What is the difference between seller vs. vendor

What you’ll learn:

The fundamental difference between the Seller and Vendor.
Pros and cons of each selling model.

Amazon Seller (3P)

Who they are: Sellers use Amazon's marketplace to sell their products directly to consumers. They are third-party sellers and maintain control over their product listings, pricing, and inventory.
Fulfillment methods: Sellers can use Fulfilled by Amazon (FBA), where Amazon handles storage, packaging, and shipping, or Fulfilled by Merchant (FBM), where the seller manages fulfillment.
Control: Sellers have more control over their listings, marketing, and pricing. They can create detailed product descriptions, manage reviews, and adjust pricing in real-time.
Fees: Sellers usually pay referral fees (a percentage of the sale price) and fulfillment fees if using FBA.

Amazon Vendor (1P)

Who they are: Vendors are manufacturers or distributors who sell their products wholesale directly to Amazon. Amazon acts as the retailer and sells the products to consumers.
How it works: Amazon purchases the inventory from the vendor and then sells it under the "Ships from and sold by Amazon" label. The vendor has less control over pricing, branding, and listing management.
Fulfillment: Amazon handles all aspects of fulfillment, shipping, and customer service.
Control: Vendors have limited control over their product listings and pricing, as Amazon sets the price and manages the listing once the vendor sells the products to them.
Fees: Vendors don’t pay direct selling fees, but they sell their products to Amazon at a wholesale rate, which may reduce margins.

Now that you know the fundamental difference between the two business models, you need to be aware of the pros and cons of each of the selling models. Let’s go through them step by step.

1. Stock and negotiation

As a seller, you can’t negotiate with Amazon. You have a fixed commission and a fixed FBA tax depending on the weight and size of the product. The warehouse space is calculated with the Inventory Performance Index. A good index requires good sales values, little excess inventory, and low out-of-stock (OOS) rates.

As a vendor, you negotiate your contract with Amazon once per year and depend on Amazon and your negotiating skills. Using a vendor account will probably be a low-income branch but will help you sell high volumes and keep control of the Buy Box for longer. Be aware that although Amazon manages the stock, you continue to work and pay for advertising.

2. Fulfillment

For vendors, fulfillment is straightforward. Amazon researches and makes predictions over selling volume, then makes regular orders from the brand, which must be shipped to Amazon fulfillment centers. These purchases ensure the brand benefits from good planning and scalability.

For sellers, the forecast is their responsibility, and the size of the available storage space is directly linked to sales performance. The recommendation is that sellers should restock every 90 days with as many items as they are sure to sell.

3. Prices

The vendor model doesn’t allow a say on pricing for the product other than specifying an MSRP. Due to Amazon’s price algorithms and competition, prices may go down even more than on the manufacturer’s website. The only good thing would be that the vendor almost always wins the Buy Box.

As a Seller, Amazon states a maximum and minimum price recommendation. If a brand does not comply with these, Amazon kicks them out of the Buy Box or suspends their product.

4. Content

For a vendor, content is more regulated. In the past, only vendors had access to A+ content, but today both sellers and vendors have access to A+ content (if a Seller has registered a brand in Amazon’s Brand Registry).

5. Reviews

Reviews are a significant part of the Amazon shopping experience. When launching a new product, the retail readiness blueprint teaches us that we must have at least 15 reviews. To get those reviews quicker, we have access to Amazon Vine. At first, Amazon Vine was only available to vendors, but for the past some years, it has also been available to sellers.

6. Advertising

A few years ago, vendors had many advantages over sellers, such as access to more advertising formats and settings. Nowadays, sellers can use the full potential of Amazon advertising on both platforms.

7. Business data

Vendors were given little data up until 2020, and this was one of the most significant advantages for sellers over vendors. To find more metrics and data, you had to subscribe to the premium program ARA (Amazon Retail Analytics).

ARA was removed in early 2020, and then Brand Analytics was introduced and made free of charge. Historical performance and conversion rates were made available to vendors at the end of 2020 for more transparency.

Conclusion

After analyzing this information, we can say that the two models have changed quite a lot over the past few years. sellers can use Sponsored Display Ads and participate in Amazon Vine, and vendors can use Brand Analytics and have access to free data and KPIs. Both models offer the same tools for researching, using historical data, and advertising across the Amazon platform and its partners. But the essential difference is that one model is used for B2C and the other for B2B.

As a seller, you should be able to monitor and modify your product prices and keep excellent control over logistics and contact with the end customer.

As a vendor, you need to have good negotiating skills and an excellent and competitive product that Amazon wants to sell.