Is the Amazon Hybrid Model in Danger?

• New policy enforcement from Amazon may make utilizing the hybrid model more complex and difficult for brands
• As Amazon begins to penalize brands utilizing the hybrid model, it’s time to make some swift adjustments to your Amazon strategy 
  

In 2021, with the aggressive relaunch of the Amazon Standards for Brands (ASB) policy, Amazon began to quietly control how 3P sellers price and sell their goods on Amazon. As the year wraps up, Amazon’s push for control is now moving towards how brands sell across both Vendor and Seller Central platforms, leaving us wondering if the foundational selling approach, coined the hybrid model, could potentially be in danger. 

The writing is on the wall: the hybrid model of selling the same ASIN on both Seller and Vendor Central may soon result in catalog restrictions. Our catalog team has begun seeing notifications on accounts utilizing the hybrid strategy stating: “we already have a vendor relationship with this Brand, through which we source products directly from the Brand for sale by Amazon to customers.” 

Sound the alarms: over time, this policy enforcement may make utilizing the hybrid model more complex and difficult for brands.

History of the Amazon Standards for Brands Policy

This new target on the back of the hybrid model isn’t totally surprising, due to the Amazon ASB policy relaunch in early 2021. It appeared to specifically affect larger 3P resellers. Or those who are not brands or brand agents, despite the policy itself stating it applies to “brands and manufacturers, as well as their agents, licensees, and other representatives selling on their behalf in the Amazon store.”

As Amazon began to more strictly enforce the ASB policy, some 3Ps who had been selling brands and goods for many years were receiving errors pop up when they tried to add inventory or ship goods to Amazon. The error is similar to what hybrid brands are currently seeing, and stated the product they were selling was owned by a brand that already had a relationship within Amazon Vendor Central, and could not be offered by the seller.

While this new policy has initially been positive for brand owners, we are now seeing signs of it evolving and further restricting how products are offered from various sources on Amazon.  

What Does this Mean for Your Hybrid Brand? 

If Amazon is able to detect an ASIN is already being sold by your brand in a Vendor Central account, and will not allow you to sell via a Seller Central account as well, brands may need to make a strategic decision and fully commit to selling the ASIN on one platform or the other. 

Our teams are monitoring this situation closely across all hybrid accounts, as well as diving into understanding how the connection between the two accounts is made. It’s important to note, however, while we have seen notes within hybrid accounts previously, we have yet to see Amazon remove a hybrid offer without the ability to edit or sell from a Seller Central account. 

While the push for control from Amazon may cause some quick strategic reshuffling for brands, it does have some positive effects, namely when it comes to 3Ps. As Amazon has begun limiting the resellers who can sell certain brands and products, it’s resulted in a decrease in 3Ps. Additionally, the enforcement of competitive pricing on Seller Central has resulted in less instances of resellers inflating price points unnaturally. 

Historically, Code3 has recommended the hybrid strategy to brands for a variety of reasons. Some of the common reasons for employing a hybrid model are: Amazon Retail isn’t buying certain products or enough inventory. Many brands also utilize a hybrid model because they want to control pricing, or Seller Central has proven to be a more profitable selling model.

Within the past few years, Vendor and Seller Central have gradually become more equal. For example, in the past, we recommended brands utilize Seller Central to launch new products due to the flexibility of Fulfillment by Amazon (FBA). But, in the last couple years, Amazon Vendor Central launched Born To Run -  a program that allows Vendors to send in chosen quantities of inventory, rather than having to wait for Amazon to place natural purchase orders, which can be a slow process.

Additionally, another reason Vendors would utilize Seller Central for certain products was to control the retail price and even potentially improve item-level profitability via increasing pricing. However, recently, if the Seller prices an item above what Seller Central has deemed a “competitive” price based on historical and other retailer data, they will simply remove the Buy Box as an indirect way to control the pricing. 

Is it Time to Rethink Your Amazon Hybrid Strategy? 

As Amazon begins to penalize brands utilizing the hybrid model, it’s time to make some swift adjustments to your Amazon strategy.  “The traditional hybrid model may not be as effective as it once was, with many new roadblocks popping up,” Sam Jennings, Lead Client Strategist at Code3 said. “Now is when brands should be thinking more purposefully about their selling strategy and evolving their  hybrid approach, before they are forced to make challenging decisions.” 

For brands currently operating with a hybrid model - especially those actively selling the same ASINs on both Vendor and Seller - there are a few courses of action:

1. Go “cold turkey” and either choose Seller or Vendor as your brand’s sole selling platform. This is the most future-proof approach but probably isn’t 100% necessary, unless you are already seeing signs of Amazon enforcing these new policies or getting pressure from a Vendor Manager.
2. For brands more heavily invested and reliant on Vendor Central, you could replace your current Seller Central business via a 2P partnership. We define 2P as a Vendor working with one, or multiple, authorized 3rd Party Resellers. This removes all risk from the brand while maintaining some of the benefits of Seller Central (ie. inventory backup, price flexibility, product launches, etc.). The downside of this approach is the possibility of losing some degree of control over your products in the form of advertising, product page optimizations, and inventory management.
3. And lastly, another option is to continue selling on both Vendor and Seller but to ensure the products being actively sold on each platform are 100% unique (no overlap). This approach counteracts many of the new policy challenges we have been seeing. Examples of ways Vendors could approach this model are:
   1. Testing out new products on Seller (with the option to move to Vendor Central if successful)
   2. Selling products Vendor Central rejects
   3. Reintroducing CRAP’ed Out items on Seller
      

From what we have seen, the most risky approach is to take items historically sold on Vendor Central and move them exclusively to Seller. It is still up in the air as to whether this will be allowed in the future, but if you are actively doing this as part of your hybrid strategy and Amazon provides any sort of warning, we recommend re-introducing the item to Vendor Central or providing your Vendor contact with solid reasoning for the transition.

All that said, we recommend brands begin thinking more critically about their approach to selling on Amazon. “With both platforms becoming more similar to one another, and with the likelihood of more policy change from Amazon, it’s key for brands to build a contingency plan that puts the majority of the focus on one of the two platforms, ” Jennings said. 

Are you unsure which platform is best for your brand or concerned about how the move away from the hybrid model will affect your business? Contact us today and we can help with your critical strategic decisions.