28 Mar-2016

Amazon Vendor Central & Vendor Express: Is it Right for You?

In recent months several Amazon merchants, who are also the manufacturers and designers of the products they sell, have asked me if they should just sell their products to Amazon and let Amazon be their distributer. What these merchants are really asking is if I would recommend them to use Amazon Vendor Central or Vendor Express. If you are a manufacturer with your own line of products and are new to the Amazon marketplace, this looks like an attractive option for two major reasons. For one, you don’t need to spend your time and energy learning how to navigate the challenges associated with being a successful 3rd-party seller. Ask any seasoned Amazon merchant and they will tell you that their success didn’t come over night as there were a lot of mistakes made until they established their best practices to continuously turn a profit. Second, nobody can beat Amazon at selling things on Amazon so being a 1st-party seller and letting Amazon manage the listings, content, promotions, sales, returns and customer service gives confidence that the online retail aspect of your business is in good hands.

On the Vendor Central website, Amazon lists several reasons why you should sell them your products at wholesale prices and let them be your distributer. Below I break down Amazon’s alleged benefits and comment on how advantageous they actually be compared to if you just used Seller Central with Fulfillment by Amazon (FBA):

  • Amazon says: “Increased Conversion – Your products will be eligible for benefits that drive customer demand, including free shipping for Prime members.”
    We say: If you use FBA your items are also eligible for free shipping for Prime members.
    Verdict: Weak benefit
  • Amazon says: “Trusted Brand – Customers can buy your product with confidence on Amazon.com, knowing that we take care of packing, delivery, customer service, and returns.”
    We say: If you sell on FBA, Amazon also takes care of these things. Shoppers buy with confidence all the time from all sorts of sellers. They don’t need to see that Amazon is selling the item to have faith in the transaction, especially if you have great seller reviews. If you are a new seller with no seller reviews perhaps shoppers will be wary but Amazon is very customer-centric and the shopper should know that Amazon has their back if the transaction goes awry.
    Verdict: Reasonable benefit if you are a new seller with no credentials. At the start Amazon could probably sell more under their name than you could sell yourself as a new seller but we all started at zero and eventually you would want your own account. If you are a seasoned seller, this is a weak benefit.
  • Amazon says: “Premium Marketing – Get access to Holiday Gift Guides, Lightning Deals, Gold Box Deals, A+ enhanced marketing content, brand stores, and Vine.”
    We say: These are pretty strong marketing features that are going to give a lot of exposure to your products. The Lightning Deals and Gold Box Deals will give customers special prices on your products but since Amazon bought the products from you, their diminished profit margins aren’t your problem. With Vine, Amazon will give top reviewers your products for review. While the added marketing features are attractive, we are not convinced that Amazon A+ content will increase conversions. You must be a member of Vendor Central or Vendor Express to have A+ content on your product page. While a page with A+ content looks a little more sleek and professional, the only notable differences between A+ content and regular content is that A+ content includes a company bio and you can also have a short movie where the product images are displayed.
    Verdict: Overall good benefits. The added exposure always helps and several of these marketing programs are invite only. Most merchants I’ve talked to haven’t been impressed with A+ content however and they disagree with the 3-10% sales increase that Amazon touts for the service. The video on the product page could be huge though if you manufacture something where a demonstration could go a long way in enticing the customer to a sale.
  • Amazon says: “More Sales Channels – Reach the millions of business customers already shopping on Amazon Business.”
    We say: When you sell on Amazon Business you are able to offer business-only prices as well as bulk prices. Amazon’s goal here is to attract procurement professionals in various fields. This is a great sales channel if you manufacturer restaurant or hotel supplies/ equipment, raw materials, construction equipment, healthcare/ laboratory consumables, etc.
    Verdict: Weak benefit. While selling on Amazon Business can be very lucrative to the right manufacturers, you do not need to be a Vendor Central member to sign up.
  • Amazon says: “Simplified Order Fulfillment – No more individual customer orders. Purchase orders are placed once per week and shipped in bulk to Amazon fulfillment centers.”
    We say: If you use FBA, you also only have to send your products to Amazon periodically.
    Verdict: Weak Benefit
  • Amazon says: “Detailed Analytics – Learn more about your customers with detailed sales and operational metrics, traffic, and geographic sales analysis.”
    We say: This is an odd “benefit” of Vendor Central. The reason you have Amazon sell your products for you is so they can look at the data and adjust their strategy accordingly. The information of who is buying your products is of course interesting but if you are using Vendor Central it’s because you don’t have the time, resources or desire to interpret data and adjust your business plan for the retail aspect.
    Verdict: Irrelevant Benefit

If the above “benefits” aren’t enticing for you, or if you don’t have a Vendor Central invitation, Vendor Express is another option. There is no invitation required for Vendor Express and you have the option of having Amazon pack and ship your items for you or doing it yourself. All returns go to Amazon’s warehouse however. Vendor Express does not offer the same level of services that Vendor Central does. Vendor Central has more personalized and responsive support as well as more access to different marketing strategies and analytics. Vendor Express users still get A+ content on their product page and their products are Prime eligible.  With Vendor Express you are also required to send Amazon free samples of your products. The amount of free products requested seem to depend on their value. Amazon might request 20 items that are worth $6 and 2 items that are worth $100.

One other major issue with both Vendor Central and Vendor Express is that Amazon is not obligated to adhere to your MSRP. You can request that they sign a contract agreeing to sell at your suggested retail price but it is unlikely they will agree. Amazon likes to have the lowest prices on the internet and they will make sure that they sell your products for less than other sites. This will also create problems for other retailers who sell online, especially if they already sell on Amazon. When Amazon sells your products, your other retailers automatically lose the Buy Box.

To determine if Vendor Central or Vendor Express is right for you, you need to decide how much control you want to have over the way your brand is represented and sold online. If you would rather focus on the designing and manufacturing of new products under your brand and want to have a hands-off approach to distribution and customer care, the Vendor services are a good way to go. However, a lot of sellers, myself included, prefer the control and higher margins that come with managing your own Amazon sales. Several aspects of Vendor Central and Vendor Express are also available if you use FBA. To sum up, if your answer is “yes” to any of these questions, you may want to stick with or sign up for Seller Central and FBA:

  • You currently sell on Amazon and have a good working knowledge of the platform
  • You have good, lasting relationships with your retailers who sell on Amazon (Hearing that Amazon is also selling your products won’t be welcome news)
  • You sell on Amazon and you like interacting with customers, controlling the price of your products and the way they are portrayed on Amazon
  • You currently benefit from strong sales on your own webpage and/ or Ebay, Houzz, Rakuten, Etsy, etc.

Conversely, if you answer “yes” to any of these questions then you may want to give Vendor Central or Vendor Express a try:

  • You make a great product and know there is an Amazon gold rush going on but you don’t have the time or desire to learn about the best-practice approaches to being successful on the marketplace
  • You have a brand new product that hasn’t hit the market yet and you are too busy working on the next product to worry about distribution and retail
  • You are a small design or manufacturing company and want to test the Amazon waters before you get an online sales & marketing force

 

Patrick M.
Amzaar.com