Amazon captures over 50% of online eCommerce transactions in the US alone, making it one of the primary ways that big brands and agencies create sources of revenue. If you are looking to compete in that arena, you should consider selling directly to Amazon.
Amazon gives two options for anyone wishing to be a seller. The most commonly used option is through the Amazon Seller Central, which is essentially a 3rd party seller platform.
For agencies and big brands looking to get exclusive marketing offers from Amazon, they should seek to sell directly to Amazon itself, using their first-party seller platform.
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What Is Selling Directly To Amazon?
As a business, your goal is to create quality products, right? By selling directly to Amazon, you’ll essentially have Amazon’s stamp of approval, giving you access to their resources.
Perks Of Being A First Party Seller
The biggest reason many sellers choose to utilize the first-party option is that you get paid much faster.
As a third-party seller, you typically receive the revenue of your sales 45-60 days from when you send the product to their fulfillment center.
In contrast, you can receive payment in as little as a few days after completing the purchase order as a first-party seller.
Amazon will also make bulk purchases of your product, which is fantastic for inventory forecasting.
As a first-party seller, Amazon will allow you to display and detail page functionality exclusive to Amazon alone, this allows you to stand out more on the market.
Marketing Of Your Product
When you are selling to Amazon, they will personally handle the marketing of your product through AMS (Amazon Marketing Services).
They already control the listing and the price, so paying for marketing is something they offer. The marketing is altogether a blind purchase because they provide little transparency and the sales attribution is difficult to determine as a seller.
Along with their marketing, you also have access to Amazon’s A+ content, allowing you to convey the product through multimedia better.
Now that you have a more comprehensive understanding of what this all means, consider checking out our 2021 Amazon Advertising Strategy Guide, where we go over advertising strategies on Amazon.
How To Sell Directly To Amazon
One thing to note is that 99% selling directly to Amazon can be challenging to achieve. Though you are a seller and manufacture your product in rare cases, you are more likely to become a first-party seller.
With it being relatively challenging to sell to Amazon, much of the control gets relinquished from your end. Being a first-party seller is invite-only, so you start as a third-party seller.
If your product is doing well on Amazon consistently, then you have a chance of receiving that invite.
What Amazon Controls
Before accepting that invite, you should know what it entails:
- Pricing: Amazon will control the price of your product. They will consider every other store’s price and list it at the lowest price possible.
- Customer Messaging: Amazon will handle all customer messages and returns.
- Product Logistics: They will ultimately handle the logistics of your product sales.
Cost Of Selling To Amazon
On top of Amazon controlling the price of your product, you will also have to pay them for their return allowances, slow movers, marketing co-op funds, etc. Taking all of that into consideration means you’ll see around 10% taken off the top of your margins.
Amazon first-party sellers also have to pay a monthly fee of $39.99, which exempts them from the $0.99 fee per item.
Why pick one over the other? The answer is simple, “Can I afford it?” To even be considered a first-party seller, your product must perform very well on the market and bring in top-tier margins.
Amazon Referral Fees
The Amazon Marketplace Referral Fee is the percentage of your item price based on its CPA model. For automotive prices, just as an example, they will typically take around 12%.
Thus, if your total price is $100, then Amazon will take $12 from that as their referral fee.
Variable Closing Fees
When selling directly to Amazon, you will still be subject to variable closing fees. They are simply the fees for shipping your product out to customers.
For media products, the closing fee is fixed, but for non-media products, it can vary. Make sure to take advantage of a fee calculator to help break down the expenses of shipping your products.
Fulfilling Orders Through Amazon
Since you are selling directly to Amazon, they will give you the option of shipping through them, giving you access to Amazon Prime, or fulfilling the orders yourself.
Fulfilling the orders yourself may seem ideal for some, but it will cut you off from the majority of customers who prefer to utilize Amazon Prime for its convenience.
When you fulfill orders through Amazon, it is known as FBA (Fulfillment By Amazon). This does come at a cost for handling, storage, item weight, pick & pack, etc.
What Is FBA?
FBA allows Amazon to handle the storage & shipping while also allowing your product to be shipped through Amazon Prime.
FBA fees are all calculated, taking into consideration: item weight, handling, storage (sq ft.), and pick & pack. This means that the FBA fees for any product will be different and should be handled case by case.
We explain Amazon FBA fees in-depth and how it varies per seller.
Remember, you are not forced to use FBA for your products, so it is important to consider the costs and what would work best for your business.
Why Use FBA?
FBA is for those who wish to automate their Amazon process to almost 100%. While you will still have to manufacture your product, you no longer have to deal with marketing, storage, shipping, customer service, or pricing.
What Is FBM?
FBM (Fulfillment By Merchant) is the alternative to using FBA. While you won’t have to adhere to the FBA fees, you will have to abide by Amazon’s seller rules.
When using FBM, the first major difference from FBA is that you cannot list your product as Prime since you will be handling the packing, and shipping of your product.
Utilizing FBM does require a lot more effort but is still do-able for those who would rather escape the FBA fees. The choice is completely in your hands as the merchant.
Why Use FBM?
FBM is for brands who want full control over their marketing, inventory, logistics, listings, pricing, etc. You are free to take your business in a direction you see fit.
What Is SFP?
SFP is seller fulfilled prime. This is the marriage of both FBA and FBM. It allows you to utilize Amazon’s prime option while remaining free of their FBA fees and standards.
Now be aware this only works if you have a strong fulfillment strategy. You have to qualify to use SFP, and just like selling directly through Amazon, it is not easy.
SFP is where Amazon allows you to store, pack, and ship your products while still utilizing their Prime option. This allows you to reach customers who prefer that convenience while still controlling your inventory.
Now to get access to SFP, you will first go through a trial period that requires a minimum of 300 orders while simultaneously meeting Amazon’s requirements.
A shortlist of some of Amazon’s requirements are: cancellation rate of less than 1%, use Buy Shipping Services for a minimum of 95% of the orders, on-time shipment rating of at least 99%.
As you can see, they are nowhere near easy, but if you can achieve this, SFP might just be the best option for you.
Why Use SFP?
SFP allows you to cultivate your own brand while still having Amazon’s stamp of approval. This will help you stand out from other brands as customers will fall in love with your brand, not just Amazon.
Inventory is something any seller has to deal with, whether or not you are selling through or to Amazon. However, there are some major differences when it comes to inventory demand.
When selling to Amazon directly, they will personally store your products, but they also have an inventory requirement that you must meet at all times.
This can sometimes be extraneous if you, as a seller, are also the sole manufacturer, as you would have to work hard to meet the standard consistently.
In those situations, it may be good to look into outsourcing production; if you cannot, you may have to find an alternative way to boost production.
For those selling through Amazon as a third party, inventory may not be as stressful, but if you have high demand, you will still need to meet your customers’ needs.
Though the workload may not be as encumbering since you may move at a pace of your own choosing.
Another advantage of handling your own inventory is you do not have to pay Amazon for storage fees. You can choose to utilize their warehouses or ship them on your own, so it is all about preference and what is best for your product.
If customer experience is imperative to you and your brand, selling directly to Amazon might be difficult. Amazon has curated their brand for years and intends to uphold it, and that includes when they decide to put their name on your product.
When selling directly to Amazon, you hand overall customer service to them. For some, this is an amazing benefit, but this can be worrisome if you are trying to curate your own brand image to stand out.
As with any product or brand, there is a constant need to innovate and upgrade. When selling as a third party, listing a new product is simple and doesn’t require anything more, but this changes when selling directly to Amazon.
Amazon allows you to sell directly to them because that product did well in their market, and they saw profit in doing so. Even with that, introducing a new product is not easy.
This is because Amazon has not seen how well that product will do and if it will provide the same margins as the product they are currently buying from you.
If you want to introduce a new product, it will have to go through the same process as the first product that Amazon decided to buy from you. Meaning you have to rinse and repeat every time.
Cut To The Chase: Is Selling Directly Through Amazon Worth It?
Selling directly through Amazon is only worth it if it fits your needs. It can help with marketing, handling inventory, and overall growth of your brand or product on Amazon itself.
It is really up to you as a seller to consider the different costs of each strategy, how much work you can put into it, and if you are willing to meet all of Amazon’s standards day in and day out.
While taking all of that in an attempt to try and elevate your Amazon business, you can also take a look at our 2021 Amazon Playbooks for other ways to bring your business to that next level.
This playbook offers expert tips and recommendations that will help you skyrocket conversions and sales on Amazon.
Frequently Asked Questions
How Do I Sell My Product Directly To Amazon?
The first step is for your product to consistently meet Amazon’s requirements every month to sell directly to Amazon. After that, it is up to Amazon to bring you in.Can We Sell Directly To Amazon?
Yes, you can directly sell to Amazon. As long as your product is performing well on Amazon, selling to Amazon is simply a matter of time.What Does It Mean To Sell Directly To Amazon?
To sell directly to Amazon means that Amazon will buy your product directly from you as a wholesale just as Walmart or Target would.What Business Models Are Ideal To Sell To A Big Company Like Amazon?
A business that manufactures its own product is ideal. When selling to Amazon, you will have to meet their supply demands, so if you are not personally creating your product, you may find it difficult to increase your output.