Is being an Amazon Vendor killing your profit margins?
We are hearing a growing refrain in the Amazon marketplace. An increasing number of vendors are approaching us with the complaint that their relationship with Amazon has turned into a one-sided affair.
These vendors – whether working via the Vendor Central or Vendor Express programs – are working hard to provide the inventory, product quality and responsiveness requested by Amazon. However, in return, they feel like they are:
- Hammered by downward pricing pressure
- Unable to offer product variations they know would be successful
- Frequent victims of stock-outs and lost sales
- Unsupported by promotions and marketing efforts
- Beaten down by the Amazon warehouse, which confuses product variations, fulfills orders incorrectly, receives inbound shipments slowly and inaccurately, and loses or damages large quantities of inventory
- Nickel-and-dimed by mandatory co-op fees, return fees and operational fees
For these vendors, we suggest a new strategy that has the potential to increase sales, while almost certainly improving profitability.
Basic Amazon selling account types
There are three ways a company can sell on Amazon:
- A third-party seller account, where the company sells directly to Amazon’s customers. Orders can be Fulfilled by Amazon (FBA) or fulfilled by the seller.
- A Vendor Express account, which is designed to transition third-party sellers to Amazon’s wholesale program. Vendors in this program have extremely limited power. Amazon sets products’ wholesale pricing with an algorithm, and it fluctuates frequently.
- A Vendor Central account, which is available by invitation only to large and successful brands. Prices and terms are negotiated up-front with Amazon.
How vendors can take their power back
Many vendors have never had a third-party selling account. They were recruited by Amazon for the power and attractiveness of their brands. Others were once third-party sellers, but transitioned to vendor accounts in hopes of an easier, smoother and more profitable experience on Amazon.
For many brands, there is a better way. Either transition exclusively to a third-party seller account, or sell with some combination of third-party and vendor accounts. By going direct to the consumer, with Amazon as more of a hands-off middle-man rather than a wholesale relationship, companies can benefit from higher margins and better control of their catalog of products.
By moving at least some listings to a third-party selling account, vendors can reap incredible benefits:
- Control of their own pricing. MAP won’t be violated, and margins can be protected.
- Ability to list all product variations, which greatly enhances revenue potential.
- Creation of new listings with multi-packs and variety packs. This can result in much higher margins, since consumers will pay a premium, while pick-and-pack fees are lower per the quantity sold.
- Control over promotions and pay-per-click ads to drive additional demand.
- Ability to edit and enhance listings that were neglected by Amazon Vendor account managers.
But isn’t that a lot of work?
Yes, it is. But there is a solution.
Companies like Riverbend Consulting offer Premium Account Management. We handle all of the difficult details that make running a third-party selling account challenging – especially for companies that are accustomed to the wholesale model.
Fist, we focus on profitability:
- We analyze your catalog of ASINs and determine which are most likely to be more successful sold on your own account, rather than Vendor.
- We examine opportunities to add successful listings, such as variations, multipacks and SKUs passed over by Amazon.com.
- We enhance listings, improve SEO and launch pay-per-click campaigns to drive volume.
Then, we take on the day-to-day details of managing your third-party selling account:
- Listing errors and enhancements
- Listing optimization and keywords
- Listing photography
- Ongoing ad campaigns
- Coordination with FBA prep and warehousing
- Inbound FBA shipments
- Inventory reconciliation and reimbursement
- Customer service messages
- Negative feedback removal
- Performance notifications
- Stranded inventory
Are you ready to rescue your brand from the Amazon vendor program? Give us a call!