Which is better Vendorcentral or Sellercentral?
Another way to ask is “Do I become a seller on Amazon and sell directly to Amazon customers or do I become a vendor to Amazon and sell to Amazon?” This is a question that gets a different answer depending on who’s asking. You’ll also get a different answer depending on who’s answering. Nothing in life is simple and doing business on Amazon is far from simple. Let’s dig in and study the subject from different perspectives.
If you are a seller of products (or a wholesaler/distributor or a retailer)
It’s time to start selling on Amazon through Sellercentral. The primary reason is margins. If you’re simply sourcing products from vendors and reselling them, it will be hard for you to be competitive enough to sell to Amazon at wholesale prices and make money. On the other hand, if you know what to sell on Amazon and how to sell on Amazon, you can generate significant revenues at a healthy profit margin.
Sellercentral is definitely the business model for sellers of products though it comes with its challenges. Operating an Amazon Seller Account is not easy. We’ve covered some aspects of operating a Sellercentral account previously from Getting Started to Selecting Items to studying the Amazon Buy Box. Amazon will track every aspect of your performance when you become a seller. If you fall below the standards they set for you, you’ll be given the opportunity to appeal and if successful, you can continue selling, however your failures will be part of your record and it will affect your long-term success.
A common misconception is that if you are generating significant revenues on Amazon, that makes you a successful seller and Amazon will have different standards for you. This could not be further from the truth. Amazon, the world’s largest marketplace, does not care about how much revenue you generate. They care about how strong your seller account is, how strong your performance metrics are and most importantly, what type of customer experience you’re providing. These are things that matter to Amazon and if you are pushing revenues while neglecting the rest of your account performance, you’re taking a major risk and may lose your selling privileges permanently. Since operating a seller account is not the subject of this article, I will move on for now, but feel free to reach out if you have questions on operating a seller account.
Finally, if anyone recommends becoming a vendor to Amazon rather than a seller, do not buy into it. Even if Amazon invites you to become a vendor to them, you will either soon lose your own vendor relationships because Amazon will buy from them directly or simply lose in price wars.
If you are a manufacturer or a private label owner
This question gets different answers depending on different scenarios. So, let’s dig in with the type of answers you get and then look at the winning formula.
The distribution model for a manufacturer or a private label owner is usually to sell thru a supply chain. That may be either thru retailers and/or wholesalers. So, when Amazon comes knocking on the door and invites you to become a vendor, the choice is obvious. Why not? Besides it is impressive to receive an invite from Amazon. Naturally, management goes with it and joins Vendorcentral and becomes an Amazon Vendor.
This decision may not be in your best interest, it depends on the following two questions:
1. Are your products already listed on Amazon and being sold by other Amazon sellers?
If the answer is NO, do not bother becoming a vendor. Amazon will only give you a Purchase Order (PO) if your items are selling. If your listings do not even exist, it will be a long time before you receive a PO from Amazon and even then, it will be a fairly small PO.
If the answer is YES, then check the Best Seller Rank (BSR) of your listings. If you would like to know how to find it, check out Interpreting the Product Details Page .
- Your items have high BSR: If the BSR of all of your listings are 15,000 or better (lower the better i.e Top 10), you can become of a vendor to Amazon and enjoy the benefits. If you have many items, check the BSR for every item listed on Amazon. If only a few of them have the qualifying BSR, then it is not worth it since those are the ones that will produce POs for you. It will be a long time before you get POs for the rest. This is a scenario that is the same as having items with low BSR. See Paragraph b below.
At the same time, there is another legitimate question to ask for manufacturers, whose listings have high BSRs. Wy would you want to leave money on the table by letting Amazon take the top line revenue? They don’t do anything other than simply fulfil the orders for your items and give you a PO. Their exposure is minimal. Since your items are already in demand, why not set up a seller account and use Amazon’s FBA service to have them fulfill the orders. You would basically continue the same operation by shipping to Amazon in bulk while taking the top line revenue. Except in this case, you would also set any price you want for your items rather than let Amazon control the price.
If you are a current Amazon vendor and love it so much, you can even split your items and decide to sell some of them thru Vendorcentral and the rest as a seller.
Bottom line: It pays handsomely to restructure your infrastructure a little to service a seller account even if you’re a current Amazon vendor.
- Your items have low BSR: If the BSR of your listings are less than 15,000, here is what is likely to happen:
• You will receive POs of mediocre size from Amazon
• Your POs will infrequent
• Amazon will slash the selling price of your items regardless of any MAP pricing you may have in place.
I would highly doubt that you would find this a desirable scenario. In this case, it is best to become a seller and use our Winning Formula below.
2. How important is price control for you?
When you become a vendor to Amazon, you will be asked to sign a MoA (Manufacturers on Amazon) Agreement, which basically says you must offer Amazon the same price you offer your supply chain. The catch is that your supply chain may preserve your MAP pricing and allow you to maintain some control over your pricing. That will not be the case with Amazon. Amazon’s philosophy and the vision is to sell everything at the most competitive price to everyone. Their algorithms are designed to automatically apply heavy discounts to items if they are buying them directly from the manufacturer. They call this “Website Behavior”.
If you view an item on Amazon, where Amazon has the Buy Box and other sellers are also listed on the same item, you will find a huge price disparity between Amazon and the next seller. For example, if the next seller’s price is $91.65, Amazon’s price is likely to be less than $80. This is because Amazon wants to maximize sales on every item and do not care about Brand Equity or MAP.
So, if you care about the price of your items and want to have control over them, there is no question that becoming an Amazon Seller will give you that control.
The winning formula for manufacturers with items of No or low BSR
If you have your product line and you want them sold on Amazon without having to deal with shipping orders or customer service issues the business model, without question, is to become a Seller on Amazon and use Fulfilment by Amazon (FBA). By becoming a Sellercentral customer and having Amazon fulfill your orders, you continue shipping items in bulk to Amazon Distribution Centers while having 100% control over your pricing and collecting the top line revenue.
This is still not enough. You will need to work on your items’ BSR. The popularity of your items will drive your revenue. So, you work, promoting your listings externally through paid search. The only difference between driving traffic to your Amazon listings thru paid search and driving traffic to your website is that after a while, you get the BSR to start working for you, thus scaling your revenues without spending any advertising dollars. Included in such paid search is the Amazon Ads that you get to see on Amazon pages, which tend to be highly focused and cost effective. Unlike Google, it does not drain your budget.
By combining a well-managed Seller Account and an effective, ROI sensitive, paid search campaign, you would get the best of both worlds. In other words, sell at retail price, which delivers healthy margins without having to deal with customer service and order fulfillment. In short, this is how you have your cake and eat it.
About the Author:
Nick Uresin is the Founder and CEO of ArgoMetrix, a New York based software and consulting company established in 2013. Nick is an Entrepreneur, Electronics, Communications and Computer Science Engineer, who has a passion for problem solving with technology. Nick built an online retail company with annual revenues of over $10 million. He developed his vision to organize the knowledge and technology he developed to become a large Amazon Seller and provide it as a service to manufacturers and sellers of consumer products. Let's get social! Follow us and get ArgoMetrix's latest updates on Twitter, Facebook or LinkedIn.
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