Amazon Vendor Central vs. Amazon Seller Central

Many freelancer job boards have jobs like this appear on a frequent basis. I think it is important to examine the difference between they way Amazon interfaces with vendors to understand how the process works and to make educated decisions.

You have to realize to take advantage of the Amazon Vendor Central program you must be invited by Amazon to enroll.

The process usually begins with an email from Amazon, saying that they are interested in selling your products. If you let Amazon know that you’re interested in becoming a vendor, they explain how Vendor Central works and provide their terms of business.

There usually isn’t much negotiating on these terms. Amazon will make you an offer, and you can either accept or decline. There may be more scope for negotiating if you’re a large, influential brand, or if you’re assigned a vendor manager as you have a unique product Amazon wants. Amazon wants to be the one stop shop for all of the best products, at the best price.

When terms have been agreed, Amazon will create an account for you in Vendor Central and invite you to register. You can then start providing product and cost information to Amazon.

The fundamental difference between Vendor Central and Seller Central is who will be selling your products. With Vendor Central, Amazon’s retail team buys and resells your products to their customers. With Seller Central, you are selling directly to Amazon’s customers.

In both cases, Amazon considers these to be their customers which can become problematic (more about that in future blog posts).

Once, you have enrolled in the Vendor Central program you will find these main tasks.

• Orders, where vendors receive purchases orders and provide shipment information. Typically these orders are received electronically via and EDI connection. You want these orders received electronically for reasons of speed and accuracy.
• Items, for vendors to provide product information. You can upload images, edit costs and provide other product-related information. Keep in mind if you edit it likely will not change. As I was once told by a vendor manager…Amazon does not accept price increases.
• Merchandising, for handling the marketing of products. This is where you access features like Amazon Vine and A+ Content. Besides the volume of your orders this is the main benefit to control the branding of your merchandise if you are a manufacturer.
• Payment, where you’ll find your invoices and remittances.
• Advertising, which takes you to the separate Advertising Console (formerly Amazon Marketing Services or AMS) where you can manage ad campaigns. Advertising and marketing are treated totally independent. Advertising always costs and is usually required by Amazon in your terms. Marketing items may or may not have and associated cost.
• Reporting, where you can see how your business is doing. Some reports are accessed directly in Vendor Central, while others can be found via Amazon Retail Analytics (ARA). These reports are used for estimates to pass along for forecasting to the supply chain. They are also not very realistic.

Once vendors are set up, they will typically receive a purchase order on a weekly basis. This is usually every Monday. However, if there’s a peak in demand for your product, you may receive purchase orders more frequently. The time for fulfillment is usually tight and as mention you might not have any warning of a large order on a specific item.

One indicator that a large order might be pending is a request for a bulk order where they want a bigger discount to buy in “bulk”. Keep in mind once you sell it at a lower price it is very difficult to go back to the higher pricing.

Amazon also prefers to order little and often rather than order in bulk and risk getting stuck with huge amounts of stock.

Where Is My Order?

Just because you set a product up on Vendor Central doesn’t mean you’ll receive a purchase order straight away. The ordering process is automated. Amazon’s system will look at sales history and current demand before deciding whether to place an order.

This gets even more complex if you are introducing the brand in a different country like Canada or the UK. Amazon will tell you that you need to invest in some advertising to build demand for your product.

This usually means that the initial purchase order is smaller than vendors expect. Momentum needs to build so demand increases before the system will make larger purchase orders for your product.

What Do I Do When I Am Out Of Stock?

If you can’t fulfill a purchase order, you have two options. You can cancel it completely or, if you’ve been authorized, you can place it on backorder. My experience tells me that you should cancel the order even if you lose out on the volume. Keeping items in a backorder state can start to accrue fill rate fines or even have the item discontinued on the website.

But if you run out of stock, you should always mark items as temporarily unavailable so Amazon doesn’t include them in their purchase orders.

Setting The Price On Vendor Central

Vendors set their wholesale price when they create their product listing. If Amazon is happy with the price that you’ve set, they will place an order with you.

If Amazon is not happy with your pricing, you will receive an email asking for cost improvements on certain products. You can then go into Vendor Central and see exactly the price that Amazon is asking for.

You can then either:

1. Match the price that Amazon wants
2. Lower your price but not as far as Amazon requested
3. Mark your stock as permanently unavailable

Amazon is aggressive on pricing and you may decide not to use Vendor Central at all, rather than sell to Amazon at the price they demand. Amazon will continue to ask for a lower price over the course of time.

Here is a good time to have that Seller Central account ready to place the item on the Amazon Marketplace.

Does Amazon Honor MAP?

No.

Amazon’s  main goal is to offer competitive pricing and they like to be in control. MAP constrains them, so it’s very unlikely that they’ll agree to it.

Even if you have an informal agreement with them, it doesn’t mean they will adhere to MAP pricing. For example, if any online vendor starts your products for $5 below MAP, then Amazon will automatically match it. Whats more you will get emails requesting funding which makes no sense to me but can and will impact your ability to advertise on AMS.

Amazon wants to have all the best products at the best price.

Getting Amazon to follow MAP pricing is very difficult, but as a vendor there are two things that give you a better chance:

• You must have tight control over your distribution to make sure that nobody else is selling under MAP. This can prove problematic if you have dealers that have discovered the marketplace and will drop below MAP. Because they are technically an Amazon customer the name of the marketplace account does not have to match the business name. Amazon will not disclose that information to vendors.
• Managing your overstock. Make sure that Amazon doesn’t have too much inventory. If they do, and it doesn’t sell, they’ll lower the price below MAP to try and clear it.
• Adhere to an allocation policy if you have limited quantities. Reward your vendors that stick to MAP. If it is a popular item rest assured Amazon will want to have it in stock.
• Sell the item exclusively on your own marketplace account. There you have tighter controls on pricing and a point of negotiation should Amazon’s retail team decide they want it. Keep in mind that heavier, larger items take up more space and there are more Marketplace vendors under the FBA program which makes Amazon more money. Your large heavy item could be deemed unprofitable.

The Difference Between Vendor Central and Fullfillment By Amazon

Sellers can often confuse Vendor Central and FBA. While there are similarities, fundamentally they are completely different programs.

Vendor Central is for sellers who want to sell their products to Amazon, who then sell those products on to consumers. Amazon buys inventory from you and is then solely responsible for selling the products on to shoppers. This includes factors like setting the retail price. Amazon will tell you that the vendor should not tell them how much to sell the items for and will add that should you press the matter they will turn you and the company top executives over to the legal department citing antitrust laws.

On the other hand, FBA is a fulfillment option for third-party marketplace sellers. First, you send your inventory into an Amazon Fulfillment Center. When an order comes in, Amazon picks, packs and ships it for you. The big difference here is that you are still responsible for selling the products, you are simply paying Amazon to handle the fulfillment process for you. FBA comes with a schedule of different costs than Vendor Central which they deem as a fair exchange for you to do all the marketing.

Similarities between Vendor Central and FBA:

1. Your products qualify for Amazon Prime
2. Your inventory is stored in an Amazon warehouse $$$
3. Amazon handles shipping and fulfillment $$$
4. Amazon handles customer service relating to shipping and fulfillment.

Differences between Vendor Central and FBA:

1. With FBA, you retain ownership of your inventory, it’s just stored with Amazon. With Vendor Central, you have sold your inventory to Amazon. They own it.
2. With FBA, you only get paid for products that have been sold to consumers. With Vendor Central, you get paid for products sold to Amazon (but the wait to get paid is longer).
3. With FBA, you set the retail price and pay commission and fulfillment fees to Amazon. With Vendor Central, Amazon sets the retail price. You are paid the wholesale price.
4. With FBA, you can have direct contact with the consumer and can see individual orders. With Vendor Central, there is no contact with the consumer.

Will my product sell more units if it’s sold by Amazon themselves?

Some businesses love using Vendor Central because they believe that having “ships from and sold by Amazon.com” on the listing will help the product sell in higher volumes. They also love those large PO’s that come in on Monday morning.

Shoppers may prefer to buy from Amazon, and that Amazon probably has  an advantage over marketplace sellers in search results and the Buy Box. Some businesses have reported higher unit sales as vendors than sellers.

In reality though, it doesn’t necessarily make much difference. Some businesses have even reported a slump in sales after changing from Seller Central to Vendor Central.

Why wouldn’t having your products sold by Amazon increase sales? 

Customers do look for the Prime badge but they are less concerned about who is selling the item. The third-party marketplace is well understood by buyers and they know that they are protected by Amazon.

Amazon likes to buy from vendors “little and often” and increase order volumes gradually. It’s not uncommon for Amazon to run out of stock, which can then affect search ranking negatively and send sales on a downward spiral.

Products sold by Amazon may have a positive effect on high value items. If buyers are going to spend a large sum of money, then product sold by Amazon can provide extra security. Not only do they trust that the product will be genuine, but they also like the safety net of Amazon’s own aftercare should something go wrong.

Are there any fees to sell on Vendor Central?

One of the biggest sources of confusion on Vendor Central is the fees, which are referred to by Amazon as “allowances”.

These are set in the terms agreed with Amazon at the start. The contract is also reviewed annually. Businesses should read the contract very carefully, and can try to negotiate if the allowances are set high at the start, or are increased substantially at an annual review. Many businesses don’t read their contract properly and are later shocked by all the deductions.

There are three main allowances that Amazon charge:

Market Development Funds (MDF)

This is typically around 10% but can vary by as much as 5% to 15%.

Amazon say that the MDF allowance is for everything that they’re doing in the background to manage the catalog, and the various marketing initiatives they carry out to help sell your products. However, most vendors find that this isn’t a very tangible allowance and it can be hard to see what you’re getting in return. In otherwords they are charging you to list your product just like with Amazon marketplace.

Damage Allowance

The damage allowance is usually around 2% to 3% but can vary by category. The allowance is usually higher on items where it is not easy to put returns back into stock, such as electronics that might need testing.

Amazon charges this allowance instead of returning damaged goods to the vendor. You may find these same “damaged” goods later in their open box/discounted area which is pure profit to Amazon and also undercuts any MAP program.

Freight Allowance

The freight allowance can also be in the region of 2% to 3%.

Amazon plays a big part in helping vendors get their stock to Fulfillment Centers. Vendors book the shipment, but Amazon will use their courier service to pick the stock up and move it. The freight allowance covers Amazon’s costs during this process.

How often do you get paid as an Amazon Vendor?

Unfortunately, one element of Vendor Central that can be really frustrating is the payment terms.

Amazon has many different options which it offers vendors, including:

• Net 30 – Under these terms, Amazon will pay you after 30 days. However, on this plan, Amazon give themselves a 2% discount.
• Net 60 – Under these terms, Amazon will pay you after 60 days. This is the plan that most vendors are on.
• Net 90 – Under these terms, Amazon will pay you after 90 days.

The longer terms can cause real cashflow issues for vendors. It can lead businesses to take out bridging loans or use invoice factoring, so they can replenish inventory while they await payment from Amazon.

Can I use both Seller Central and Vendor Central?

There is nothing to stop you using both Seller Central and Vendor Central. The retail manger will tell you yes that Amazon frowns on using both but that is only because it impacts the numbers and they do not receive credit. To make sure that it’s a successful, you need to have a plan. The main consideration is selecting which products to distribute as a vendor, and which as a seller. It’s not a good idea to offer the same products through both routes!

Some selection strategies are:

Product life cycle

When launching products, sellers can use Seller Central because they can control price, market their products and solicit feedback. After time, when demand is steady, you can move the SKU to the vendor side. Amazon is going to pressure you to run an introductory (discounted)campaign on new items.

Seasonal products

Sellers tend to offer their seasonal products through Seller Central. This way they can manage sell-through and set their own retail prices. For continuity products, that sell all year round, Vendor Central is a good choice.

Price

Vendor Central is not great for low value items. Amazon constantly asks for lower costs, which makes it really hard to turn a profit on these items. So, offer cheaper products via Seller Central, and consider Vendor Central for higher value products or multi-packs of cheap products.

Why is Amazon Vendor Central Different Than Seller Central?

The short answer is because they serve very different purposes. People compare Vendor Central and Seller Central, because the end result is the same: your products become available to buy on Amazon.

Amazon is a unique company. They bring together a huge marketplace and a huge retail operation on the same platform. Forget for a moment that it’s the same company, comparing Vendor Central and Seller Central is like comparing selling single items to people on eBay, to selling to Walmart by the truckload. They are two completely different worlds.

When sellers don’t appreciate just how different Vendor Central and Seller Central are, it can cause a lot of problems. Sellers assume that because they’ve had success on Seller Central, that they will have success on Vendor Central. It doesn’t work out like that.

So, if you’re considering Vendor Central, think about the way you want to do business as much as the benefits it can offer you. If you are a manufacturer or distributor, with no appetite to sell directly to consumers, then Vendor Central makes a lot of sense. If you’re a different kind of business, or a smaller brand, Seller Central should probably have a place in your strategy.

Do you need more help in deciding what is right for you? My qualifications are here and I can be reached via the contact form.