Should you hire an Amazon Vendor Central agency? Is it worth it?
Well, the honest answer is, it depends. For some vendors, it’s absolutely worth the cost. For others, maybe not. The goal of this post is to offer guidance on when hiring an Amazon Vendor Central agency is worthwhile for your business.
First things first, what is Vendor Central? If you’re still in the exploration phase and not yet selling on Amazon, you may be fuzzy about what Vendor Central is and how it differs from Seller Central.
To keep it brief, Vendor Central is the platform that manufacturers use when they wholesale directly to Amazon’s first-party seller (1P) division, Amazon Retail. Seller Central, on the other hand, is the platform that manufacturers or third-party sellers (3P) use when they sell products directly to end consumers on the Amazon marketplace.
Check out this post for a more complete comparison of Vendor Central vs Seller Central.
Vendor Central is an invite-only program. Amazon will only buy products that they are confident that they can sell high volumes of. New or smaller brands are unlikely to receive an invite.
If you operate a large brand, you’re more likely to receive an invite. If you’re an exceptionally large or successful brand, you may receive an ultimatum: Amazon has been known to tell large-volume brands that if they want to sell their products on Amazon, they must exclusively wholesale to Amazon Retail; they are not allowed to sell on Amazon through their own seller account or through third-party sellers.
Naturally, this autocratic approach rubs some people the wrong way. This scenario is why some brands choose to hire an Amazon Vendor Central agency. If you’re restricted to Vendor Central, you may as well get the best results out of it as you can.
If you’re reading this post, chances are you’ve encountered some frustrating problems in Vendor Central. Below are a few of the most common pain points that lead vendors to hire an Amazon Vendor Central agency.
Amazon negotiates their wholesale rates annually. If a manufacturer’s costs of materials, production, transportation, and/or storage rise – as tends to happen during a global pandemic – Amazon won’t change their rates and you eat the costs. As a result, your margins as a vendor can quickly thin.
While an agency cannot necessarily mitigate every rising expense, the best of them can help you implement more cost-effective solutions. Agencies can also pull marketing levers in coordination with supply chain optimization, accelerating sales which leads to more purchase orders.
Speaking of purchase orders, one of Amazon Retail’s biggest value propositions to brands is the fact that they tend to place substantial purchase orders. However, these purchase orders are become less frequent or smaller if your prep issue rate exceeds 5% on the Operational Performance Dashboard. Vendors who need help improving their operational performance score may seek an agency’s assistance.
In addition to impacting purchase orders, failure to meet Amazon’s many requirements can also result in fees, which are called chargebacks. Chargebacks can occur for dozens of reasons, including:
These fees can quickly add up, eroding your margins. Brands that lack the personnel, time, or skillset to negate these issues may seek outside help.
Another reason vendors seek outside help is a lack of training and ongoing support from Amazon. Typically, Amazon assigns a vendor account manager for large brands with high sales volume. Brands that have lower sales volume will not be assigned a dedicated account manager; instead, their account is serviced primarily through automated support.
Without an actual human there to answer urgent questions or collaboratively workshop through issues, vendors may struggle to achieve the quality and performance they desire.
Vendors who lack a vendor account manager may also struggle to get dedicated Vendor Central support in a timely manner. This is an immensely frustrating experience when delays can cause irrevocable harm to your business.
So, with all these challenges at play, how would hiring an Amazon Vendor Central agency help? The two most common approaches are either hiring an Amazon advertising agency or a full-service Amazon agency. Let’s break down the when and why’s.
This first route is for vendors who have a strong grasp of the operations and logistics pieces of the business, but they need help devising and running an effective Amazon advertising strategy.
Amazon advertising can be a powerful lever for your entire Amazon strategy. As sales velocity accelerates, Amazon will place larger and/or more frequent purchase orders to you. As your brand grows, your power at the negotiating table increases.
With an Amazon advertising agency, you continue handling the day-to-day of reviewing P.O.s, comparing them to invoices that still need to be paid, and reviewing your catalog and price suggestions made by Amazon. You’ll also make sure P.O.s are shipping on time, confirm that lead times are accurate, and monitor operational performance scores to ensure that Amazon will continue to view you as a good vendor.
With this option, you’re paying an agency for their Amazon marketing expertise, time, personnel, and tools. Like any market, you’ll have a large number of options to choose from.
If you already use an Amazon advertising agency or you’re shopping for one, we’ve written a blog post with 11 questions you can ask to determine if your Amazon advertising agency is actually competent.
The second route is when you need help with the entire Amazon channel. Perhaps you wish to focus on brick & mortar sales channels, product development, or other aspects of your business.
Regardless of your motivation, with this option, the full-service Amazon agency will handle all elements of daily account management for operations, logistics, and marketing. You will receive regular performance reports and progress updates. If you’d like, you can help coordinate strategy, or you can simply review their recommendations.
There are fewer full-service Amazon Vendor Central agencies than marketing agencies, but there are enough options that you can shop for the right combination of experience, price, and customer service to find an agency you’re happy with.
Check out our post on 5 questions to ask when shopping for an Amazon agency.
For both above options, you may consider hiring the personnel in-house instead of hiring an agency. This is a totally valid approach, but there are good reasons why many brands with the option to hire in-house prefer the agency model.
The primary benefit? With an agency, you get the power of an enterprise for the price of an employee.
Instead of paying the salary and benefits for a full-time employee with the necessary experience, you can pay a similar amount to access all the resources of an agency.
At Kaspien, for example, our agency clients work with a dedicated account manager. That account manager coordinates Kaspien’s internal teams on behalf of their client, drawing on deep expertise from multiple individuals in marketing, logistics, operations, finance, etc. Our clients also directly benefit from Kaspien’s proprietary technology for advertising, seller tracking, reimbursements, dropship, inventory management, and more.
On average, our agency clients see:
In the end, our clients gain much more for their dollar by hiring us as their Amazon agency than they would from hiring a full-time employee.
If you’re in the market for an Amazon agency now, consider reaching out to Kaspien. We’ll connect with you to learn more about the challenges you’re facing, then prepare a proposal defining how Kaspien could help.
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