Amazon dominates online retail because it offers many ways for companies to reach customers. Two of Amazon’s most popular offerings are their Amazon Vendor Central and FBA (Fulfillment by Amazon) programs.
What is Amazon Vendor Central
Manufacturers and wholesalers interested in becoming Amazon’s primary suppliers can do so through the Amazon Vendor Central portal. In contrast to other marketplaces, Vendor Central allows businesses to sell in bulk to Amazon rather than directly to customers. Through this partnership, the supplier functions as a wholesaler or manufacturer, and Amazon assumes the role of retailer.
How Does It Work
Invitation and Onboarding: Access to Amazon Vendor Central is typically by invitation only. When a potential vendor is found, Amazon invites them to join the Amazon Marketplace.
Purchase Orders: Amazon places purchase orders with the vendor for specific quantities of products. Amazon forecasts demand using historical sales data, seasonality, and market trends.
Shipping to Amazon: The vendor ships the products to Amazon’s distribution centers once a purchase order is accepted. Amazon has packaging, labeling, and shipping guidelines to streamline processing.
Payment: Amazon pays the vendor based on the agreed terms after receiving and processing the products. These terms vary, but usually, there is a payment period.
Sales and Marketing: Amazon handles sales, marketing, and promotions once the products are in stock. This includes advertising, listing on Amazon, and featuring products in promotions or deals.
Pros of Amazon Vendor Central
Bulk Orders: Selling directly to Amazon can increase sales volume.
Amazon Marketing: Amazon may promote your products with the “Ships from and sold by Amazon.com” tag.
Reduced Operational Hassles: Amazon handles order fulfillment, returns, and customer service.
Cons of Amazon Vendor Central
Less Control: Since Amazon is now the official seller, you have less control over pricing, inventory, and how your product is presented.
Payent terms: Payments can sometimes be late, and the terms might not always be good for all vendors.
By Invitation Only: Access to Amazon Vendor Central is restricted. You must be invited to join, which may be restrictive for some businesses.
What is Amazon FBA
Amazon’s Fulfillment by Amazon FBA service enables sellers to use the company’s extensive logistics network. Sellers can focus on other tasks by outsourcing product storage, packaging, and shipping to Amazon.
How Does It Work
Product shipment to Amazon: Sellers ship inventory to Amazon fulfillment centers. Product storage and management are optimized in these strategically located warehouses.
Product storage: Amazon stores products in fulfillment centers. They keep inventory safe and accessible for orders.
Order Processing: Amazon’s system detects FBA orders. Products are picked, packaged, and shipped from shelves.
Shipping: Amazon takes responsibility for delivering the product to the end customer. They use their vast logistics network, which includes a mix of their delivery infrastructure and third-party carriers, to ensure timely deliveries.
Customer Service and Returns: Amazon also manages customer service inquiries related to product deliveries and handles returns for FBA products. If a customer has a delivery issue or wants to return a product, they’ll interact directly with Amazon’s customer service.
Pros of Amazon FBA
Prime Eligibility: Products fulfilled by Amazon are eligible for Prime, which can significantly boost sales due to the vast number of Prime members.
Customer Trust: The “Fulfilled by Amazon” tag can enhance customer trust, as they know it comes with Amazon’s reliable customer service and return policies.
Global Reach: Using FBA, you can easily sell your products internationally, tapping into Amazon’s vast global network.
Cons of Amazon FBA
Fees: Amazon charges for storage and fulfillment, which can add up, especially if your products sit in their warehouses for a long time.
Inventory Risks: You might incur additional fees if your products don’t sell. Plus, there’s always the risk of inventory getting damaged or lost in Amazon’s warehouse.
Commingling Issues: Amazon might mix your products with those of other sellers (if they’re identical). This can lead to issues if the other seller’s product is counterfeit or of lower quality.
Which is Right for Your Business
The decision between Amazon Vendor Central and Amazon FBA largely depends on your business model, goals, and resources.
Scale and Volume: If you’re a large manufacturer or distributor who can handle bulk orders and prefers to wholesale, Vendor Central might be the better choice.
Control and Flexibility: If you want more control over your pricing, branding, and customer interaction, FBA offers that flexibility.
Operational Capacity: If you don’t want to handle customer service, returns, and fulfillment, Vendor Central relieves you of these responsibilities, whereas FBA offers a middle ground.
Know that Amazon Vendor Central and FBA can help your business. A cost-benefit analysis, company needs, and future consequences should inform your decision. Amazon will boost your business and customer base regardless of strategy.