In the wake of Amazon Retail’s pause on purchase orders to vendors, many business owners are comparing the economics of Amazon’s two selling platforms, Vendor Central and Seller Central.
In this post, we compare their fee structures, detailing the factors brand owners should consider when determining which Amazon sales model to use moving forward. For more information on the operational differences between Vendor Central and Seller Central, read our previous post, Amazon One Vendor: Where to Go from Here.
How Much Does Selling on Amazon Cost?
VENDOR CENTRAL COSTS
Payment. Brands who sell wholesale to Amazon Retail (1P) operate through Vendor Central. Amazon offers standard payment terms in Net-30, Net-60, and Net-90, but there are horror stories of vendors having to chase down Amazon Retail to collect their payments.
Pricing. Amazon Retail’s commitment to offering the lowest price means they don’t abide by manufacturer’s Minimum Advertising Price (MAP) policies. If your product is offered for a below-MAP price anywhere else, Amazon Retail will slash prices to ensure that it always offers shoppers the best deal. Amazon’s commitment to price-matching can result in low or even negative margins for both Amazon and your brand.
Fees. While vendors avoid marketplace fees, they are subjected to a slew of other percentage-based Amazon fees, including marketing co-op, damage allowance, early payment, chargebacks, and shipping to Amazon.
SELLER CENTRAL COSTS
Payment. Brands who sell through third-party retailers like Kaspien or from their own accounts will operate through Seller Central. In our retail partnerships, we offer flexible payment terms, creating a payment plan that works for our partners and Kaspien. When brand owners sell themselves, their income comes directly from sales revenue.
Pricing. If you sell from your own account (including through an agency), you maintain absolute pricing control. If you sell through one or multiple third-party sellers, you can tell them of your pricing policy, but unscrupulous retailers may ignore your MAP to try to capture more sales, creating a pricing race to zero.
Fees. Some third-party sellers like Kaspien are able to provide greater transparency into their partnership terms. We don’t charge hidden percentage-based fees for marketing co-op, damage allowance, early payment, or chargebacks. Instead, most third-party retailers charge a flat marketplace and shipping fee based on the product.
Example of Amazon Retail vs Kaspien Pricing & Profits
|PRODUCT EXAMPLE||PRODUCT A||PRODUCT B|
|Total Marketplace Fees||$0.00||$6.49||$0.00||$20.94|
|Shipping to Amazon||$0.00||$0.94||$0.00||$2.35|
|Standard Payment Terms||Net-90||Net-30||Net-90||Net-30|
|Shipping to Amazon||1.75%||0%||8%||0%|
|Average off invoice charges||15.25%||0%||22%||0%|
|> Paid to Manufacturer||$9.86||$11.63||$17.55||$25.50|
Where to Go from Here
Since Amazon has backtracked, you now have the benefit of preemptive action. Rather than wait to react to Amazon’s next major move towards the fabled One Vendor system, you can be proactive and begin building the infrastructure now. Check out our previous post on the three business models for selling on Amazon to learn the key differences.
For assistance in transferring to or adding a Seller account, contact your Kaspien account manager or reach out through our contact form.
Want more options? Kaspien can help.
If you want to create a Seller Central account to replace or supplement your Vendor Central account, Kaspien has the tools and expertise to help. We support two sales models: traditional retailer and channel management agency.
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