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You have a great e-commerce business idea and feel ready to kickstart it with Amazon, or you already have a thriving business but want to take it to Amazon – in any case, it’s good to know your options before you get started. Let’s go through the top three selling models on Amazon with their pros and cons.

First-Party (1P) Seller Model

The 1P sales model is great for established retailers and manufacturers who want to expand their reach. With 1P, Amazon directly purchases your products wholesale and sells them for you, taking care of everything else from there. Literally, everything else. Amazon optimizes and manages listings, pricing, and all aspects of fulfillment from packaging, and shipping, to customer service and returns. It is, however, invite-only and not open to all. As a 1P seller, you will be using Vendor Central to track your products and sales in real time.

Pros of 1P

  • Access to Amazon Prime perks, with fast and free shipping options
  • Eligibility for “Sold by Amazon” label boosting customer trust
  • Reduced inventory risk, and no fulfillment headaches
  • Better options for advertising and placement priority, increased visibility
  • Low maintenance (everything, from product listings and ASINs to customer service, is taken care of for you)

Cons of 1P

  • Restricted control over branding and marketing
  • Limited access to customer data
  • Lower profit margin (in comparison to the 3P model)
  • No control over inventory availability
  • Payments are monthly, or sometimes less frequent
  • Invitation only, not open for application

Third-Party (3P) Seller Model

In the 3P sales model, you set up and manage your store on Amazon as an independent seller, and sell directly to the customers. Amazon’s Seller Central is open to all, so if you’re thinking about building your million-dollar Amazon business, 3P might be the place to start. With great power, however, comes great responsibility. As the owner and representative of your brand on Amazon, you will have to handle every aspect of your store. This includes creating optimized listings, setting rates, handling shipping and fulfillment, and providing customer service.

Pros of 3P

  • Full control over branding, marketing, and pricing strategies
  • Lower costs (no fees and commissions for fulfillment and marketing), higher profit margins depending on your MAP policies
  • Flexibility with inventory management and availability
  • Direct relationship with customers, opportunities to increase brand awareness
  • Payments are biweekly, cash flow is better

Cons of 3P

  • Having to deal with shipping, fulfillment, and inventory management
  • Constantly optimizing listings, campaigns, and ads
  • Investing time and resources in quality customer service
  • Keeping up-to-date with Amazon’s policies
  • Dealing with the fierce competition on your own

Partnering with a 360 Amazon Agency

The third most popular way to sell on Amazon is by working with a full turnkey Amazon agency. This model is great for medium-large businesses looking to scale or improve their presence with the help of an expert. The best part is, you can choose the level of involvement – some Amazon agencies offer complete services from inventory management and fulfillment to branding and marketing, whereas others offer specific resources and expertise. For example, you can work with an experienced agency to come up with a strategy for questions like “how to protect my brand on Amazon,” rather than dealing with it on your own.

Pros of Working with an Agency

  • Building a comprehensive strategy with the help of expert insights
  • Access to technical support and advanced data analytics tools
  • Regular updates and briefings on Amazon policy changes
  • Flexible, customizable services according to your needs and budget
  • Saving time by not dealing with all aspects of your Amazon presence

Cons of Working with an Agency

  • Setting up a budget for recurring help and quality services
  • Risk of not delivering the expected quality and results
  • Dependence on the agency to make branding decisions
  • Still being responsible for inventory management and fulfillment (some agencies also take care of that)
  • Communication and alignment challenges can add to your burdens

The Takeaway

As you may have noticed, there is no single “best” solution that fits every business. With their strengths and weaknesses, these are the top three ways businesses sell on Amazon. You can always switch things up, or opt for hybrid approaches. In the end, the key is identifying what works for you and pivoting when you notice a particular approach is not profiting your e-commerce business.

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