Amazon Vendor: What it is and how it works

For many companies, selling on Amazon has become a crucial element of their business strategy, enabling them to reach a broad customer base and boost sales of their products. Within this platform, there are various sales models, and one of the most prestigious and exclusive is Amazon Vendor Central. In this article, we will take a closer look at what Amazon Vendor is, how this sales model operates, its advantages and disadvantages, and the conditions required to join it.

What is Amazon Vendor Central?

Amazon Vendor Central is a sales model where the seller supplies wholesale quantities of goods to the platform, which then sells the products on their behalf. This cooperation is based on a B2B relationship. The company sells its goods at wholesale prices, while Amazon handles further distribution, including all customer service and returns. The marketplace also sets the prices at which the products are offered to consumers. This allows sellers to focus on production and supply.

Vendor is an exclusive program to which a platform representative extends invitations. It is estimated that only 0.5% of sellers use this model. The likelihood of receiving an invitation is higher for sellers offering attractive, best-selling brands and products with high customer demand. You cannot start selling under this platform independently; it is not a program available on demand. Specialists from around the world seek sellers with new, promising brands and products that have significant potential to become market hits.

How does Amazon Vendor work?

The Amazon Vendor model is based on regular orders placed by Amazon, which are then fulfilled by the seller and shipped to the appropriate logistics centers. This process is planned and organized to ensure efficiency and speed of delivery, as well as high-quality customer service.

Amazon typically places orders for goods from Vendors twice a week—on Mondays and Wednesdays, although it may do so more frequently at times. Orders usually appear in the morning, between 4:00 AM and 6:00 AM, though they may also appear around 8:00 AM.

Upon receiving an order, the seller begins preparing the goods for shipment. Orders are bulk-shipped to Amazon’s warehouses, which handle further product distribution. Shipments are generally directed to logistics centers appropriate for the respective market. Amazon takes care of all aspects related to packing the shipments. This means sellers do not need to worry about additional aspects of the shipping process.

Advantages of Amazon Vendor

The Amazon Vendor Central sales model offers several benefits that can significantly impact the growth and success of your business:

• Enhanced perception: Sellers who choose the Vendor business model can expect to be viewed more favorably by customers. Products sold directly by Amazon, bearing its logo, enjoy greater trust and prestige. Additionally, these products are more likely to receive designations such as Prime or Amazon’s Choice, further enhancing their credibility and appeal to consumers.
• Better visibility: Products sold under the Vendor model are generally ranked higher by algorithms. Since Amazon sets the prices and promotes the products, they have a better chance of higher visibility on the platform.
• Predictable orders: One of the major benefits is that vendors sell bulk quantities of goods to the platform. Sellers can count on regular orders. This predictability allows for better planning of orders, production, and logistics, leading to improved financial liquidity. Regular orders enable more effective management of resources and help avoid stock shortages.
• Cost efficiency: Sending goods in bulk to Amazon’s warehouses significantly optimizes shipping time and costs. Instead of handling multiple small shipments, you deliver larger batches of goods to the logistics centers appropriate for each market, which is more efficient and economical.
• Price management: In this model, Amazon sets the sales prices of products, which can be both an advantage and a disadvantage. For many sellers, this is convenient as they do not have to monitor and adjust prices based on market needs.

Disadvantages of Amazon Vendor

Despite numerous advantages, there are also some drawbacks associated with participating in the Amazon Vendor Central program:

• Dependence on Amazon’s Orders: Sellers supply wholesale quantities of goods to the platform, and sales depend on how much Amazon orders. In cases of lower demand, this can result in reduced earnings for the seller.
• Price control: Amazon controls the retail prices of products sold under the Vendor model. This can negatively impact orders on other platforms, as customers may find the products cheaper on Amazon. Lack of control over pricing can limit a seller’s flexibility and affect their competitiveness in the market.
• Complex delivery process: Although Amazon handles customer shipping, the producer must deliver goods according to specific guidelines. The lengthy and complex delivery process can be problematic, particularly for smaller companies or those just starting such collaborations.
• Longer payment terms: The payment term is 90 days, which is significantly longer than the 14 days typically seen in Amazon Seller Central. The extended payment period can impact a seller’s cash flow and complicate financial management.
• Market-specific invitations: The Vendor invitation applies only to a specific market. If sales are successful and Amazon is satisfied with the cooperation, there is a possibility of receiving an invitation to other markets. However, if the product is listed in different markets, Amazon might transfer the sales to other countries without sending new invitations. This can create challenges for sellers with distributors abroad who want to control sales there.

Amazon Vendor represents an attractive option for companies seeking a stable partner to sell their products on the Amazon platform. Prestige, stability, logistical support, and increased visibility are just some of the benefits of this sales model. However, before deciding to participate in the Amazon Vendor program, carefully consider its benefits and drawbacks and determine whether you meet the requirements and if this sales model aligns with your business needs and goals.