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What are 1P and 3P sellers on Amazon?

You may have heard the terms 1P and 3P seller when you are researching how to start selling on Amazon. Amazon is one of the largest marketplaces worldwide, with no less than 300 million users and 2.7 billion visitors per month.

Selling products on Amazon can therefore be a good idea for your business, but this will require a few things. For example, you will first have to determine which business model suits you best (1P or 3P).

In this article we will explain exactly what a 1P and 3P seller is, what the advantages and disadvantages of each model are and we will highlight the main differences. You can then determine for yourself which sales model best suits your company and brand.

What is a 1P seller on Amazon?

A 1P seller (First Party Seller) is a wholesale supplier of Amazon, more commonly known as a ‘Vendor’. As a Vendor, you deliver products directly to Amazon and they resell them to the consumer. So you are basically a supplier of Amazon as a 1P seller.

Vendor Central is the main hub for 1P sellers. This is the sales account dashboard on Amazon where they can manage the purchase orders and track shipments. In Vendor Central, sellers also have the option to customize offers and possibly create advertisements.

How does 1P work?

To become a 1P seller (Vendor) on Amazon you will have to meet a number of strict requirements. This is why you can only become an Amazon Vendor by invitation. There are 3 possible ways to do this:

  • You have a top status brand as a seller on Amazon;
  • You have good running/selling products that you sell through FBA or FBM;
  • You can apply for an invitation to the Vendor Program.

Once you receive an invitation to Amazon’s Vendor Program, the sale of your products will be different. We are happy to explain how it works exactly:

  1. Negotiations of Purchase Orders (POs) between Vendor and Amazon;
  2. Ship products to Amazon warehouses;
  3. Amazon obtains full ownership of the product;
  4. The products are marked with the ‘Shipped from and sold by Amazon’ badge;
  5. Amazon determines the unit prices of the products;
  6. Amazon sells the products directly to consumers.

As a 1P seller, you basically give control over the sale of your products to Amazon. This may be ideal for some sellers, while some brands prefer to keep full control.

Pros and cons

A 1P seller on Amazon has a good chance of selling more as a 1P seller than they would as a 3P seller, but there are also disadvantages to this. In the table below you can immediately see the most important advantages and disadvantages of a 1P seller (Vendor) on Amazon:

Advantages:Cons:
By having your products sold and shipped directly by Amazon, you increase consumer confidence.No control over product price per unit. Amazon determines the final selling price of the products.
Receive stable purchase orders from Amazon without the need for inventory forecasting.Amazon uses wholesale prices, which means that profit margins can be lower.
Supplier surcharges and fees are clear and do not change easily.Less or no control over the branding of your brand.
Products are shown with the ‘Shipped from and sold by Amazon’ badge, increasing sales.Amazon may modify product listings without taking your branding into account.
Amazon takes care of product optimization, customer service, shipping and distribution.Depends on purchase orders from Amazon to maintain a presence in the marketplace.

What is a 3P seller?

A 3P seller (Third Party Seller) is a retailer that sells its products to consumers through Amazon. They retain full control over the logistics, shipping, customer service and returns of their products.

The main hub of 3P sellers is Seller Central. This is where sellers can manage their activities on Amazon. As a result, they retain full control over their brand and products. Here’s what you can do in Seller Central, among other things:

  • Create, optimize and change product listings;
  • Keep track of the inventory;
  • View order and delivery status;
  • create and manage advertisements;
  • Adjust sales prices of products.

How does 3P work?

When you start selling products via Amazon, you basically always start as a 3P seller. For 3P sellers, there are two possible selling models, namely FBA and FBM:

  • FBA (Fulfillment by Amazon): with Fulfillment by Amazon you hand over the entire order processing process. You send your products to one or more Amazon warehouses, where the process from order picking to shipment to the customer is handled by Amazon. As a seller, you pay a fee to Amazon for this.
  • FBM (Fulfillment by Merchant): with Fulfillment by Amazon, you as a seller remain responsible for the entire order processing process, from order picking to packing and shipping the products. As an FBM seller you must meet the requirements regarding the quality of delivery and shipment.

Depending on the chosen Amazon program, the method of order processing will differ. With FBA you outsource this part to Amazon, while with FBM you remain responsible for this yourself. Depending on your brand and products, you choose which sales model suits you best.

Pros and cons

If you are a retailer selling your products through Amazon (3P seller), there are some advantages and disadvantages to this. Below you can see in one overview what the most important advantages and disadvantages of 3P sellers are.

Advantages:Cons:
Complete control over the selling price of your products.It takes time and money to get a good status as a 3P seller.
Retail profit margins are higher than wholesale profit margins.Knowledge about Amazon SEO optimization is needed to make products easy to find.
Control over the branding of your brand and products.Products are not shown with the “Shipped from and sold by Amazon” badge
Freedom to create, change and manage your own product listings.You pay monthly fees to Amazon.
Decide for yourself which and how many products you sell.

What are the differences between 1P and 3P sellers on Amazon?

We’ve explained what 1P and 3P sellers are, and the pros and cons associated with them. But since advantages and disadvantages can be interpreted subjectively, it is important to state the differences explicitly.

It completely depends on the nature of your brands and products, and how involved you want to be with your business. Some sellers experience it as positive to let Amazon sell their products, while others prefer to keep control over the sale of their products.

Below we will therefore tell you more about the differences between the 1P and 3P sales model with regard to diversification, fulfillment and branding.

Diversification

In terms of diversification, 3P sellers generally have more freedom. They determine their own sales prices and can therefore also offer their products on other marketplaces, possibly at different prices.

In contrast, product prices at 1P sellers are set by Amazon. While 1P sellers are not prohibited from offering their products elsewhere, their store on Amazon may be removed if they offer the products elsewhere for a lower retail price.

As a 1P seller you are (almost) completely dependent on Amazon. As a result, they are almost obliged to sell their products through one sales channel, in this case Amazon. In that case, 3P sellers have more freedom and options with regard to diversification.

Fulfillment

Do you want to outsource fulfillment for a fee or do you prefer to keep full control over the order fulfillment process yourself? 1P sellers have no control over the method of packaging and shipping. After all, Amazon has acquired product ownership over your products and determines how the products are shipped.

An advantage of this is that you do not have to invest time in setting up a structured logistics system, which ultimately saves time and money. However, you may not be able to ship your products to the customer in the desired way with regard to your brand.

In that case, 3P sellers have more freedom and options. For example, they can choose to pack and ship their products to the customer in their own way, provided Amazon’s quality requirements are met.

In addition, 3P sellers can sign up for the FBA program, which sends their inventory to Amazon’s warehouses and product fulfillment is handled by Amazon. In this case, they know for sure that the method of shipment meets Amazon’s requirements.

Branding

As mentioned earlier, 1P sellers have little or no say in terms of branding. Sure, you can provide product descriptions, images, and marketing resources up front, but ultimately, Amazon decides what to do with it.

Unlike 1P sellers, 3P sellers have complete freedom over their product listings. This allows them to determine their own sales strategy and invest in branding, SEO optimization and marketing.

Sellers who sell their own brand products generally benefit more from selling through a 3P sales model. They retain complete freedom over their branding and can also offer their products elsewhere.

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You can have the e-tailize platform fully operational within 15 minutes with just a few clicks. So start selling via e-tailize today and discover all the possibilities.

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