Choosing an operating model for Amazon
There are numerous articles on line outlining differences between these two platforms and listing pros and cons of both. Most of these articles are very well written but address this issue as if it was 2018 … Fortunately or unfortunately there is only one constant with Amazon – change.
I used to say that Amazon today and Amazon a year ago are two different Amazons. Back in 2019 I said "I won't hire anyone who has actively engaged with Amazon for six months or more". It is no longer true. The platform is changing monthly if not daily. Keeping up with revised requirements, new programs and adjusting internal policies and growth strategy to fit new reality is literally a full time job today. And to make things even more interesting, Amazon rarely explains either its near-term tactical aims or its long-term strategic vision. Most of the time the changes are not even announced. They are simply implemented. it is up to you to figure out what new program has been released or which of your favorite features is no longer available.
That said, if you worked in their ecosystem long enough you begin to see patterns and can pretty much predict the future. Well, you can try.
At least three years ago it became obvious that Vendor Central is no longer a priority. Thousands of vendors were removed from the platform – Amazon sent them messages saying that it had determined their businesses would perform better as third-party sellers on its marketplace and that the move was permanent., Those who were granted the privilege of continuing selling to Amazon lost their dedicated Account Managers and now had to deal with generic Vendor Support similar to Seller Support.
Around the same time 3rd Party sellers started seeing more and more features made available to them in their Seller Central accounts. Features previously only available for those lucky enough to receive much coveted invite from Vendor Central. But on one condition – they had to have a registered Brand.
So what happened? It is now absolutely obvious that Amazon developed a long term plan of switching their platform from Product Centric to Brand Centric. Any medium and large company selling on Amazon has to develop an internal 3rd party department because every day Vendor Central is losing whatever remaining advantage it has (if it has any at this point) to Seller Central. High priority programs are all aimed at Brands and rolled out in Seller Central at the same time (if not sooner) as in Vendor Central. A lot of these new products are not even usable for Vendors.
For many corporations switching from 1P to 3P is an extremely complex project. Most manufacturers don't even realize just how much money they are leaving on the table by not selling directly to Amazon's customers. For example, I worked with brands that were very unpleasantly surprised when they had to subsidize any promotion on retail level while being paid on wholesale. In real dollars and cents it means that if you sell a widget to Amazon for $50 and they retail it for $100, any time you run a Lighting Deal for 20% off, you are getting paid $30. That's before all those deductions for Freight, Returns, Coop, etc. And we all know that nobody does deductions like Amazon does.
So at the end of the day you will be lucky if you get $25. $20 sounds more realistic. Oh, and you still have to run your advertising campaigns out of your pocket. That "marketing fee" that you get charged does not really include any marketing whatsoever.
Same product sold via Seller Central will generate significantly higher cash flow. For example, let's say the product in question has a $20 cost of goods, weighs between 10-16 oz. and falls under Baby Products category. Sold at regular price it will net you $62.37 after all applicable fees and COGs.
Sold at 20% discount it will generate profit of $45.37.
Introduction of Brand Benefits in Seller Central pretty much rendered Vendor Central no longer useful. So why do Amazon Account managers still run VC accounts for their companies? Let me know what you think.