Recent data from Unioncamere have shown that, over the past 5 years, more and more Italian companies have opened up the online channel to increase their sales: we are talking mainly about small and medium-sized enterprises, which have always lagged behind in terms of digitalisation. Whether through the development of their e-commerce channels or through marketplace platforms (one above all Amazon), today in Italy there are more than 23,000.
If you consider Amazon in particular, you will discover a significant number: in Italy, over 18,000 companies sell their products on the most famous marketplace platform in the world. And this number has continued to increase following the Covid-19 pandemic, which forced the Italians to stay at home, unable to continue shopping in the most classic way.
This data confirms an increasingly marked trend: Amazon is today the largest search engine for e-commerce in the world, and represents an unprecedented opportunity for companies that decide to rely on the platform for the sale of their products.
The solutions made available by the Jeff Bezos platform to all companies that want to open up to the online channel are different, each of them with specific trade-offs of advantages and disadvantages. In this regard, this article aims to analyze the two main ways in which Amazon allows you to sell on its platform: Amazon Retail and Amazon Marketplace.
With the retail model, a manufacturer or distributor – also called “Vendor” – sells its products wholesale to Amazon as a supplier. In turn, Amazon resells these items to the end customer, indicating them on the platform with the words “sold and shipped by Amazon“.
With the marketplace model instead, a manufacturer or a distributor – also called “Seller” – sells its products directly to the end customer, thus using Amazon as a normal marketplace platform. Third-party vendors can choose to manage all logistics and storage activities themselves (option FBM-MFN), or to rely on the service Fulfillment by Amazon (option FBA-AFN).
The different type of commercial relationship with Amazon, depending on the sales model adopted, implies a number of fundamental differences between Vendor and Seller accounts.
Activation and Channel Management
The first difference lies in the activation and management of the channel.
The Vendor program is in fact accessible only by direct invitation from the local Amazon team and is reserved for producers or distributors with exclusive. With this modality, once the terms of wholesale are negotiated, Amazon has complete control over the assortment, the number of goods to buy and, above all, the selling price to the end-users.
The Seller profile can instead be activated and managed independently by any brand or distributor interested in selling through the platform. Seller accounts have complete control over every aspect of the business: from the selling price to the decisions about the assortment, to the activation of offers on the different foreign marketplaces. But without any guarantee of a sale. The subscription fee to the Seller platform equals 39€ per month, a cost to be added to a variable commission depending on the product category and that can reach up to 15% of the final sale price.
Sales Data Accessibility
As for the accessibility of sales data, Vendor accounts have access to the detailed reporting of Brand Analytics, complete with fundamental insights such as the actual sales of their products to end customers by Amazon and Amazon orders in terms of sell in.
Seller accounts can only access Brand Analytics if they are brand owners (and therefore registered in the Amazon Brand Registry). The Business Activity Report, which includes useful data to evaluate your performance in terms of traffic generated and percentage of BuyBox winnings, and final customer orders in terms of sell out, are accessible without restrictions.
Brand positioning activities are available for Vendors and Sellers alike (the latter, however, only if registered in the Amazon Brand Registry): both can create a Store dedicated to their brand, and enrich the product cards with videos and A+ pages and participate in the Vine program.
Also for sponsorship options, Vendor and Seller registered in the Amazon Brand Registry have at their disposal the same wide range of marketing tools, such as: Display Advertising campaigns, Sponsored Brands, Sponsored Products and Product Display.
As mentioned at the beginning of this article, to manage logistics, Seller accounts can choose between two different options:
- They can entrust everything related to logistics, shipments and returns to Amazon, through the program Fulfillment by Amazon (FBA-AFN): in this way, Amazon will take care of all orders made by end customers on behalf of the same seller. The seller will however be responsible for sourcing Amazon’s warehouses, so as to maintain continuous availability of goods on the site. Clearly, for this mode there are additional costs, such as storage fees and shipping costs;
- They can take care of logistics and storage independently, thus adhering to the program Fulfillment by Merchant (FBM-MFN).
Although the FBA program provides significant additional costs for Sellers, the benefits deriving from this service guarantee important advantages (especially in terms of competitive advantage), such as:
- Reduced shipping costs;
- Advantages in terms of SEO and BuyBox;
- Prime delivery in 24 hours also in foreign marketplaces (and consequent improvement of the conversion rate);
- Outsourcing of return and refund processes.
The advantages deriving from the FBM program concern the lower costs and the greater control by the seller.
So, to sum up: when should a Seller choose FBA and when should he choose FBM?
FBA is perfect for:
FBM is perfect for:
A Seller account does not necessarily have to choose one of the two modes, therefore excluding the other: it is in fact possible to join both programs (and in reality, it is a much more widespread situation than you think).
As highlighted in this article, the ways to sell within the Amazon platform are multiple, each with specific trade-offs of advantages and disadvantages.
Contact us by filling out the form, whatever the Amazon sales model that best suits your needs, our team is ready to support you in the best possible way.