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
Ongoing ad campaigns
Coordination with FBA prep and warehousing
Inbound FBA shipments
Inventory reconciliation and reimbursement
Customer service messages
Negative feedback removal
Are you ready to rescue your brand from the Amazon vendor program? Give us a call!
Lesley is co-founder and co-owner of Riverbend Consulting, where she oversees the firm’s client services team. She has personally helped hundreds of third-party sellers get their accounts and ASINs back up and running. Lesley leverages two decades as a small business consultant to advise clients on profitability and operational performance. She has been an Amazon seller for almost a decade, thanks to her boys (19 and 13) who do most of the heavy lifting.