Since a large number of Amazon vendors went without purchase orders (POs) in early March 2019, many brands using Vendor Central have considered making a transition to Seller Central. The process of moving a brand’s catalog to operate within a different system can be stressful enough. However, making the switch can have a number of implications for a business. In this post, we explain why vendors would make the switch and what they need to consider before doing so. Continue reading to prepare your brand before it makes the transition to Seller Central.
Why are Brands Considering a Transition to Seller Central?
Amazon has denied rumors of a full-scale vendor purge, but it’s wise for brands to be prepared for the possibility. Veterans to the channel understand they have to be ready for anything, and change on Amazon is the only constant. As the holiday season approaches, vendors are considering moving to Seller Central to protect themselves in the event Amazon decides to remove them from Vendor Central entirely, or decides to combine the two platforms in another form.
Primary Differences Between Vendor Central and Seller Central
When transitioning to Seller Central, vendors tend to focus on the process of moving all the listings within their catalog. This is a large piece of the puzzle, but there's a lot more to consider in the short- and long-term, as the two options support fundamentally different business models. Here are some of the main differences and implications to be aware of beforehand.
- Sales: Vendors sell their products directly to Amazon via purchase orders and follow the format of a typical retail relationship. On the other hand, sellers operate through a direct-to-consumer model and are paid on consignment.
- Pricing: A product’s retail price is controlled by Amazon at all times when it lives within Vendor Central. However, brands have the option to change a product’s price at any time when operating within Seller Central.
- Logistics: Brands within Vendor Central adhere to Amazon’s purchase order system or a lesser-common direct fulfillment option. Those on Seller Central sell either through Amazon’s logistics infrastructure (Fulfilled by Amazon [FBA]) or ship directly to the consumer through Fulfilled by Merchant (FBM).
- Inventory Management: Amazon handles inventory forecasting and management for vendors. If a seller is using FBA, they’re responsible for inventory forecasting and deciding what to send to Amazon’s fulfillment centers. If using FBM, the seller must be prepared to ship on demand.
- Fees: There is a difference in fees applied to brands that sell on Vendor Central and on Seller Central. For vendors, terms vary depending on annual negotiations. Sellers can expect to pay 15% of the retail price in addition to costs associated with FBA.
- Customer Communication: Vendors and sellers don’t have the same opportunity to speak directly with customers. Amazon handles messaging and returns for vendors, while sellers do have some options to communicate with customers.
- Marketing & Analytics: Finally, vendors and sellers have a different level of access to marketing tools and analytics. There are small differences in each platform (i.e. Lightning Deal availability, review acquisition platforms, etc.), but Seller Central becomes more equipped on a monthly basis with new tools not previously provided. Vendors considering a transition to Seller Central can also look forward to more robust sales, customer, and operational data.
How Do These Differences Impact My Business?
It's not only important for brands to understand the differences between the two, but how a change will affect how their business operates. Below are four critical implications brands should consider before it transitions to Seller Central.
- Sales Tax: A company will need to determine how using Amazon Seller Central will impact its requirement to collect and remit sales tax. Since Amazon controls where inventory is held, this could create tax nexuses.
- Operational Oversight: Vendor Central allows for a very hands-off model. Seller Central requires more attention to keep things running smoothly. Inventory forecasting, monitoring, and the creation of shipments are examples of some of the tasks brands will take on after the transition to Seller Central.
- Consignment: Unlike the purchase order model used in Vendor Central, sellers aren't paid until an order is placed. Then, a balance accumulates and the amount deposits into a seller’s bank account every 14 days. For sellers using FBA, this creates a situation where inventory is stocked in an Amazon warehouse but is still technically owned by the manufacturer.
- Price Control and the Buy Box: Sellers have the opportunity to control a product's retail price. This can help to lessen price matching from other retailers. However, if there's heavy competition for the Buy Box, sellers may need to use software to update pricing in real-time.
Perform a Profitability Analysis Ahead of Time
To further understand how a transition to Seller Central will impact your bottom line, brands can perform a profitability analysis. We explain how to do this in four simple steps in this blog post and webinar. With these resources, you’ll learn how to break down the costs of both Vendor Central and Seller Central, analyze ASINs, and determine your brand’s profitability on either avenue.
If your brand is considering a transition to Seller Central, make sure to consider the implications and prepare your company. We’re here to help if you have any questions about Amazon related.