Vendor vs Seller Central on Amazon
The Key Differences Between 1P and 3P on Amazon and Hybrid Models
On Amazon, there are two primary ways for sellers to do business: Vendor Central (1P Vendor Model) and Seller Central (3P Seller Model). Each model has its own benefits and challenges, and some brands use a Hybrid Model to get the best of both worlds.
Vendor Model - First Party 1P Sellers
In the Vendor Model, the seller acts as a supplier, selling products wholesale to Amazon who then sells them to customers.
The benefits to this model include:
Amazon Manages Fulfillment and Customer Service: Amazon buys products in bulk and stores them, and handles shipping, returns and customer service inquiries.
Trusted by Customers: Products are shown as “Sold by Amazon” which can help boost consumer confidence in where the product is coming from, supporting conversion rates.
Simplified Operations: Brands don’t have to manage direct customer interactions, pricing or fulfillment logistics.
However, this model also has its own challenges:
Less Control over Pricing and Promotions: Amazon sets the final prices of the goods. This can impact brand positioning, perception and pricing across other marketplaces (e.g. DTC, retail stores).
Lower Margins: As sellers have sold their products to Amazon at wholesale prices, margins may be slimmer compared to direct selling.
Strict Purchase Orders and Inventory Control: Amazon decides order quantities and unpredictable restocks can cause out-of-stock (OOS) or overstock situations.
Seller Model - Third Party 3P Sellers
In the Seller Model, the brand sells directly to customers on Amazon, managing their own inventory, pricing, and fulfillment either themselves or through FBA (fulfillment by Amazon).
Some benefits to this model are:
Full Control over Pricing and Branding: Sellers set their own prices and can create custom promotions as they please.
Higher Margins: As sellers set their own prices and do not sell at wholesale pricing, they can keep more of their profits after Amazon fees.
Better Inventory Control: Sellers decide how much stock to send and when, better supporting forecasting and planning.
However, it is not without its own specific challenges like:
More Operational Responsibilities: Sellers must manage their own fulfillment, logistics and customer service (unless they use FBA).
FBA vs MFN: If a seller fulfills orders themselves through MFN (merchant fulfilled network) rather than through Amazon FBA, their visibility on site may be impacted. Amazon tends to favour products that are sold or fulfilled by them on the Search Results Page, so MFN products can be subject to reduced visibility and conversion rates.
Storage and Fulfillment Costs: If sellers use FBA, fees can add up, especially for large items.
Account Management and Compliance Risks: Sellers must ensure they comply with strict Amazon policies across their operations or they risk suspension, which can be extremely difficult to come back from.
On the PPC and advertising front, while Sellers and Vendors both get access to Amazon Advertising tools and features, Vendors automatically get access to A+ Content, and Subscribe & Save as part of their agreements but Sellers need to meet specific requirements (Brand Registry for A+ Content, FBA for Subscribe & Save).
Hybrid Models - Both 1P and 3P
Many Sellers in the UK are now considering a Hybrid Model which combines elements of both 1P and 3P, allowing brands to better optimise for profitability, flexibility and control.
There are various strategies brands can employ to take advantage of this hybrid approach:
Keeping Best Sellers in Vendor Central (1P) and Niche Products in Seller Central (3P)
Keep high-demand products in 1P for broad distribution, but manage specialty or premium items in 3P.
Best-selling products perform well in Vendor Central (1P) because Amazon prioritises them for stocking and promotions. Also, as they are FBA, Amazon is more likely to favor them in the Search Results Page (and advertising efforts) than 3P MFN.
Niche, premium, or lower-volume items do better in Seller Central (3P) as you can control pricing and distribution. This allows sellers to maintain prestige and high quality brand perception for these products.
For example, a brand selling kitchen gadgets might put its top-selling “stainless steel measuring cups” on Vendor Central (to benefit from "Sold by Amazon" labelling trust and bulk distribution). Meanwhile, a “limited-edition copper measuring set” could be sold via Seller Central, keeping higher margins and controlling exclusivity.
Launching New Products in Seller Central First
Brands can test new products as a 3P seller before moving them to 1P if they gain traction, as Amazon can be selective with Vendor Central purchase orders and a new product might not get immediate orders. Seller Central allows brands to test market demand, pricing, and advertising performance. If a product gains sales traction, it can be moved to Vendor Central to scale.
Using 3P to Maintain Availability
If Amazon doesn't place Vendor purchase orders, 3P ensures the product stays in stock. Vendor Central orders fluctuate, and Amazon doesn’t always restock products consistently. If Amazon doesn’t place an order and the item goes out of stock, this leads to lost sales. Using Seller Central as a backup ensures customers can still buy your products.
For example, a pet brand sells dog supplements via Vendor Central, but Amazon suddenly stops ordering. Instead of waiting, they switch the ASIN to Seller Central, keeping it available and preventing any lost revenue.
A hybrid approach gives brands better inventory management, greater pricing and margin control, and more flexibility in testing and scaling new products.
Want to know more about which model is best for your business? Or want to move from one model to another, or adopt a Hybrid approach? Zeal Agency is a full service Amazon marketing agency and can help!
Get in touch with us at zeal@zealagency.co.uk or at www.zealagency.co.uk for more information.
