In this article, we will discuss 1P and 3P, its pros and cons, and how these terms relate to Amazon.

The Difference Between Amazon 3P and 1P Selling

Both 3P and 1P involve selling items on Amazon, but the main difference is the target customer. With 1P, you are selling directly to Amazon, whereas 3P means selling directly to customers visiting the Amazon website. 

What is Amazon 1P? | Vendor Central

Amazon 1P is a first-party selling option. It pertains mainly to manufacturers, distributors, or brand owners acting as sellers to Amazon. Amazon purchases products in bulk from these sellers through Amazon Vendor Central. 

Your primary role as a first-party seller is to fulfill the purchase order of Amazon. You will be responsible for sending these orders to Amazon. 

Once the inventory products are received, Amazon will take full control of the product, including its pricing and marketing. Amazon will be selling your products under its name, and it will also be the one handling the shipping, customer service, and Amazon returns. 

Amazon 1P Pros

Improved Visibility: Embracing the role of a 1P seller means better product visibility. With Amazon having control of your product, you are assured of better product placement and marketing opportunities.

Less Burden: Since Amazon will be taking ownership of your product, the burden of customer service and sales tax collection will not be your concern anymore. Amazon will be the one to perform such tedious tasks.

Simplified Inventory: Since Amazon orders large quantities, you can sell your products in bulk. Thus, simplifying your inventory management.  

Trustworthy Label: Once Amazon sells your product under its name, it will have a unique label. 1P products get the “Sold by Amazon.com” label which boosts the confidence of Amazon shoppers in purchasing the listed product. 

Image Source: Amazon

Amazon 1P Cons

Uncertainty: Despite having established a connection with Amazon as a 1P seller, you might still be dropped by Amazon for various reasons. Hence, 1P sellers should always abide by Amazon Vendor Central guidelines. 

Limited Control: When you are a 1P seller, you will not have control over product pricing, shipping, and inventory. Amazon has complete control over those things and would sometimes bypass your MAP pricing (minimum advertised price).

Low-Profit Margin: You cannot expect a huge profit margin when you sell directly to Amazon. As an Amazon 1P seller, you typically receive lower profit as compared to Amazon third-party sellers. 

Payment Terms: One of the drawbacks when selling directly to Amazon as a 1P seller is the slow payment method. Amazon’s payment terms can be as long as 30 to 90 days, which makes it challenging for some businesses’ cash flow. 

What is Amazon 3P? | Seller Central

A more popular Amazon selling option for online sellers and retailers is 3P. It refers to the third-party selling option Amazon offers to those who want to sell directly to customers via Amazon marketplaces.

Unlike Amazon 1P, where transactions are made via Vendor Central, Amazon 3P sellers list their products via Seller Central. Under 3P, a third-party seller may choose to sell either under the Amazon FBA program or Amazon FBM.  

Fulfillment by Amazon or FBA is a service offered by Amazon wherein it will be the one to pick, pack, store, and ship your products. Moreover, under the FBA program, Amazon will also be the one to handle customer service and Amazon returns. 

On the other hand, Fulfillment by Merchant or Amazon FBM is a selling method where sellers list their items on Amazon, but unlike FBA, the storing, shipping, and customer support are handled by third-party sellers independently. 

Amazon 3P Pros

More Control: 3P sellers on Amazon have greater control over their Amazon business, unlike 1P sellers. Third-party Amazon sellers have control over their products’ listing, pricing, advertising, and more.

Better Profitability: Since sellers handle product pricing directly, they can choose how much they want to sell their products. In most cases, Amazon sellers use Amazon repricers for price optimization to obtain a more competitive price.

Global Selling Option: Amazon 3P sellers can list their products on multiple Amazon marketplaces via Seller Central. With the Amazon Global program, third-party sellers can sell their products to consumers around the globe, including those in India, Japan, France, Germany, and more. 

Amazon 3P Cons

Amazon Seller Fees: You will be dealing with numerous seller fees when selling on Amazon as a 3P seller. These fees vary depending on the size and weight of your product and how long it will be stored in the fulfillment center. 

More Tasks: 3P sellers are sometimes overwhelmed by the tasks required when selling on Amazon. Unlike Amazon 1P, where Amazon handles almost all business-related tasks, 3P requires sellers to handle tedious tasks from listing, advertising, and inventory management. 

To automate some aspects of these tasks, sellers often use Amazon seller tools, like Amazon Ads solutions for advertising and AI repricers for automated price adjustments. 

Tax Handling: Amazon 3P sellers will have to handle their taxes, including sales tax and VAT. This task can be confusing and demanding for most sellers, which is why most third-party sellers employ the help of tax service companies to handle business tax matters. 

How to Become an Amazon 1P Seller

Becoming an Amazon 1P seller is more challenging than becoming a 3P seller. For one, there is no way for sellers or entrepreneurs to apply directly. Amazon Vendor Central is currently on an invite-only basis. 

While there is no fixed blueprint for becoming a 1P seller on Amazon, many online resources recommend establishing a solid reputation as a reliable third-party seller. It helps catch the attention of Amazon brand managers or vendor recruiters. 

Moreover, it is crucial to cultivate a robust brand identity not only within the Amazon platform but also beyond it. This could involve participating in trade shows or eCommerce exhibits to enhance your brand presence.

Generally, the best way to be invited into the Amazon Vendor program and become a 1P seller is to: 

• Have popular products on the Amazon marketplace.

• Maintain high sales performance on Seller Central.

• Introduce a product capable of attracting consumers and Vendor Central recruiters.

If Amazon finds your products or brand highly interesting, they will contact you via email. Their recruitment team will explain further the process of joining Amazon Vendor Central and the terms of business.

How to Become an Amazon 3P Seller

Becoming a 3P seller is easier compared to becoming a 1P seller. Anyone can sign-up to become a third-party seller on Amazon. 

Becoming a 3P seller on Amazon means having multiple options in terms of business models. You can be an Amazon arbitrage seller, Amazon private label seller, wholesale seller, handmade seller, or even dropshipper. 

If you want to become a third-party seller on Amazon, we have created a step-by-step guide on How to Become an Amazon Seller. 

Amazon 1P vs 3P: Important Things You Should Know

Whether selling directly to Amazon or online shoppers, you must establish a strategy to make your Amazon business more efficient. To help you create a strategy for your Amazon 1P or Amazon 3P business, here are some of the crucial aspects of the business you should take into account: 

Listing Customization and Flexibility

It is worth emphasizing that with Amazon 1P, it is Amazon who controls the product listings. Amazon can change product listing details, including the title or image used and the listing description. 

As for Amazon 3P sellers, they have more control over the product listings. This gives sellers better flexibility when enhancing their brand, for they can customize their keywords, imagery, and other listing content. However, such customization should still align with Amazon product listing guidelines. 

Account Dynamics

In terms of how you will manage your account and interact with your customers, you must familiarize yourself with Amazon Vendor Central account or Amazon Seller Central account. 

For first-party sellers, you will manage your transactional relationship with Amazon through the Vendor Central portal. Vendor Central allows you to manage orders, generate sales reports, and more. 

On the other hand, third-party sellers, be they FBA or FBM sellers, handle their business via Amazon Seller Central. Seller Central is a portal exclusive to third-party sellers on Amazon. They can see and manage their listings, orders, sales reports, fulfillment, relevant metrics, and seller functions. 

Cash Flow

Whether it is an online business or a traditional business, cash flow is of great importance. Advance planning is vital to avoid cash flow problems affecting your business operation and your transactional relationship with your wholesale supplier or manufacturer. Undermining such a relationship with suppliers can decrease the chances of negotiating a better wholesale price for your inventory.

To avoid such a scenario, it will help to know that Amazon 1P and 3P have different payment terms. As mentioned earlier, the typical payment terms for first-party sellers can be 30 to 90 days, whereas fund transfers for third-party sellers only take 14 days.

Knowing these payment terms for each type of Amazon business can help you manage your finances and grow your business exponentially. 

Fees

For third-party sellers, some of the fees to note include referral fees, fulfillment fees, variable closing fees, storage fees, and selling plan fees that vary depending on your chosen plan. Sellers who choose the Professional selling plan will have to pay a monthly recurring of $39.99, whereas the Individual selling plan will come with a flat fee of $0.99 per unit sold.

On the other hand, the standard fees 1P sellers should prepare for include marketing, remittance, co-op, and packaging fees. Amazon may also charge vendors with a penalty in the form of chargebacks that can impact profit margins.

Customer Interaction

Customer interaction is another aspect of the business that requires careful consideration. If you intend to sell directly to Amazon as a 1P seller, your interaction with end customers is somewhat limited, as Amazon’s own customer service team will handle customer concerns for the products they sell under their own brand.

Conversely, 3P sellers interact more with their customers since they sell directly to Amazon shoppers. This leads to better customer service and enhanced online presence. 

Inventory Management

Inventory management is a crucial part of any business. When selling on Amazon, consider how you can manage your inventory efficiently to avoid any delays and mitigate inventory risk. 

For 1P sellers, most of the inventory management tasks are performed by Amazon. However, you should be prepared to deal with potential inventory buyback if the products will not perform well in the market.

As for Amazon 3P, most of the inventory management tasks are performed by third-party sellers. Third-party sellers are encouraged to maintain inventory levels and develop efficient forecasting to avoid stockouts or overstock situations. This, in turn, helps sellers improve the metrics of their Amazon seller account.

Branding

Becoming an Amazon third-party seller means you have a better opportunity to establish and showcase your brand identity to online shoppers. However, if you prefer to become a 1P seller, it is essential to be ready to deal with the potential decrease of your brand visibility, as products are labeled as “Ships from and sold by Amazon.”

Considering all these insights and understanding the limitations of each account type can aid you in devising a more effective business strategy to enhance the overall success of your Amazon 3P or Amazon 1P business.

Choosing the Right Path for Your Business 

Amazon offers a huge opportunity for online sellers and business owners. Whether you engage as a first-party (1P) seller or a third-party (3P) seller on Amazon, each avenue has its own advantages and disadvantages. Considering the outlined pros and cons above, you can better assess the suitable path for your journey as an online entrepreneur.

It is essential to acknowledge that becoming a 1P seller on Amazon can prove to be demanding, mainly due to its exclusivity. On the other hand, if you aim to swiftly launch your Amazon business, opting for the 3P seller route is more viable.

Whether you’re motivated to make ends meet or save up for the future, starting your own Amazon store can be the perfect side hustle. 

However, great opportunities come with great competition. As more sellers enter the market daily, you need a clear vision to stay ahead of the curve. 

Are you motivated to start an Amazon side hustle for some extra income? Follow along as we take you through the best practices required to set your store up for success.

Organizing Your Amazon Side Hustle

Breaking into the competitive world of Amazon selling isn’t easy. But once you have the store set up, you’ll be able to enjoy a steady stream of income while working on it part-time. 

Follow these initial steps to start your Amazon selling journey:

Research fulfillment options

Everything that involves receiving, processing, and shipping customer orders falls under fulfillment. Needless to say — you need to get fulfillment right to maintain your reputation and customer satisfaction.

Go through each fulfillment option and choose the one that matches your business requirements. To pick the right method, consider factors such as: 

Inventory management

Storage fees

Shipping logistics

Customer service

Overall business strategy

Some of the most commonly used fulfillment options include:

Fulfillment by Amazon (FBA): The most popular and widely used fulfillment method is FBA. It allows you to store your inventory in Amazon fulfillment centers and lets you outsource the order fulfillment process. FBA also makes your products eligible for Amazon Prime, which can boost sales and customer loyalty.

Source

Amazon fulfillment alternative: As a new online seller, consider your budget while choosing a fulfillment method. While Amazon FBA may be the most popular, it also has various fees that might be too high for some businesses. To bridge that gap, you can go for Amazon fulfillment alternatives instead. These services offer benefits such as fast inbound receiving, same-day fulfillment, zero inventory shrinkage, and more to help businesses of all sizes. If FBA isn’t a fit for your business model, try choosing an alternative that caters to your unique needs.

Fulfillment by merchant (FBM): If you prefer handling the products on your own, FBM might be your cup of tea. With this method, the seller is responsible for storing their inventory, packaging products, and shipping them directly to the customer. While FBM requires more effort and resources from the seller, it can offer more flexibility and potentially lower costs.

Set up a business plan 

Before jumping headfirst into your Amazon selling business, the first step is to create a bulletproof business plan.

Figure out your target audience

Find your niche

Check out the competition

Set your prices and profit goals

Plan your marketing strategy

Figure out your operational plan

Make financial projections

Optimizing Your Amazon Listings

Now that you have a business plan, it’s time to start creating listings so you can do some actual selling. 

The goal is to hit the ground running with optimized listings, designed to rank well in Amazon search results and convert visitors into buyers. 

This involves fine-tuning various elements of the product listing so they align with Amazon’s search algorithm. Let’s see how we can achieve that.

Conduct market research

Before you jump into creating a product listing, you need to carry out some more hands-on market research. 

Here are some ways to help you identify profitable product opportunities, gauge customer demand and determine pricing strategies:

Utilize Amazon’s market research tools: Explore Amazon Best Sellers Rank and Amazon Movers and Shakers. These tools can give you useful insights into popular products, along with customer demand and competition trends.

Analyze customer reviews: Customer reviews are a great way to pinpoint what you should do to win them over. Take notes from reviews on competitors’ product listings to learn what customers like and dislike about products in your niche. This can help you identify areas for improvement or product opportunities.

Craft compelling product listings

It’s essential to provide customers with all the information they need to make an informed purchasing decision, and a compelling product listing can do just that. The components of the perfect product listing are:

Product titles: This is the first thing potential customers see when they come across your Amazon listings. Amazon allows product titles of up to 250 characters, but the recommended length is 80. Focus on using descriptive words, and highlight the USPs of the product. 

Description: The product description is one of the main driving factors for sales. Write top-notch descriptions — focus on the benefits, use bullet points for features, and clear, error-free language.

Images: Remember, never compromise on quality when it comes to pictures. Make sure images are well-lit and display the product from multiple angles. Another good practice is to include pictures of the product in use.

Pricing: Price your product too high, and it won’t sell. But set the price too low, and you’ll miss out on profits. Search for similar products and compare their prices to get an idea of what the market is willing to pay. 

Keywords: SEO plays a huge role in making your Amazon listings discoverable. Using relevant and popular keywords in your product title and description can improve your product’s search ranking. You can find high-ranking keywords through the Amazon search or Google Keyword Planner.

Deal with customer feedback and reviews

Happy customers result in a successful Amazon store. 

With so many sellers promoting similar products, excellent customer service is what sets your store apart from others. This involves following up after orders and dealing with negative feedback too.  

Following are some tips for dealing with customer feedback:

Respond promptly and politely to negative reviews.

Offer a solution such as a refund, replacement, or compensation.

Don’t get defensive or try to make excuses.

Learn from the feedback and improve your service.

Encourage positive reviews with great customer service and follow-ups.

Managing Your Amazon Side Hustle

How do you ensure that your Amazon side hustle runs smoothly even when you have a lot on your plate? There are limited hours in the day, but here’s how to make the most out of them. 

Manage inventory and finances

To achieve financial sustainability with your Amazon side gig, you also need to focus on managing your inventory to meet customer demands:

Forecasting demand – Much like any shop, your Amazon store needs to meet the demand and avoid stockouts. For that, you need reliable demand forecasting. For example, fill your inventory with relevant products for the holiday season and special occasions such as the Black Friday sale. Tools like Amazon’s sales data and Google Trends will help you track product demand and adjust your inventory levels accordingly.

Monitoring stock levels – You can’t have a steady sales flow without keeping track of your inventory levels. Amazon’s inventory management tools can help you monitor your stock levels and set up alerts for when running out of inventory.

Tracking sales – Tracking your sales gives you an idea of how well your products are selling and highlights areas of improvement. It also enables you to make informed decisions about your business. You can use Amazon’s seller central and sales reports to analyze your sales data to monitor your store’s progress and improvement.

Time management and scheduling

Selling on Amazon can generate a decent source of passive income but it still requires time and effort to keep it running successfully. 

To effectively manage your time as an Amazon seller, try these:

Create a schedule – Set aside dedicated time blocks for sourcing products, creating listings, managing inventory, and responding to customer inquiries.

Outsource tasks – Consider outsourcing tasks such as bookkeeping, customer service, or product photography to free up your time for other aspects of your business.

Use automation tools – There are tools that can automate important, time-consuming tasks like repricing, inventory management, and order processing. For example, the SellerSnap Amazon Repricer leverages AI to optimize listings and generate maximum profit.

Marketing and Promoting Your Amazon Store

Now that you’ve taken the first step into the world of eCommerce, it’s time to make sure your side hustle takes off. That’s where marketing and promotion strategies come in.

Build a brand and establish customer trust

Establishing your own brand gives you the competitive edge needed to stand out from the millions of sellers trying to attract customers’ attention.

Create a unique brand name and logo

Use high-quality product images and videos

Offer excellent customer service

Engage with your audience on social media

Implement marketing strategies

With thousands of options to choose from, customers don’t have the time to browse through each and every product listing. Most people either go for the top-ranking product or follow their favorite content creator’s recommendations. 

That’s why your products need to be easily discoverable. And this is where marketing and promotion strategies come into play. 

Here’s a video introducing 9 ways to promote your Amazon listings for maximum visibility:

So, in a nutshell, the key to growing your business is finding the right mix of marketing strategies that work for your Amazon business and target audience. Some popular options include:

Amazon Advertising: You can utilize Amazon’s advertising platform to promote your products and maximize visibility. This allows you to run sponsored product and brand ads, and display them on Amazon.

Social media marketing: People from all around the world use social media to make buying decisions. So, if you’re not promoting your product on online platforms such as Facebook, Instagram, Twitter, and TikTok, you’re missing out.

Influencer marketing: Another winning tactic is promotion through influencers on social media. Whether it’s TikTok or Instagram, social media celebrities with large followings can bring you a lot of new customers. 

Email marketing: Email might not be everyone’s first option but providing customers discounts, offers, and promotions still works like a charm. It also builds brand loyalty as customers get informed about new product launches and store updates.

Content marketing: Produce value-added content about your product niche through a blog, a YouTube channel, or other online platforms. As people gravitate towards your content, you’ll automatically get more traffic to your Amazon listings. 

Thriving in the Amazon Side Hustle Game

As you enter the world of Amazon selling, you should remember that success doesn’t come overnight. It’s called a hustle for a reason! 

To thrive on the platform, you need to take your time to organize and perfect the main pillars of a successful eCommerce business. This includes everything from fulfillment to marketing and promotion. 

Just start with a solid business plan and stick to your vision to turn your Amazon store into a profitable side gig.

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About the Author:

Alex Selwitz is the Director of SEO for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce. He has years of experience in eCommerce and digital marketing. In his free time, Alex enjoys playing guitar and learning about new trends in the digital world.

Why Should You Sell On Amazon Prime?

Similar to how Google algorithm works, Amazon also ranks the products it sells according to various criteria. One of the best ways for your product to be ranked higher than others is to sell it on Amazon Prime. And that’s one of the important tips for selling on Amazon.

It has been tested and proven by most sellers that items sold as Prime products are ranked higher than those of non-Amazon Seller Prime products. Similarly, sellers with multiple items sold online are also on a vantage point in terms of winning the highly coveted Amazon Buy Box.

To simply put it, when you sell on Amazon Prime you will enjoy increased sales of your business. This is evidenced by the fact that Prime shoppers purchase more items and buy products frequently as compared to traditional Amazon customers.