When harnessed correctly, Amazon is one of the most lucrative global eCommerce platforms for brands to expand their reach and increase their revenues. Deciding the best Amazon strategy for your business includes choosing between platforms, fulfilment types and supply chain management.

Read more about the benefits of selling on Amazon and about expanding to Amazon Europe.

Amazon Platforms: Seller Central vs. Vendor Central

Amazon has two selling platforms: Vendor Central and Seller Central. An Amazon Vendor is a manufacturer or distributor that sells products in bulk at a wholesale price to Amazon. An Amazon Seller is an individual or business that sells products directly to customers on Amazon. The pros and cons of both platforms depend on your business’ existing capabilities and goals for expansion.

Vendor Central

Becoming a Vendor on Amazon Vendor Central is by invitation only. Amazon owns, sells and ships your products under the Amazon Vendor Programme. The “Sold by Amazon” label and Amazon shipping brings higher confidence in your product and brand. Inventory management and order fulfilment becomes Amazon’s responsibility, allowing your company more energy to focus on growing your brand. A disadvantage is that Amazon’s control of the price can have an impact on the sales and prices of your products on other eCommerce platforms.

Seller Central

If you sell your products on multiple eCommerce platforms, Amazon Seller Central gives you more control over pricing. As an Amazon Seller, you also have more control over inventory management and order fulfilment. Without the “Sold by Amazon” label, Sellers must work harder to develop a customer service model to increase customer confidence. Sellers have flexibility in choosing order fulfilment options, an advantage for companies with a strong logistics system (from storage to delivery and customer service) already in place.

Hybrid Selling Model

An increasing number of businesses choose a hybrid model of having both Vendor and Seller Central accounts. They enjoy lower fees and marketing tools via Vendor Central and control over the sales process via Seller Central. Companies have opportunities to build their customer base by selling certain products via Vendor Central while encouraging customers to buy more products from their brand through the Seller Central account.

Fulfilment Types: Fulfilment by Amazon (FBA) vs. Fulfilment by Merchant (FBM)

Under the Vendor Central model, Amazon becomes entirely responsible for product storage and order fulfilment (Fulfilment by Amazon). Companies following the Amazon Seller model have access to two types of fulfilment when selling their products on Amazon: Fulfilment by Amazon (FBA) or Fulfilment by Merchant (FBM, also known as Merchant Fulfilled Network, or MFN).  Under the FBA programme, Amazon handles order fulfilment from purchase to delivery (and returns). Under the FBM programme, the merchant is responsible for all fulfilment aspects.

Fulfilment by Amazon

Merchants take advantage of the Amazon FBA programme to focus on other aspects of building their brand. This is helpful for merchants without a strong logistics system in place for handling shipping and customer service. Amazon’s network includes fulfilment centres worldwide, making it easier to expand your brand’s reach to global markets. Amazon is responsible for customer service for all aspects of shipping and returns.

Fulfilment by Merchant

The Amazon FBM programme is suitable for merchants with an existing logistics system for inventory, shipping and customer service. Merchants have a higher degree of control over the fulfilment process, including customer support, from enquiries to complaints and returns. Merchants selling products that are The FBM programme may also be more suitable for merchants with products that require special handling and delivery.

Pros and Cons

For some merchants, the potentially higher costs of the Amazon FBA programme in combination with having less control over the process may be burdensome, especially if products have expiry dates or if there aren’t enough sales turnover to justify the costs. On the other hand, taking part in Amazon Prime shipping is only possible under the Amazon FBA programme. If merchants are unable to compete with the fast shipping options afforded to Amazon Prime customers, this may cost valuable sales and make it harder to attract and retain customers. Having more control over customer service gives merchants opportunities to build a strong brand backed by loyal customers.

Supply Chain Management: Domestic vs. International

Under the FBA programme, there are two ways of managing supply chains from sourcing to getting products to Amazon warehouses. Domestic supply chain management refers to the movement of products from local factories/warehouses to Amazon fulfilment centres. International supply management refers to the movement of products to Amazon fulfilment centres directly from factories located internationally.

Domestic Supply Chain

Domestic sourcing is ideal for merchants that already have their products in a domestic warehouse. Merchants can easily and quickly restock their products in Amazon fulfilment centres on an ad-hoc basis, making this an ideal approach for transporting low volumes of goods from the merchant’s warehouse to Amazon’s fulfilment centres. It is easy to adjust the volume of goods being transported, and logistics can be planned quickly.

International Supply Chain

Direct Import is ideal for large companies with high sales turnover on Amazon and need to move high volumes of products to Amazon fulfilment centres. By shipping directly to Amazon fulfilment centres from the factory, the supply chain is streamlined. This eliminates middle-man timelines and costs, thus driving up profit margins for the merchant. Logistics under Amazon Direct Import are measured in weeks or months, due to the need of longer-term planning for production and shipping over long distances.

Connecting Supply Chain with Brand Goals

Depending on the goals of growing your brand (either expanding to new markets or increasing your revenue), deciding to manage your product chain domestically or via direct import has a huge part in a successful strategy for selling on Amazon.

Conclusion

Getting the most potential out of your selling experience with Amazon requires careful consideration of the different features offered by the different Amazon platforms that fit best the goals of your brand. Whether you are a small-scale merchant looking to eventually scale up or an already established brand looking to increase profit margins, it is possible to fine tune your strategy that allows your company to grow in the best possible way through consideration of selling platforms, fulfilment types and domestic vs. international supply chain options.

If you would like to know how you can improve your brands’ marketing strategy on Amazon, get in touch with us to schedule a consultation!

Image credit: Oliver Roos for Unsplash