbacks Of Becoming A Vendor On Amazon
How To Become A Vendor On Amazon
How You Can Achieve These Requirements
After You Become A Vendor On Amazon…
The Benefits Of Becoming A Vendor On Amazon
Where to start? Once you become a Vendor, you have access to an enormous range of advantages. Your business will scale up, and your profits along with it.
Less Hassle
As an Amazon Vendor, you sell your products wholesale to Amazon, and Amazon then distributes them under first-party selling. This is ideal for businesses who want a greater number of orders and engage in less hassle. After all – one bulk order compared to many separate orders can cut down on a MOUNTAIN of paperwork.
While Amazon FBA essentially does the same thing for Amazon Sellers, it isn’t quite as effective as Vendor Central. Sellers in the FBA program still have to pay multiple Amazon FBA fees for storage, postage, packing and much more.
In a nutshell:
- Amazon sends you a Purchase Order detailing the inventory that Amazon wants to purchase.
- You send the inventory to Amazon.
- Amazon sends payment (minus any Amazon chargebacks and shortages.)
The Amazon Buy Box
If you’ve ordered anything from Amazon, you will have used the Amazon Buy Box to make a purchase.When you scrolled through Amazon for a particular product, you saw certain products listed as “In Stock, Shipped and Sold by amazon.com” (or something like the image on the right.)
Around 82% of Amazon sales are made through this Buy Box, and it’s closer to 90% on just mobile devices. That is why every business through Amazon aims to win the Buy Box.
While it is possible for you to win the Amazon Buy Box as an Amazon Seller, it requires time, effort, planning and careful price handling. However, once you become an Amazon Vendor, you have a major advantage.
Amazon Retail tends to win the Amazon Buy Box more than any other third-party sellers. Their repricing strategies and inventory management (thanks to their home-team advantage) ensure that they consistently own the largest share of the Buy Box at any given time.
As a Vendor – your products are being sold by Amazon Retail. You gain the best selling spot for a business without any of the nitty-gritty details that Amazon Sellers have to deal with.
Enhanced Product Reputation
In the minds of consumers, Amazon Retail > Third-party Sellers.
It is due to a number of factors including Amazon’s return policy, their customer service and their brand-building. Even if two products are the exact same price and specifications, sales from first-parties appear more trustworthy than third-party selling.
Despite Amazon Retail’s products coming from Vendors, customers still trust in the Amazon name. Your products will come under that umbrella of integrity and quality that drives sales.
Qualified Target Audience
We aren’t talking about gender, age or interests, no. Amazon Vendors have direct access to Amazon Prime members.
Your products are automatically listed under the Prime program. These members that pay for Amazon Prime are not only more likely to make purchases through Amazon than non-prime members, but they are also more likely to purchase Amazon Prime products over non-prime alternatives.
You’ve heard of the phrase “Wine and Amazon Prime?” Essentially you have enthusiastic consumers, ones who are all too happy to make impulse purchases left, right and centre. To make matters even better, did we mention that there are 200 million of them scattered across the globe?
Customer Support Handled
As we know the customer is always right (or is that the other way around?) This means that customer support is often a taxing, thankless task. You deal with irate customers who may or may not have ordered from your company at all, and have to explain why the product that they ordered two hours ago hasn’t been delivered.
Once you become a Vendor on Amazon you don’t have to deal with that.
You can happily write that down under “not my problem.” Your only focus is to maintain a sufficient inventory for each Amazon Purchase Order that they send to you.
The Drawbacks Of Becoming A Vendor On Amazon
While Vendor Central is an amazon opportunity, there are some issues that you should be aware of. All those Amazon Seller problems that you were used to before are either gone, or drastically altered.
Once you become a Vendor on Amazon, you’ll discover that, despite cutting out a great deal of the nitty-gritty parts, there are in fact a few obligations that Vendors have to stick to.
Extra Fees Once You Become An Amazon Vendor
Oh wait, they aren’t “fees” because that has negative connotations, so Amazon dubs them “allowances.” However, if it looks like a duck, walks like a duck and sounds like a duck – it’s probably a duck.
Once you become an Amazon Vendor, your job is to:
- Fulfill Amazon purchase orders
- Provide up-to-date shipping information
- Product Information Updates, eg: images, prices etc.
These are your essential obligations as a Vendor, but let’s have a brief look at these “allowances” that you should bear in mind.
- Fees
- Vendor Chargebacks and Shortages
- Damage allowances (approximately 2%)
- Market Development Funds – find out more below
- Potential access to Premium Vendor Services including:
- Amazon Vine
- A+ Content
- Amazon Retail Analytics Premium
- Shipping Costs / Freight Allowances
- International Shipping / Return Shipping
- Taxes and Duties
- Currency Conversions
Although admittedly, some of these are only necessary when it comes to international shipping.
Market Development Funds
These type of “allowances” are a vague type of fee, so we decided to create its own section.
“Market Development” is a wonderfully ambiguous umbrella term that Amazon came up with for their behind-the-scenes work. It covers catalogue management and marketing initiatives Amazon employs in order to promote and encourage product sales.
This “allowance” is usually around 10% with some occasional variances.
Delayed Payment
As an Amazon Seller, you deal with small volumes of order (unless you’ve ramped up with Amazon FBA) therefore you receive small, but regular payments.
As you work on a Wholesale basis with Amazon, your orders will be much larger, but so will that wait for payment.
Once you become a Vendor on Amazon, make sure that your business plan does not expect an immediate windfall. Amazon Vendors are on one of three payment plans with Amazon.
- Net 30
- The quickest form of payment from Amazon to Vendors. Vendors receive payment after 30 days. However, as this is the “express” option, Amazon gives themselves a 2% discount.
- Net 60
- The most common payment plan for Vendors is this one. Vendors receive full payment after 60 days.
- Net 90
- On this plan Vendors receive payment after 90 days.
How To Become A Vendor On Amazon
Step 1: You don’t. Amazon invites Sellers to become a Vendor on Amazon.
Yes, Vendor Central is an exclusive program only available to promising merchants.
That doesn’t mean that you can’t maximise your chances to become a Vendor on Amazon. In fact, Amazon has an entire workforce dedicated to seeking out exceptional Sellers. If you want to increase your odds of becoming a Vendor on Amazon, you need to be:
- An existing Seller with an extensive record of successful sales with your own products and little-to-no errors.
- A business with exceptionally high demand for your products.
- An exhibitor with products that Amazon believes have high-selling potential.
You’ll need to exercise a flair for business and unique product creations in order to effectively become an Amazon Vendor. So the easiest opportunity to become a Vendor on Amazon is to increase your effectiveness as an Amazon Seller.
How You Can Achieve These Requirements
To maximise your potential as an Amazon Seller (and thus become a Vendor on Amazon) you need to take advantage of the latest eCommerce tools available.
Seller Central Connect is the most advantageous way to increase your chances. As part of the latest eCommerce technology, Seller Central Connect accurately completes tasks with automation, allowing you to focus on bigger decisions.
Seller Central Connect is a tool that can:
- Bulk upload your entire catalogue
- Automatically alter pricing to win the Amazon Buy Box
- Provide clear profit and sales information
- Synch order metrics and customer data
- Increase your operational efficiency and streamline work processes
It automates the tasks that take away from your more valuable work processes. With Seller Central Connect you can focus on providing a more productive, professional, proactive business while selling through Amazon. It builds up your performance score over time so that Amazon can notice your potential.
After You Become A Vendor On Amazon
Finally, once you’ve been invited to the program of Vendor Central, you are going to need some different tools. Ones with different priorities and functionality.
Most of all, you have to watch out for Vendor Chargebacks and Shortages. These are tiny fees that Amazon will call you out on for every single order, for a variety of reasons. One or two won’t harm your business, but as they grow and grow, your profits reduce more and more. The biggest issue is that most of the time – Vendors can be charged for things they shouldn’t be.
That is why we created VC Managed Services, a tool designed to reclaim revenue and maintain your profits by automatically appealing chargebacks and shortages. You can regain those profits month-by-month while strengthening your supply chain. Best of all, it operates on a monthly rolling basis – so you’re not worried about being locked in!
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