If you had no other reason to sell through Amazon, consider that by the end of 2015, the company had about 305 million customers globally.
If Amazon were a country, its population would be the fourth highest in the world, a little under the US, a bit more than Indonesia. Needless to say, that’s a sizeable market that includes 63 million very active users—the Amazon Prime subscribers who spend an estimated US$1200 each every year, more than three times what non-Prime customers spend.
The question for wholesalers and suppliers is how to tap that potential market. Amazon has three platforms for selling to its customer base, Seller Central, Vendor Express and (for those that are invited) Vendor Central. The platforms offer different advantages and tradeoffs, and a certain flexibility in handling inventory and fulfillment that can make the cost of selling through the eCommerce platform feasible.
Seller Central (Individual or Professional subscription)
This is Amazon’s most basic and most widely-used platform. Any individual or business can subscribe to Seller Central to list one product at a time on Amazon Marketplace. This is not ideal for vendors looking to sell in higher volume. It makes more sense for a small business to pay for the Professional seller (or Professional Merchant) subscription, which allows for bulk listings and comes with fewer restrictions on product categories. Seller Central gives higher margins relative to Vendor Express, because the Vendor controls the price. They also control their inventory, and manage shipping themselves, or they can arrange for Amazon to do it through Fulfillment by Amazon (FBA). Your product listing in Amazon Marketplace will be bare-bones, and you won’t qualify for Prime delivery options in a lot of cases.
Vendor Express
This is a better option for suppliers looking to develop a sales channel, turnover higher volume and attract more customers in Amazon Marketplace. Amazon controls the pricing, so you exchange volume for potentially lower than ideal margins. Vendor Express allows you to sell up to 85 items (listed as “Sold by Amazon”) that will all qualify for Amazon Prime shipping deals. Amazon typically asks vendors to supply free items in order to develop pricing, test demand and build better product detail pages, before placing an initial purchase order with you. Amazon buys products directly from you and handles shipping costs, merchandising, customer service, and customer returns. Amazon provides free shipping from your warehouse either to an Amazon fulfillment centre or direct to customers. So, you can maintain control of inventory and shipping, or share the logistics management with Amazon.
Vendor Central
Vendor Central is Amazon’s “by invitation only” eCommerce platform. The company says Vendor Central’s main benefit to suppliers is good cash flow. In this instance, Amazon takes full control of inventory and fulfillment, and in essence functions as a true retail partner as opposed to an eCommerce channel. Vendor Central includes advertising (ie, through Amazon Marketing Services), limitless listings, A+ Content and full access to Prime customers.
A Word About Fulfilment
Selling on Amazon allows you to set up an FBA account, but it requires you to prep your products to be “eCommerce ready” meaning that it can be safely and secuely trasnported to the customers hands. FBA means that you can reduce your inventory by shifting it to an Amazon fulfilment centre, reducing the cost of holding goods. One seller using FBA reports on the Amazon website that it was able to improve its internal operations by moving its 50 biggest selling items out of its own warehouse, making Amazon a kind of third-party logistics partner.
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