Did you know that you don’t have to use Amazon as just a sales channel? It’s actually possible to sell directly to Amazon via their platform of Vendor Central. But how much does it actually change for your business?
Obviously we’ve prepared a full breakdown for you. Maybe your business is perfectly designed for Vendor Central, or perhaps you need a few changes before you can sell directly to Amazon? Or maybe 3rd party selling on Amazon is the best choice for your business.
Don’t worry about size either. Businesses that sell directly to Amazon don’t have to be large, SMEs are perfectly capable of accessing Vendor Central, as long as they meet certain criteria.
But before we get into the advice, let’s break down the bare bones.
What is Amazon Vendor Central?
Vendor Central is the interface used by businesses that sell directly to Amazon. The entire interface is similar to Seller Central and you can view Invoices, Purchase Orders, Inventory etc.
An Amazon Vendor is a business that uses Vendor Central to manage their dealings with Amazon. The key difference between an Amazon Vendor and an Amazon Seller is that instead of selling to customers through Amazon, Amazon purchases your products from you.
As you sell your products directly to Amazon in bulk at wholesale prices, Amazon will then repackage and whitelabel your products under the Amazon Retail banner and sell onto consumers.
Amazon Vendors also have access to certain Vendor only tools, but we’ll examine that in a moment.
How Can I Sell Directly to Amazon?
In practice, the act itself is simple. After all, you can manage large bulk orders and have fewer things to worry about such as delivery and customer service.
However, in practice it’s a little more complicated.
Vendor Central is Invite-Only!
Yes that’s right, with great potential comes great entry requirements, and you don’t simply create an account for this sort of thing. Vendor Central has to be earned. Amazon Sellers can’t even apply to become Vendors. You have to wait for a Vendor brand manager to contact you.
So you’re probably asking yourself…
How Can I Become an Amazon Vendor?
You have to stand out. But how can you stand out in the crowd?
Well there are certain criteria that every Seller must hit if they want to become a Vendor and sell directly to Amazon. Achieving one of these criteria makes you good. Achieving more will make you Vendor Central material. You must be:
- An existing Seller with an extensive record of successful sales with your own products with marginal 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.
In an effort to maximise your Seller business on Amazon, you’ll likely need one of two tools (or even both!)
- A Product Finder for comprehensive product pricing analytics, marketplace comparisons and a chance to win the Amazon Buy Box.
- An Amazon Seller tool that deals with inventory management, gives in-depth reports on Amazon fees and can automatically reprice items to increase efficiency.
What are the Advantages to Selling Directly to Amazon?
The Pros If You Sell Directly to Amazon:
We love bulk orders. Who doesn’t?
It’s much more convenient to send 50 units of product to a single destination than it is to single handedly prepare, package and send 50 units of products to 50 different destinations. It’s quicker, easier and looks far nicer on those invoices…
You may love your product and your brand, but cashing in on a large brand like Amazon can do wonders for your sales metrics. Amazon will sell more of your items than you ever could simply because they repackage your items as “ships from & sold from amazon.com”. Millions of customers trust the Amazon brand and place 18.5 orders a second. Don’t look a gift horse in the mouth!
Customer Service Handled
When someone didn’t read the description – not your problem. If the delivery service damaged the item – not your problem. Someone ordered a product after a few too many drinks and no longer wants it – not your problem!
If you sell directly to Amazon you are no longer responsible for customer service. Amazon has dedicated teams of professionals to manage this thankless task. Once your goods are delivered to Amazon, it’s their problem!
Win the Amazon Buy Box
For those who sell directly to Amazon, the Buy Box is a near certainty to win.
Even if you enlist in the FBA program, each Seller still has to display extraordinarily calculated intelligence to win a share of the Amazon Buy Box. However, if you sell directly to Amazon you have a home team advantage.
Amazon Retail almost always wins the Amazon Buy Box. You can like it or not, but the fact remains that your products will sell more via Vendor Central.
Better Target Audience
Every business loves an impulse buyer, and Amazon has cultivated an entire segment of them in one place – Amazon Prime.
These customers are prevalent purchasers. With the advantages that Prime offers its members, these users are more than happy to order multiple times a week – especially after a glass or two – there’s a reason they call it wine & prime!
Once you sell directly to Amazon, your products are eligible for Amazon Prime and will take priority when it comes to product listings. This puts your products nearer the top of searches, under the “suggestions” box and showcases your products to consumers who are prone to impulse purchases.
You can’t ask for much more than that can you?
The Cons if You Sell Directly to Amazon
Smaller Profit Margins
You may be selling in bulk, but you’ll also be selling at a smaller profit margin. In principle you will make more, as your products will sell more through the Vendor Central program, however you do sell your items at wholesale price to Amazon. Just make sure to factor that into your calculations when it comes to your financial planning.
For Vendors who sell directly to Amazon, you’ll have to wait a little longer before getting paid for your large orders. Amazon’s Vendor Central payment system runs for periods of 30, 60 or 90 days before you get paid.
If you opt for the 30-day method, Amazon can actually reduce the payment by a small amount for their troubles, so most Vendors opt to wait for the 60-day payment method. It’s not exactly a drawback, unless you are operating on a very narrow profit margin with little liquidity to keep your business afloat.
Oh, this one deserves its own article – a full list of Amazon Vendor Chargebacks and Shortages!
But in short, chargebacks and shortages are potential financial sanctions that Amazon will use against you if you do not perfectly comply with their standards and regulations. These can range from mistakes on a Purchase Order, to incorrect packaging of items or mislabelled units.
The charges can vary from anywhere from 3% of the cost per unit up to 25% depending upon the severity of the infraction, and your previous Amazon compliance score.
Can I Reduce my Vendor Costs?
There is one field in which you can significantly reduce your Vendor costs. While you can’t negotiate profit margins with a giant like Amazon, and neither can you reduce the compulsory fees such as marketing, you can reduce chargebacks and shortages.
VC Managed Service is a tool designed to not only reduce your chargebacks and shortages, but provide technical, actionable advice to improve your supply chain and production.
Where chargebacks are entirely valid, VC Managed Services will highlight the areas of manufacture that need to be attended to. This tool will also raise awareness of potentially problematic products before they are packaged and prepared to nullify any technical chargebacks in that area.
Best of all, it records all your evidence and automatically disputes chargebacks and shortages through Vendor Central. Frequently, many chargebacks and shortages are actually the fault of Amazon and not the business selling directly to Amazon.
The problem is that automated systems believe that exceptions to the rule are infractions, despite that not necessarily being the case. With VC Managed Service, Vendors are saving thousands on unnecessary charges every single month!
Is Vendor Central Better Than Seller Central?
Each and every business has a slightly different setup. Profit margins, supply chains, inventory, manufacture, all of these play a part in deciding between Seller Central, or selling directly to Amazon.
Generally speaking, Vendor Central is better for more successful businesses.
That doesn’t mean bigger businesses. It means businesses that are performing well, have high demand and are on the rise.
If you are looking to expand your business to meet vast quantities of orders, then Vendor Central is ideal for your business. Whereas if you have a steady stream of expensive orders with a high profit margin – then perhaps there is no need to. After all, you may just sign up for Vendor Central to find that your profit margin has lowered, without a significant boost in sales!
Are you Going to Sell Directly to Amazon?
It’s a big decision to make once you get that invitation, so make sure that you have weighed up the pros and cons and decided to do what’s best for your business in the long run.
Whether you decide to sell directly to Amazon or stick with Seller Central, make sure to get the best eCommerce guides around. Make sure to continue your business cutting edge eCommerce tools that support, reinforce and improve your supply chain from start to finish.
Got any questions on how to improve your efficiency in business? Make sure to contact one of SuperDisty’s specialists and get leading, professional advice from one of our experts!