Planet Amazon Podcast

From 1P to 3P: Navigating Amazon's Selling Paths

• Adam Shaffer • Episode 27

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Navigating the complexities of transitioning from Vendor Central to Seller Central can be daunting, but it's a journey many brands must take for better margins. In this episode, Noah Wickham, our expert guest and Sales Director at My Amazon Guy, explores the Amazon Vendor Central and Seller Central platforms and analyzes what makes each one a fit for different businesses. Whether you're a large brand looking for streamlined operations through 1P or a smaller player craving control and flexibility with 3P, this conversation is packed with valuable information to help you decide your best path forward.

Noah discusses logistics and profitability strategies for third-party sellers, highlighting the benefits of Amazon's Fulfilled by Amazon (FBA) service. He mentions why the Prime badge can be a game-changer for boosting sales and how competitive shipping rates can set Amazon sellers apart. He emphasizes that as Amazon shifts its focus from growth to profitability, it is imperative to understand the impact on vendor relationships and the strategic value of hybrid selling models combining 1P and 3P approaches.

Learn about the increasing financial demands on 1P sellers and the rising prominence of 3P sellers, who now dominate a significant portion of Amazon's marketplace. Join us for an episode filled with actionable insights to refine your Amazon strategy.

You can learn more about Noah and My Amazon Guy in the following links:
https://www.linkedin.com/in/noahwickham/
https://myamazonguy.com/ 
https://youtube.com/myamazonguy 
 
 

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The Planet Amazon podcast, brought to you by Phelps United, addresses all things Amazon and other eCommerce marketplaces. In each episode, we talk with Brands, Agencies, and Sellers about Amazon news, new features, policies, brand policies, logistics, marketing, issues, and challenges, among other topics.

To watch all Planet Amazon Podcast episodes, visit our YouTube channel.
To learn more about Phelps United, visit our website.

Announcement:

Welcome to the Planet Amazon podcast with Adam Schaefer, where we explore the world of Amazon and other e-commerce marketplaces. Join us as we delve into the latest strategies and tactics for successful selling on the world's largest online marketplace.

Adam Shaffer:

Hello, I'm Adam Schaefer and welcome to another exciting episode of the Planet Amazon podcast, where we talk about all things Amazon. Today, we're tackling a topic that sparks a lot of debate among brands navigating Amazon, and that's the big question Amazon Vendor Central versus Amazon Seller Central. Which is right for your brand? Which is right for your go-to-market? To help us unpack this, I'm thrilled to welcome Noah Wickham, sales Director at my Amazon Guy. Noah is a seasoned e-commerce expert who has worked with over 400 brands to scale their presence and drive impressive growth on Amazon and beyond. With a proven track record in launching successful brands, optimizing operations and leading strategic ad campaigns, noah brings a wealth of knowledge to our discussion today. Not to mention, he's a Google ad certified professional, which underscores his expertise in digital marketing and delivering ROI driven results. So if you've ever wondered which Amazon platform is the best fit for your business, you won't want to miss this conversation.

Adam Shaffer:

Let's dive in and welcome Noah. Thanks for joining the show. Yeah, thanks for having me. I'm happy to be here. Thanks, and before we get into the nitty gritty, because right now it's an interesting time on Amazon, where there's a lot of pressure on brands to either shift from 1P to 3P, or the brands are getting squeezed enough that they're trying to make this decision for themselves whether they want to venture over to the 3P side of the house. But before we get there, I want everybody to know a bit more about you and I want to know a bit more about you. So can you just tell us a little bit more about your background and I hit some of it, but I'd love to know a bit more.

Noah Wickham:

Yeah, absolutely. So. You hit, I think, the major points right. So I'm Noah Wickham. I'm a sales director here over at my Amazon Guy formerly brand director. But my history in the e-commerce space is very, you know, widely varied, right? So I've been in the e-commerce space for over a decade. At this point I've had my own brands that I've worked with. I have done Shopify, Walmart, Amazon with. I have done Shopify, Walmart, Amazon, eBay is actually funny enough how I got my start reselling products 12, 13 years ago. Overall, mostly I've worked with anything from mom and pop, small startup companies all the way up to Fortune 500 Enterprise. So my experience is varied across the board in e-commerce, but I have kind of taken my home and my stance within the Amazon community, as is, in my opinion, the number one place to be if you are in e-commerce.

Adam Shaffer:

Wow, so a real veteran. So thanks again for joining us today. So let's start with the big question and we'll start drilling down from there, but let's try to. So let's start with the big question and we'll start drilling down from there, but let's try to. And maybe everybody knows this, but let's just repeat it For those unfamiliar can you explain the core differences between Vendor Central and Seller Central?

Noah Wickham:

Yeah, absolutely so. Vendor Central, often referred to as 1P, and then Seller Central, often referred to as 3P. Vendor Central is where, essentially, you are taking your products and you are wholesaling them off to Amazon, who is then going ahead and selling them on their own platform, listed as them, sold by them, fulfilled by them, whereas 3P, a lot of times you have multiple options. You have FBM and FBA, fulfilled by merchant, fulfilled by Amazon. On the 3P side, you are the seller of the product. Amazon can be the one who actually ships the product out if it is an FBA product, but more often than not, in the 3P side, you are the one controlling the entire show, whereas on the 1P vendor central side, amazon controls a large majority of the show. They control the listing, how everything is viewed, the pricing, et cetera, and so you are much more kind of hands-off in that capacity.

Adam Shaffer:

And so, again, you have selling to Amazon. So you're the brand, you're selling it directly to Amazon. Amazon, in this case, is the 1P and they're reselling it on their platform 3P. It could be that the brand has their own store on Amazon and they're sellinglling it on their platform 3P. It could be that the brand has their own store on Amazon and they're selling it on the platform, or they're using other 3Ps. Is that right?

Noah Wickham:

Correct. Yeah, they could be using other 3Ps so you can have resellers if it is Seller Central. So you could still be a wholesaler and working through other options outside of just Amazon for selling on Seller Central.

Adam Shaffer:

Yeah, I mean, and what we do. You know, one of the things we do is we're an agency but we're also a seller and so in many cases we'll go to the brand and say, hey, don't sell to Amazon, sell it to us and we'll sell it on Amazon for you and we'll protect your price and protect your brand and develop your brand. And it's a pretty compelling offer as long as we could make it work for them financially. So tell us what you think the biggest advantages of Vendor Central are and then jump over and tell us what you think the bigger and more important advantages on Seller Central would be.

Noah Wickham:

Yeah, I see Vendor Central as being the hub for especially extremely large brands, right? So Vendor Central if you're a brand that you are not wanting to necessarily dive into understanding Amazon trying to deal with other competitors, things like that Vendor Central is very appealing because you can work out how much you're going to actually spend on advertising. You get the immediate impact of Amazon being the seller right, and Amazon has a lot of pull in what makes a good product versus a bad product. So there are some benefits in that capacity as well, as you get a little bit more control over your entire logistics workflow with Vendor Central. It's the only area that I don't like there with their logistics is, you know, we don't get really all that much forecasting for how much inventory is needed.

Noah Wickham:

But nowadays, vendor Central can be a very viable place if you are a very, very large brand and you're trying to you know, only sell, for instance, to one seller, right. So if you are a very, very large brand and you're trying to only sell, for instance, to one seller, right. So if you're a wholesaler in general and you have an account of 50 other people who are selling your product, it's a lot easier to control your brand presence on the platform if you just sell it to Amazon and work through Amazon to have that overall control, if that makes sense. Now, vice versa, seller Central. What's the pros there? It's that control aspect, right. So, yes, selling just Amazon gives you that level of control where only Amazon is going to be changing things.

Noah Wickham:

But same thing with Seller Central If you are selling it yourself, you get full control over your branding.

Noah Wickham:

You get full control over how your title looks, what your bullet points are, what the product images are, your pricing when you run promotions, when you don't run promotions.

Noah Wickham:

So there's a lot of net benefit as a three-piece seller that you necessarily can't really control much on the Amazon platform. Still on your own, if you're a 1P seller where Amazon still is the one who gets control of that 3P, you get that full brand identity, that full ownership over what does my listing look like, what does my store look like, how much am I doing advertising, as well as the idea that you're likely going to see a little bit of a profit difference between the two 1P. A lot of times you're going to be seeing necessarily an easier profit margin and more consistent profit margin from Amazon purchasing the product from you, whereas with 3P you get to dictate when am I running a promotion? What is my price going to be? If you're going to be selling it at a higher sale volume, then you would be on 1P. You can be making a better profit margin than you necessarily would have been.

Adam Shaffer:

So what's interesting with Vendor Central? Like I agree, I think it's good for the largest brands, but I think it does take some pricing control away and what will happen is that Amazon will still dictate the pricing. So if you have a wide channel and you have other resellers selling in other channels, it could wind up creating a lot of conflict with them when, if you are doing it yourself as a 3P, that pricing is really important.

Noah Wickham:

That pricing is really important and that's what we run into so often is that they're trying the brands are trying to control what the pricing would be, and not to all the time with 1P. That happens is if, for instance, you are selling to Amazon but you're also selling to, let's say, walmart and you're selling to Nordstrom or some other type of retail market, you will very frequently see if one of those retail markets decides to do some form of promotion where the product is now 20% off, 30% off. It doesn't matter what. The actual cost that you end up selling the product at Amazon will then match that. But if Amazon's not meeting the margins that they are, neither are you when it comes to what they will be willing to purchase the product for. So pricing in general 1P versus 3P is always one of the bigger aspects when it comes to kind of profitability and how you handle the overall market there.

Adam Shaffer:

And then you know, explain. I think a lot of people think oh, I'm 3P and you started to say it. But I'm a 3P, so that means I have to ship all these products to these customers. And it's not like that at all.

Noah Wickham:

Amazon is the fulfillment if you want it to be so, just explain that what fulfilled by merchant and fulfilled by Amazon. Yeah, there are so many options nowadays when it comes to how you go about shipping and fulfilling products. I mean, even if you are a 3P seller central seller of your product you can send product into Amazon and have them still fulfill it through FBA. Secondarily to that, even if you still don't want to be the one shipping out your own product and fulfilling it, there are a million different 3PL companies that you can work with in this day and age in which they will ship out the product for you, and a lot of times you can still get prime shipping on Amazon even with those 3PLs as an FBM. So there's a lot of different variation option around how logistics can work for your products.

Noah Wickham:

As a 3PL seller, I'm always going to be a firm believer in the idea that FBA is usually going to be the best, just because you get the badging for Prime and you get that shipped by Amazon. The two-day shipping guarantee all of those situations as well. And then, on top of that, Amazon has released things such as AWD, which is essentially just their warehousing platform, so their warehouse distribution, where you can send products direct from your manufacturer into AWD and then from there Amazon will trickle those products into FBA for fulfillment as you need them. So it really cleans up the entire logistics process to make it. So. Yeah, if you don't want to ship your own products, that's totally fine. There's not going to be a huge heavy lift between switching from 1P to 3P or vice versa.

Adam Shaffer:

And that Prime badge is incredibly important. I mean, maybe you could talk a bit more about that, because if you don't have seller fulfilled prime meaning that you ship at BM but you're not able to put that prime medallion on there it definitely affects sales.

Noah Wickham:

Oh, absolutely. The prime medallion is one of the, I think, bigger converting factors and I think it has been purposefully made that way, right, in the sense of people are so accustomed and so used to that prime badging instantly meaning two-day shipping right, it's one of the reasons that it created Amazon as the behemoth of a platform that it is. It's just from people understanding and knowing that they are going to get fast shipping times if something is prime. So the prime badging is a huge, huge conversion where I've seen sellers that are FBM go from FBM to then FBA, see an instant uptick of nearly doubling in sales just from having that.

Adam Shaffer:

So what I've also found and unless we're just not great at understanding what shipping prices are when you try to do shipping yourself, not with Amazon is that no matter what, amazon's FBA pricing for shipping is still the lowest price in town. Now if you want to ship something USPS or mail, maybe on something very small and light, you could do well, but even on small and light with Amazon's FBA the pricing is great. So I don't know how people can beat that other than get it up to Amazon where you can. There's a cost to get it up there, but their shipping is amazing.

Noah Wickham:

Yeah, I think it's interesting because their shipping pricing is amazing, and I will say that they've done very well at making that pricing more available, even to like FBM sellers, right. So Amazon has a platform that purchased a couple of years ago called Vico, and Vico is actually a free to use platform. It just charges a little bit extra on every single shipped unit. It just charges a little bit extra on every single shipped unit, but it takes the pricing that Amazon has been able to curate from shipping millions of products every single day and passes it on to you as the seller. Now, is that a viable option as an FBM seller? Absolutely. Is it still something in that capacity where it's going to beat Amazon's actual fulfillment? Probably not. Amazon can always have cheaper fulfillment than pretty much anyone because, again, they're doing millions of orders at this point in time. I would imagine that UPS shipment-wise Amazon is Amazon trucks everywhere just delivering stuff all day long in every neighborhood.

Adam Shaffer:

So what's interesting is how do I put it? What I'm seeing and what is definitely happening right now is Amazon, who used to be really focused on growth, and they still care about growth. I mean, that's very important to them, but they're much more fixated on profitability now. So where there were brands getting maybe a bit of a free ride, they're now squeezing more and more. So every year, they have a meeting with their brands that they buy from and they negotiate with them, always trying to get a better deal. So they're trying to get better pricing, better allowances, more marketing funds, and so the squeeze has been on, and what I'm seeing is that it's too much for some of these brands to bear, so they're looking elsewhere, and so is there. I mean, I have my own beliefs on this, but do you see a play for brands that are hybrid, that sell to Amazon and also sell 3P, or do you think you need to be one or the other?

Noah Wickham:

There is room for a hybrid play, right. So there's always going to be room for a hybrid play. Now, that being said, many people know about, for instance, the Vendor Central Purge that started a couple months back.

Adam Shaffer:

Tell us more about it in case people don't know that.

Noah Wickham:

Yeah, absolutely so. The Vendor Central Purge is essentially where. Back in I believe, august 2024, amazon sent out a letter where essentially they said hey, by this date we are going to no longer be purchasing product from you. Moving forward, you are no longer going to be a part of the 1P Vendor Central network, anything like that. Now everyone thought that they were doing that just once, and then, I believe it was about four or five weeks later, they sent out another letter. Five weeks after that, another letter, and so it very quickly turned into people being able to line up and say, oh, every X weeks Amazon is sending this letter out to more and more vendor central sellers and they are kicking them off the platform.

Noah Wickham:

Now, some insider knowledge that I kind of learned as well from having talked to a couple different vendor central reps, as well as talking to a lot of people who are higher up on the vendor central side, is that it seems that the exact margin is that if you sell a product somewhere between zero and $60, amazon a couple of years ago about two years ago got new investors around the Vendor Central 1P platform and they're looking at getting only roughly 60% margins.

Noah Wickham:

So that means that if you are a product or a seller who is selling to Amazon and Amazon can't seem to get 60% sales margins on your product, you're probably not going to be lasting much longer.

Noah Wickham:

From my knowledge and everything, the Vendor Central purge will probably stop when Amazon has roughly only around the top 1%. It seems like from what I've seen on who's been kicked off, if you're doing less than about $3 million a year on Vendor Central, you're likely not within the realm of what Amazon will keep Now. They haven't released anything recently in 2025 as of yet, for any new people being kicked off the platform, but the dates that people had suspected go all the way out into April. So I guess we'll continue to see if the vendor central purge continues to happen. But again, if you're kind of, you know trying to make that profitability with Amazon. Amazon from a lot of vendor central clients I've talked to and brands I've talked to this year during their renegotiation phase before the new year, it does seem very much like Amazon is trying to push people to either choose to stay on the platform a much, much lower profitability to themselves or to just go off the platform entirely without Amazon having to necessarily kick them off.

Adam Shaffer:

I didn't realize that. So you're saying that you think that it's more of a margin thing than a revenue thing?

Noah Wickham:

I think it's a mix of both right. So, by and large, I think the way that you can look at it is like this If someone is typically making $3 million plus on the Amazon platform from Vendor Central, more than likely Amazon is probably having a much higher margin on that right and they're also someone who's probably willing to invest money. So, for instance, amazon's fees when it comes to Vendor Central, such as their ability to commit certain amount of ad dollars. Then try and say hey, you have to spend our $250,000 allotment per year. If you're doing $3 million, that's probably within the realm of your capability, whereas if you're doing less than that, you're not.

Adam Shaffer:

The 60% margin is what I've heard how do they do 60%? I mean that's shocking. I didn't know that one. I knew the size, but I didn't know that 60% margin, because we're definitely talking to a lot more brands now than ever that are being squeezed or, like you said, getting that letter or thinking they're going to get the letter, and so it's created a boon for call it agencies and three Ps that do buy and sell agency work. So really, really interesting, but let's stay with that for a little bit. So if you're a brand, are there certain categories that you could make the threshold with Amazon? Are there certain industries you think are better to be selling to Amazon, or is it not industry or category specific?

Noah Wickham:

I mean it's always going to be somewhat category specific, right? So I talked about the 60% margins that you know they're typical margins there, the beauty brands of the world, you know electronics. So these are all the categories as well. When you think of those categories that are also about the top 1% of vendors right on vendor central platform, you know the top 6,000 or so, which would encompass the top 1% all do roughly more than 3% of the platform. A weird little fact about Vendor Central right now is that about 100 different vendors make up roughly 60% of all vendor central sales.

Adam Shaffer:

So a hundred, a hundred brands or vendors make up what percent.

Noah Wickham:

About 60%, 60 to 70%, it's, it's. Uh, I probably pulled the numbers actually while we're here, but it's it's a huge margin where it's, think, you know, the Microsoft's of the world, the Dell, the you know brands that are just massive and selling the vendor central now thing is, the brand itself doesn't necessarily have to be the one selling the product to vendor central at the end of the day, right so that, uh, you know, 60 could be made up of uh 100, 200 different sellers who are supplying that through a wholesale network to Amazon.

Adam Shaffer:

Yeah, I got it. But brands like Apple and Samsung and all that stuff, they're killing it. No, of course, always. What I found is that so we'll meet a brand and we'll say, okay, you're selling on Amazon. We work with them to figure out what they're doing on Amazon, between what they sell to Amazon. And then there's other three Ps that are selling this stuff, because outside of the top brands nobody's really that clean, and so we'll look at the whole thing and say, okay, you're doing about this much money on Amazon, let's take your ASINs and put it through the Amazon Seller Central calculator. Do you understand? Can you explain maybe, what the calculator is and how people use it? Because we use it for everything.

Noah Wickham:

All the time. I love the that's probably the single best piece of technology Amazon has given to sellers is the profitability calculator. 99% of the time, your profitability on Seller Central is just going to be higher. It just will that will on Vendor Central. That being said, I think there's a merit to utilizing something like the profitability calculator to see oh I am going to make more profit on Seller Central but still thinking about the volume aspect of things. Right, so you can always make more profit. Amazon 1P vendor central is usually always going to be more of a volume game than anything, and you're probably not going to see the same volume on 3P, especially if you do like a instant switch over from one or the other. I usually see about a six-month downtrend in overall sales volume when someone switches from 1P to 3P, even if it's at a higher profit margin. You might end up making more profit at the end of the year, but you're probably going to be selling less overall.

Adam Shaffer:

What I found with the calculator is that what we first will do is we'll take the reasons, we'll put it through the calculator and then we'll say hey, if you were to sell as a 3P without anybody helping you, with you just doing it yourself, no fees to anybody, just you solo, this is how much money you would make per unit on every one of these ASINs, based on their fee, their FBA, shipping up to Amazon, blah, blah, blah. Shipping up to Amazon, blah, blah, blah. And when you look at it, if the products are too heavy and the average selling price is too low, there's no way to make money. So it's almost like, in many cases, somehow Amazon is able to buy some of this stuff that they would still lose. So there's definitely this moment in time where, if you try to do it yourself, you're going to die and you have to keep on selling it to Amazon, but Amazon at that point might not even want to be selling it anymore.

Noah Wickham:

Yeah, the Vendor Central purge to me has come from the aspect of I don't believe Vendor Central has ever been profitable for Amazon. So everyone knows that their new CEO everything came in back in 2022. Back in 2022, when he first came in, amazon in general was not doing well profitability-wise. They were actually a lot of times in the negative in a lot of their areas. He has since added fees, charged everything, the wazoo and everything, which has caused it to be more expensive. Now the vendor central side of Amazon specifically back in 2023, got new investors into it. Part of that new investment is trying to make vendor central an actual profitable endeavor.

Noah Wickham:

You talk about the big and bulky items. Amazon was never making money delivering those big and bulky items. The way that they were essentially running the business model was yes, we can purchase this from you for $10. We will sell it for $30, even though for you to sell it and ship at $30 would cost $28. We own the shipping, so we can just eat that entire cost of shipping as a you know cost of doing business right. Realistically, of course, anyone can look then and say, yeah, that does make sense. Eventually it will catch up to you and I think that's exactly what has happened here with that.

Adam Shaffer:

That's what I, that's what I think too, because you know, like we have silly things I don't want to say silly, they're huge sellers but things like bird food right, bird food it'll be something like 1499 for a 10 pound bag. I'm just making it up, it's something like that, and there's no way that you could ship it and so. But Amazon has been doing it and so, like I try to explain, that's why we run it through the calculator. First we say, look, if you were to do it yourself and your stuff weighs 10, 15 pounds and you're only selling it for $9.99 or $19.99, you're not going to be able to make money. So I wouldn't shift. But then there's plenty that we take and it's higher ASP, lighter products, and they could make a lot more money. So you really got to look at the two, because I mean, there's been. So we seem to get a lot more people that have bulky products coming to us saying can you help us? Because Amazon must be pushing them.

Noah Wickham:

Amazon. I mean, that's the thing. Amazon has been the dominator of the last mile Right In the customer journey for so long, and so they just kind of ate that fee and now it's like, oh yeah, when people look at it from a profitability standpoint it doesn't make much sense, especially they would have to a lot of times. I see you know a place like that and brands like that. If they were to sell it and do it themselves through Amazon or through their own shipping, doesn't matter They'd end up having to double, if not triple, their pricing to even make it work from a profitability, feasibility standpoint.

Adam Shaffer:

So I totally agree, you couldn't do it. I mean the stuff that you buy at Home Depot, like a bag of mulch or something. If you try to buy it on Amazon, it's hard because they'll bring pallets of this stuff to Home Depot and people take them themselves and leave from the store. But it's not like that with the shipping. So it's interesting that for so many years, like you said, they've been doing it. But I definitely see them clawing back on that now. I'll change the topic just a little bit. Same with Vendor Central and Seller Central differences. Is there a difference with advertising?

Noah Wickham:

Is there a different way that you would go about? You know 3P versus 1P advertising is. You know your click-through and conversion factor, right? So you're probably going to convert a little bit better on your advertising, no matter what when you are 3P, just because again you have that sold by, shipped by Amazon. Badging makes things a lot more comfortable for the end consumer at the end of the day, so the advertising there is always going to have a bit of a higher conversion rate.

Noah Wickham:

That being said, I also feel that 1P advertising is usually fairly limited comparatively to what you can do with 3P, because, again, with 3P, you have much more control over the entire customer journey, including things such as doing promotions, doing specific sponsored brand campaigns, sponsored display campaigns. Amazon recently allows the ability to do sponsored product campaigns on other websites, right? So things like that come along and make 3P advertising more versatile, whereas 1P advertising is a bit more straightforward in how you can really get a conversion. So you can get a much better overall advertising rate on 1P, but you're not going to have as much of an ability to grow your product and your brand on 1P as you will with 3P with the versatility that you have.

Adam Shaffer:

Okay, so you actually have more flexibility with advertising on 3P. That's good to have. Okay, so, so you actually have more flexibility with advertising on 3P. That's good to know. And then, what about? I don't want to scare the other brands that are listening in and trying to decide, but what do you have to be much better at? As if, if you're going to become a 3P seller, what do you have to be really good at as compared to if you're just selling to Amazon and fulfilling their POs?

Noah Wickham:

Ooh, everything kind of you know. So you have to understand. Yeah, I mean you have to understand SEO. You have to understand. You have to understand SEO. You have to understand advertising a lot more. You have to understand how to be strategic in your promotions. There are things such as even remarketing campaigns. These are all things where being your own three-piece seller, you usually are going to have a bit of a hard time grasping how much there actually is to the Amazon platform for you to be doing every single day. So even things when it comes to troubleshooting is one of the biggest areas that I see.

Noah Wickham:

You know one piece sellers who are making a transition. They don't realize that. You know they don't have a rep that they can ask to solve a problem for them anymore, right? They have to go through customer, you know seller support which, as we all know, sucks. There's just so many intricacies to being a seller versus a wholesaler, right? So there are a lot of 1P brands I have talked to and worked with that they don't really do anything on 1P. They sell the product to Amazon. Amazon created the listings, did everything for them, and that's they wipe their hands clean at the end of the day, whereas you know, transitioning over to 3P, they have to manage everything themselves. They have to manage the listings, they have to make updates to the SEO, they have to make sure that their advertising is staying on budget and on track, things like that.

Adam Shaffer:

What about the logistics and products? Is there a difference between shipping to Amazon when they give you POs or shipping it to FBA yourself?

Noah Wickham:

Yeah, I think not majorly. The major difference is obviously, when you're talking logistics is Amazon will say, hey, we would like to purchase this PO which contains this many units for this price, right. So they send you a PO every week two weeks depends on the seller right and that PO will be an exact amount, Whereas switching over to the 3P side, you have to do that forecasting yourself right. You have to figure out how many units am I going to send in, what makes sense to send in based on my sales volume. I will be bluntly honest, I think forecasting is one area that, like 99% of sellers just are really, really bad at when they get started on 3P.

Adam Shaffer:

And being out of stock is not good, but having too much stock is bad news.

Noah Wickham:

There's no fine line there, unfortunately. Amazon will charge you for having too little stock and they'll charge you for having too much stock.

Adam Shaffer:

And so how does returns work with 1P versus 3P? Is there a difference? Because they all go back to the brand or what?

Noah Wickham:

Yeah, there's multiple different ways you can set it up, obviously, right. So the 1P side of things obviously is much, much easier on that end, simply because Amazon handles end-to-end everything there. The 3P side, you can set it up in a few different ways, right? So you can have it added back into inventory. If it's still sellable, you can have it liquidated. If it's not sellable, you can have Amazon Warehouse take it and sell it as a used product as well. So there's a lot of versatility you can do on the three piece side versus the one piece side. It's kind of just like oh, amazon deals with it and then they send you know anything, they have to back to us if they want to Cool.

Adam Shaffer:

I hate returns. Everybody hates returns, don't we all? Yeah, it's an ugly part of the business, and especially when you get scammed by a customer, that's the worst.

Noah Wickham:

But that means that they took something old and put it in a box and sent it back to you and kept the new thing. It's never nice or fun. My, uh, my favorite favorite story, uh, from back in the day with one of my brands is that, uh, I end up getting a bunch of returns from somebody who ordered like 25 products at once, uh, so they and these were big bulky, uh like metal shelving type things, um, and they end up returning all 25 uh, which I thought was odd. So amazon approved the return. Once it came through, I had to ask amazon to send it back and to check the boxes. Lo and behold, they had filled the boxes with rocks. Oh, come on 100. This was back before amazon had a lot better checks and balances around the returns. Obviously that they do nowadays, but that used to be a super common thing. That would happen a box of rocks awesome so yeah, that was that.

Noah Wickham:

That's one of my funnier return stories on amazon.

Adam Shaffer:

That, uh, I've heard some amazing stories where somebody would buy cleats for their kids and send back the old ones every year when they grew out of them. So every year they were buying them and sending back the old ones. It's kind of gross, but whatever, people are people, so hopefully there's a lot less of them than the good guys. So, talking about recommendations for brands, so if the brand, okay, say hey, noah, okay, we want to make the move, we want to move from 1P to 3P, what would the process be? How would you advise them?

Noah Wickham:

First and foremost, the number one thing I will tell anyone who is currently 1P if they want to go 3P, is if you do not have your seller central account set up set up before you even think about doing anything else, make sure you actually have a seller central set up, tied to your brand registry. There are no issues there whatsoever, because the amount of 3P that I've started to work with where they're like, oh, we don't have a 1P, we can't, or, sorry, 1p that I've worked with that don't have a 3P it's baffling, right. So always, always, always, make sure you have a seller central that is active, available and attached to your brand registry. Now the thing is, if you are in a scenario in which Amazon is still trying to purchase your products and everything and you're wanting to migrate away from 1P, that's a much trickier process than if Amazon does the old boot and kicks you off. If Amazon does the old boot and kicks you off, you're scot-free. You can transfer all your listings to Seller Central. You can do everything you want. You should have a fairly easy time there.

Noah Wickham:

Now, if you're not, you have to go through a process where, essentially, you have to get Amazon to ungate your products from them being the primary contributor, because that is the biggest issue with people who are trying to go from 1P to 3P, where Amazon technically owns the ability to sell and list the product and the ability to make changes on the product.

Noah Wickham:

They are considered the primary contributor to the listing and even if you are the brand registered owner, amazon still gets final say. So that process in of itself especially if Amazon still wants to purchase from you it's not an easy one. Amazon still wants to purchase from you. It's not an easy one, unfortunately. I would, uh I would always advise uh you know whether I'm talking to someone or somebody is listening to this and looking for advice. Uh, reach out to someone who has experience in the realm of doing this, because it uh is a long and tedious process, unfortunately, uh, especially if you don't know what you're doing, uh, especially if Amazon pushes back and is you're doing, especially if Amazon pushes back and is like, no, we're not going to release these because you either get to sell them to us or not sell them at all, which I have seen happen a few times, which is never fun to deal with, unfortunately.

Adam Shaffer:

Okay, that's interesting. I mean, if the product is being sold through distribution and there are other three-piece sellers on it and Amazon's buying it direct and selling it, so you have multiple sellers on the ASIN, it's probably a little easier, but if it's completely clean, it's hard.

Noah Wickham:

Yeah, it's a little bit easier. The primary thing that you're trying to get from Amazon when switching from 1P to 3P is that contribution rate, so the ability to change a listing image, change your title, change your bullet points right. Amazon will restrict people from being able to do that, especially if they're still selling the product. So if Amazon is ever selling a product, they get the final say in how everything on there works, even if the brand owns a brand registry?

Noah Wickham:

Absolutely. Amazon gets primary contribution rights for any products that is being sold through Vendor Central, so they get to have the final say on how everything looks. It's a lot easier to make changes to listings through Vendor Central than it is through Seller Central. So, for instance, one of the things I'll always have people who are switching from 1P to 3P do is keep their 1P account active and open because we can at least in that capacity, even in the middle of this transition, make changes to the listings, push through title changes, and Amazon's much more open and flexible to it if you're making those changes through vendor than if you are trying to push them through seller.

Adam Shaffer:

Okay, and then continuing on. So basically, make sure you have a three-piece store set up, make sure you have your brand registered to attach to it If you don't have the rights to sell the product. You got to figure it out and work with somebody to get the rights to sell the product, because Amazon might want to still continue to sell it and they might not let it go that easy. So you need to find a professional to help you navigate this. But so now you're selling, you got the rights, you're selling it, you create your 3P store. What's next?

Noah Wickham:

Got to get all your product listings up. You're selling it right. You got to make sure you're still optimizing. And the biggest thing I think that people will find as an issue switching from 1P to 3P is that they are not used to the actual customer journey, right. So I always tell people when they switch from 1P to 3P, expect somewhere between a 40% and 60% sales drop off for the first six months. Now, that being said, we talked about the profitability calculator a little bit earlier. That profitability calculator will help us again see how bad off are we going to be, comparatively to where we actually were with vendor central as well. But, all that being said, it typically will. You'll see it uptick again once you actually get selling and get the product actually in customers' hands.

Noah Wickham:

So 3P is a much different customer journey than 1P because again you don't have the big, bold Amazon badge that shows that it's sold, shipped by Amazon. You have to actually convince customers. You now have less of an opportunity to be overall pick badge for your product because you are selling it yourself, even if it's FBA. So there's a lot intricacies people need to think about with 3P, not necessarily saying it's always going to be better than 1P right and same thing with 1P. It's not necessarily better than 3P. I think there is a fine line for each, but for most sellers I would say, at the very least a healthy mix. I don't think one or the other is always the option.

Adam Shaffer:

And the evaluation that the brands need to go through is simply what is their relationship with Amazon, if they're selling 1P or not, and can they take ASINs that aren't focused on by Amazon, put them on their own 3P or get a different 3P selling them, start building that way. But I guess it's the margins. Like can you or can't you make more money doing this, unless they're throwing you off? Maybe you shouldn't leave, but if they're throwing you off, you got to bite the bullet and do it. So I think that's part of the evaluation process. Like are they going to do it to you?

Noah Wickham:

Yeah, you got to bite that bullet. You also got to see again, there are different fees and different allocations that they're requiring. So again, I've seen a lot of brands where they have had an increase in their allocation budget that they have to have to 250k this year and that's up a hundred to 150k.

Adam Shaffer:

So that 250k is, is there spent on advertising.

Noah Wickham:

No. So that well, it's a mix. So that's actually Amazon's own budget where, essentially, you have to have that much in overall kind of fee generation. So you have to commit that much as well as yes to advertising as well as to overall process. So's again up $100,000 to $150,000 over prior years, which you know that's a big jump and that's actually one of the bigger things that I'm seeing this year, with a lot of 1P where a lot of people are telling me this is probably going to be their last year, just because Amazon gave short notice. People are telling me this is probably going to be their last year just because Amazon gave short notice. They always give short notice on contract changes, unfortunately, and they don't take any different than what the contract says, even if you try and negotiate, unfortunately.

Adam Shaffer:

The larger brands that I talk to have to also pay for a person. Do you hear about that? They need to have an Amazon rep.

Noah Wickham:

And that's not cheap. That's you know. That's part of that 250 K. Uh, is that's going towards um having that rep associated? Because normally you the way you used to be vendor is you would get invited to the platform, then you would have a rep assigned to you. Uh, and then from there that rep would just be a part of your ecosystem. They would work with Tom brands. Wasn't a charge there, none of the fees were affected with that. Nowadays, yeah, you have to pay for that rep, which is insanity. I had a client I was working with last year where they had gone. I think it was like a year and a half without a rep. They don't know what happened to their previous one, but one day the email stopped working and then Amazon never assigned them a new rep and I think that's kind of indicative also of the fact that nobody's getting vendor central invites anymore from reps or anything. I was at Accelerate last year. I met one vendor central rep and they were like, yeah, it's pretty much a skeleton crew over there.

Adam Shaffer:

Really Okay. That's interesting information. And so when you think about it all, you seem like you're pretty agnostic. 1p or 3P, where do you lean? I mean, I are currently 3P and have never been 1P.

Noah Wickham:

Don't expect to ever be 1P at this point and I would not push you to ever go to 1P. If you are 1P, however, and you've never been 3P, I would push you to go at least a mix of the two. There is not much benefit for a 3P seller to move to 1P, but there's a lot of benefit, in my mind, for a 1P to move to 3P. It's one of those that, if you start out as 1P, it's probably fantastic for you, especially in the Amazon world, and 3P is going to seem like especially in the Amazon world, and 3P is going to seem like a terrible, terrible time because of how much you have to do on the platform. But realistically, I think 3P sellers in general, especially if you're doing anything less than probably 5 million 3P, 1p would not be worth the investment to even try and get on the platform. So 5 million a year, yeah, which realistically is pretty small as far as Amazon. No.

Adam Shaffer:

I mean, it's still a decent account.

Noah Wickham:

It's a decent account, but from a 1P perspective kind of pittance right, and so that's the big thing to take in mind is. I also just don't think 1P is ever going to be handing out invitations except for top, top, top 1% brands.

Adam Shaffer:

Yeah, I mean in 3P is I mean people. I don't think the end users completely understand that so much of what they buy is coming from a 3P. It's being shipped by Amazon, which is all that matters in its prime, but about close to 70% of the gross merchandise value on Amazon is 3P. So you know, the tip of the spear is really Amazon selling, like you said, those big, big, big brands, but the balance of the stuff is other people. Yeah Well, and that's again that's the big thing it's.

Noah Wickham:

You know it's something like 30, 40% of all sales come from, you know, vendor central. But of those 30, 40%, you know 60, 70% of it comes from a hundred different brands, you know. So it's really, it's really a small margin that makes up, uh, the overall but granted Amazon's ginormous right.

Adam Shaffer:

So that's part of that, it's kind of the fun of it. So you know, coming down to the end here, what are we not talking about? That's important for people to know, about? 1p versus 3P what are we missing?

Noah Wickham:

The number one thing that you know people need to understand 1P versus 3P. I think I kind of started touching on it there. But if you're 3P, don't ever think about going 1P. Realistically it's not worth it. If you ever are thinking about going 1P, you're probably a top 1% brand on the platform and the reality is, even if you are a top 1%, you're probably going to be still making more money on 3P from a profitability perspective. If you're 1P right now and you haven't gotten a letter from Amazon anytime soon or anytime recently, be fearful. I don't see Vendor Central living another two, three, four years. Even if they're making all these changes for their profitability and making a more profitable solution for them, it probably just won't be realistically. People have been saying Vendor Central has been dying for the last five years. I think last year was a good nail in the coffin. Whether that final nail hits this year, next year or the year after, unsure, but it's definitely on the downtrend and I would prep for it if you're not already.

Adam Shaffer:

And if people need help, I mean, obviously they could always talk to us at Phelps United, but how do they reach you, noah, and you know how can you help? Yeah absolutely.

Noah Wickham:

People can always check us out uh our website, myamzonguycom. So right there, that sign just myamzonguycom is our website. Uh, we do tons of 1p to 3p uh transitions all the time. Um, it's one of the things that we have a special account program for as well. Um work with clients all the time. Like that you can also reach out to uh me specifically. If you just want to shoot an email over to sales at myamsonguy, I'm always happy to help anyone and chat with anyone on uh seeing if it would would be something we can help them out with.

Adam Shaffer:

Great, I mean super important, very relevant topic, and really thank you so much for helping us talk about it, navigate it and think about it. This is something that I think most brands are thinking about right now.

Noah Wickham:

Absolutely. It's a huge topic in space and I'm sure it will get more insane as the year goes on.

Adam Shaffer:

Yeah, well, good for everybody to think about it Always, every year, rethink about your strategy, rethink your strategy. Make sure that it's the right strategy for your brand, and companies like my Amazon guy and Phelps United are here to help. There's a lot of love and help we can give, so think about that. Don't do it by yourself. No, do not Do not. Thank you. Thanks, noah. Thanks for joining us today.

Noah Wickham:

Thanks, Sam.

Announcement:

Thank you for watching another episode of the Planet Amazon podcast, where we talk all things Amazon. If you want to learn about how to accelerate your sales on Amazon, visit Phelps United's website at phelpsunitedcom.

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Adam Shaffer

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Noah Wickham

Guest