By Nick Heethuis, Founder of TripleShot Marketing, an Amazon marketing agency helping brands launch and grow on Amazon.
If you’re a seller on Amazon (or you’re interested in becoming one), you may have heard the terms 1P and 3P being thrown around. But what exactly do these terms mean, and how do they describe your relationship with Amazon? 1P refers to a first-party relationship with Amazon, while 3P is a third-party relationship. They both deal with how much control you have over selling your product on the Amazon marketplace. We’ll go over everything you need to know about Amazon 1P versus 3P and what this means for you as an Amazon seller.
Amazon 1P: Vendor Central
A first-party relationship with Amazon means that you sell your products directly to Amazon. Amazon then sells those products to customers. Your role as the vendor is to fulfill purchase orders (PO) sent by Amazon and ship the product to Amazon. Then, Amazon takes control of the product by pricing it on the marketplace, selling it to customers and shipping it themselves. To be a 1P seller, you must be directly invited by Amazon.
Selling on Amazon via 1P gives you access to Vendor Central, a portal where you can manage information about your products and gain access to POs. While you don’t have control over how Amazon prices your product, you do have the ability to update the product listings, run promotions and advertise your products so they sell faster and so Amazon buys more from you. Amazon will charge you fees for things like chargebacks, co-ops and more.
Amazon 3P: Seller Central
A third-party relationship with Amazon gives you much more control over selling your products on Amazon. In this arrangement, you sell your products directly to consumers on the Amazon marketplace. You have control over the advertising, marketing and other logistics of your products, including shipping. However, you are still able to use Amazon’s fulfillment by Amazon (FBA) shipping program to send your products to customers if you wish.
Selling on Amazon via 3P gives you access to Seller Central, a portal that allows you to manage every aspect of your product listing and marketing. Seller Central allows you to create product detail pages, manage and monitor inventory levels, view the status of your orders and adjust your pricing and all other details.
Pros And Cons Of These Selling Options
Let’s take a look at some of the pros and cons of both 1P and 3P selling.
Pros of Amazon 1P:
• You receive POs from Amazon on a regular basis. No inventory forecasting is required by you.
• You gain the credibility of the “Ships From and Sold by Amazon” Prime badge on your product, which builds customer trust and helps you stand out from other sellers.
• You are offered a consolidated fee structure instead of having to pay multiple fees for features like Fulfillment By Amazon (FBA) and Amazon referrals.
Cons of Amazon 1P:
• You don’t get control over your product prices. This may lead you to break your minimum advertised price (MAP) policy.
• Amazon can change your product descriptions and visual listing elements without your approval.
Pros of Amazon 3P:
• You retain control of your retail prices. This allows you to change it accordingly to remain competitive on Amazon. This also gives you the ability to maintain consistent pricing across all your branded items.
• You retain control of your brand, which can be an important part of establishing your identity in the eyes of your customers.
• You can edit your listings, product detail pages and promotions at will. You don’t need Amazon’s approval to make changes.
Cons of Amazon 3P:
• It requires a great deal of time and overhead to manage all the marketing aspects on your own.
• You’ll have to be well-versed in optimizing your listing for the platform as well as running advertising campaigns.
• You’ll have to pay marketplace fees for things like variable FBA fees, referral fees and more.
The biggest difference between Amazon 1P and Amazon 3P comes down to control. If you’re in a first-party relationship with Amazon, then you’ll act mostly as a wholesale supplier and forego the ability to control your pricing and some branding elements. But if you’re in a third-party relationship, then you’ll be dealing with all the different factors that come with pricing, marketing and operations.