The very first consideration for someone trading through Amazon is what trading model is preferable. Amazon operates two very different selling models – Vendor Central and Seller Central. You can choose to sell your products to Amazon as a Vendor, or become a Seller on Amazon to sell directly to consumers (with the option of using Amazon’s fulfilment network). These two platforms are designed to meet different needs and it may appear that they’re not compatible, but there are some unique situations where it could be useful to have a hand in both with a hybrid account.
The Seller Central Model
Let’s start with Seller Central. With this marketplace model, the seller keeps title of their product until it reaches the consumer. Products get to consumers in one of two ways.
FBA (Fulfilled by Amazon) products are sent into the Amazon warehouse and listed on the relevant country Amazon site, where customers will make their purchase. Because the stock is already in Amazon, the customer benefits from same or next day delivery (if they’re a Prime member). The seller pays at least two fees to Amazon. A ‘referral’ or ‘selling’ fee is between 8-15% of the selling price dependent on category. It applies across all products sold through Seller central, regardless of who fulfils the order. The second fee is the fulfilment cost. This is the cost of packing and shipping, defined by weight and size of the product. There are other fees that sellers may pay, such as storage, labelling etc.
The alternative to using Amazon’s fulfilment service is FBM (Fulfilled by Merchant). In this workflow, the supplier retains the stock and sends directly from their facility to the customer. Generally, an FBM product will not have the coveted Prime flag (unless they’re signed up to Seller-Fulfilled Prime). But there are some products for which this model will work best. Some examples might be heavy items, products which are made-to-order or anything with a customisable element. With this option, the seller still pays the referral fee to Amazon, but the cost of boxing, labelling and shipping the item stays with the supplier.
There’s a monthly fee of £25 to sell via Seller Central, but this is open to everyone.
The vendor central model
Over on Vendor Central, the process is more reminiscent of the traditional supplier-buyer relationship. Amazon orders products directly from the supplier using a sophisticated algorithm that predicts demand, then re-sells to the customer. It’s an invite-only programme and potential Vendors will be identified by Amazon directly.
In this model, the supplier is the first-party Vendor and Amazon owns the stock once purchased. This means Amazon have full control over the retail pricing, but they will deal with all customer-service related issues. Once Amazon owns the product, category-specific regulations are triggered and Amazon must comply to these industry rules (e.g. GSCOP).
Amazon’s profit through Vendor Central comes from agreed terms and chargebacks – you can find out more about this here.
Because Vendor Central is more akin to the big retailer relationship, it’s also a more closed system. This means, unlike Seller Central which has dedicated websites and social media groups for users, it can be difficult to find answers to some of the more complicated issues you might come across. There are add-on services that can be bundled into your agreements with Amazon. For example Amazon Vendor Service (AVS) gives a dedicated account liaison and they are often able to help with tricky problems.
A final warning about Vendor Central…remember that Amazon now owns the product? This means they can mess with the content (and they often do!). In Seller Central, you have more control over the content, but so do other sellers. The best way to combat this is with Amazon Brand Registry.
To summarise, here are the major differences between the two platforms:
what does ‘hybrid’ mean in the amazon context?
When we talk about a ‘hybrid’ Amazon account, what we mean is a third way of managing your products through the Amazon platforms. No, that doesn’t mean a super-secret interface hidden in the depths of the internet. It simply means utilising both Vendor and Seller Central to maximise your sales and product range.
reasons for a hybrid approach
There are a few scenarios in which using a hybrid approach may be the logical next step for your business.
You have very different product types within your catalogue
If you have a mix of small and light/large and heavy items, it may be prudent to run both a Vendor and a Seller account so that you can optimise your model for each product type. For example, you might offer bespoke made-to-order picnic benches (Seller Central is best for this), but also sell packs of DIY consumables such as screws and nails, for which Seller Central may not be profitable.
You offer a consistent range of products, but also want to offer something which can be personalised
For example, your brand might sell teabags (high turnover, small and light product). On certain occasions you may wish to offer a special edition tea caddy with the customer’s name printed on the side.
Amazon can be very rigid when it comes to cost price increases through Vendor Central, particularly if other major retailers in your category haven’t yet increased their retail pricing. It may become apparent that the prices at which you’re currently selling are no longer feasible for you as a business. It can be worthwhile in this case to use Seller Central to sell your products and secure your revenue stream.
Due to the Amazon demand-prediction algorithm, it can be difficult to launch new products in Vendor Central. Some accounts will have access to ‘Born to Run’ – the Vendor-Initiated Ordering System which allows you to send in product before there is an identifiable demand. There are limitations to this of course – you must commit to selling a certain volume of product or risk sanctions. For those accounts that don’t have access to this feature, it may be useful to have a Seller account. You can use it list new products, generate the demand, and then switch back to Vendor.
limitations of a hybrid account and when not to use it
First things first – the hybrid model can violate Amazon’s multi-platform policy. The most important thing to remember is that if you choose to use a hybrid model, the product range must be different for each platform. Selling the same product (on the same ASIN) on both platforms could land you in hot water – with Amazon, but also by opening up the potential for cannibalising your own listings. It’s not advisable to use the hybrid model to manipulate pricing or any other part. of the Amazon service, as you could lose selling privileges.
If the hybrid model isn’t tightly managed, it can lead to duplication of products or a messy and confusing catalogue. Before starting, it might be useful to separate your products into two groups defined by the reason you decided to use the hybrid model. One group for Vendor and another for Seller – and manage these separately. One major downside of the hybrid approach is the reporting tools on each platform differ. They cannot be merged to give an overall sales picture.
Your choice of selling model will influence your experience of selling on Amazon. Making a careful choice will help you have control over the things that are important for your business. Often making a straight choice between Seller and Vendor (if available to you) will the the most important decision. There are reasons for using a hybrid model when working with Amazon, but we recommend a cautious approach, ensuring you can manage the additional workload that running two Amazon selling accounts will generate.
It’s important to follow the guidelines above and, as always, keep up to date with developments in the Amazon world in order to ensure both businesses are getting the most from your relationship.