Amazon - Which is Best for You - Vendor Central or Seller Central? [Podcast ep.30]

 

 

With the increase of traffic online, especially related to buying products as a result of the Coronavirus pandemic, today’s topic is very timely.  Our chat focuses on our real case experience with Vendor Central vs Seller Central on Amazon and which is better for you in the long term and short term.  

Some of the highlights of our podcast on this very important topic include:

• Deciding which option is best for you - Vendor or Seller Central
• Amazon’s reputation and why it matters to you
• How to be the Master of Your Own Destiny with Amazon, by using your own brand
• Avoiding pitfalls in both Vendor and Seller Central

Need help sourcing products or developing products in China?  Schedule your FREE Call! 

Listen to all our podcast episodes here.

Here are some popular podcast episodes you might be interested in...

 

See David featured in...

• USA TODAY Featured with Mark Cuban, billionaire, owner of the NBA’s Dallas Mavericks, and Shark on “Shark Tank” and Barbara Corcoran, founder of The Corcoran Group, podcast host of “Business Unusual,”

• CNBC Made it, alongside titans like Shark Tank's Barbara Corcoran and Serial Entrepreneur Gary Vaynerchuk

• Business Insiders David Hoffmann with Gary Vaynerchuk and other successful leaders on how to respond when employees royally mess up

Helpful Resources

• Get a free copy of our book, China Sourcing For Startups.
• Book A free 15-minute consultation with our team.

 

Full Transcript | Amazon - Which is Best for You - Vendor Central or Seller Central? [Podcast ep.30] 

 

David - 0:01

Hey guys, welcome to this week's episode. And today I'm gonna be talking a little bit about Amazon, in particular, Amazon Australia, and the differences between Seller Central and Vendor Central. And, you know, some recent things that I've encountered that I want to share with you. And hopefully, you can get some great takeaways from that. And I'm here with my co-host, Kevin. Hey, Kevin.

Kevin - 00:25

Hey David, how are you doing today?

David - 00:27

Good, good. How are you doing?  

Kevin - 00:29

It's good to catch up again. Anxious to hear the, just the differences in Amazon, you know, in the different regions of the world where they operate, I mean, to see if there's consistencies or real differences and how they're operating.

David - 00:42

Yeah, no, I mean, it's global and there are a lot of consistencies. And the one specific thing because quite an interesting story just happened recently and I had a big debate with somebody over stuff, I'll share it today and that is, should they be using Vendor Central or Seller Central. And do you know the difference between those Kevin or should I explain it?

Kevin - 1:03

I don't, you know what? I was gonna ask you that. So yeah, unpack that for a little bit.

David - 1:09 

Yeah, so for those who don't know, Vendor Central and Seller Central work differently. Seller Central means you're selling your products on their platform in the marketplace. And you kind of managing your own store on Amazon, you're responsible for areas of product listings, your advertising, the sales or customer service, the inventory, etc, etc. The way vendor central works, Vendor Central works really like Amazon's retailer and you're the supplier, so you're selling to Amazon, they're buying the product from you, and then they're selling the product. And then they're selling the product. So they kind of commit to what they buy, and then they sell it at a margin. So it's really a completely different concept. And I just felt it's probably worth touching on this a little bit because of Amazon's launch in Australia. But I think the principles apply anyway. You know, the debate came up about, should we be on Vendor Central or should we be on Seller Central or some of our brands in consumer electronics. And while obviously it's very attractive, I think the attraction of Vendor Central is that they're buying the stock and they're also proactively trying to sell it, so there's a commitment it's like supplying a retailer. But one thing that caught me a little bit cautious and concerned about and by the way, anybody's got thoughts on this, you know, please comment and send your comments in, I'd love to hear it. Amazon has had a bit of a bad reputation in the past, particularly in the US of kind of starting companies or for suppliers off on Vendor Central model. Especially when they're trying to start a category or start a new market. And you know, people jump in and get excited and then, you know, they put the kind of whole heart and soul into the business and then over time, you know, Amazon with all the analytics, see what works, what doesn't work what's doing well, what's not doing well with the ratings on the product, and they start dropping suppliers of lacquer, literally like hotcakes like a ton of bricks. And that's kind of what puts me off of Vendor Central. Because you can build this whole business in reliance, in dependence on them, and then they just for no random reason other than data just cut you and you don't really necessarily always have people to talk to, you know, to help me to try again, it's very much a data driven business.

Kevin - 3:49

When you sign on as an Amazon vendor. Is there a certain period of time that Amazon says we guarantee we will buy from you for 12 months or I mean is that built into the contract or could they just stop tomorrow?

David - 4:02 

They can stop tomorrow. I think each purchase order is done there's always the intention to do more. But you know, each purchase order's a commitment. So you're as good as your last purchase order, so to speak.

Kevin - 4:16

What a risk to ramp up and Amazon just say, well, you know, we'll buy from you one time but you've ramped up production, and all of a sudden your buyers are gone.

David - 4:29

It is a real risk. But there is an advantage if they are buying the stock, right? Because obviously most people have to carry the inventory themselves. So you know that of course, that's where the Seller Central comes in, right? Is it better to be on Seller Central and kind of manage it yourself, and as long as you're getting good reviews and your products are selling well, you're not violating any of the Amazon policies. you've kind of got your own business. So it's the real kind of debate going on Seller Central versus Vendor Central. And, you know, I know that, you know, I've had guys with multimillion dollar Amazon businesses that have been on Seller Central and Amazon have approached them very aggressively to move to Vendor Central, because they want to kind of get a bigger piece of the pie. And almost to a point where there's been bully tactics or you know, have strategies to try and force them into a Vendor Central situation rather than a Seller Central situation. Fortunately, they haven't been successful at that, all the time, because the sellers tend to push their price up and then Amazon make this margin so it kind of falls away. So it's kind of the question I guess is, what is the right approach? Do you go Vendor Central or do you go Seller Central?

Kevin - 5:48 

So what's the difference? I mean, kind of average difference between like the margins between these two. So if you're doing everything yourself, I mean, is it a 70/30 split, 70 to you 30 to Amazon and if you go the vendor route is it like 50/50? What's the, or do they just buy your stuff at a discount?

David - 6:06

Well they buy your stock at a discount. Remember that they're wanna pay you less and they're gonna sell it for more. So it's probably not a great idea for you but there's less inventory risk. With Seller Central, you pay your flat Amazon fee, which ranges roughly 15% so Amazon take their fee and then you know, whatever you are selling you can manage and control all of that. So I kind of feel like my take on it is-- and this is what we've done with one of our brands is, there was value for us installing on a Vendor Central relationship, specifically because Amazon wants to launch that product category. And they promised us a whole lot of special listing details. Will hand our mini store with extra banners that promise certain rankings and things like that, and visibility on Amazon which, in terms of marketing dollars is like unbelievable and irreplaceable. So, you know, we saw the value in that and we started with the Vendor Central. But what I did say to, you know, colleagues here in Australia I said, start with the Vendor Central. But be ready and expect to move to Seller Central as quickly as possible so that you don't build your whole expectation around Vendor Central just kind of launch with Vendor Central. If you have that opportunity and try and leverage the benefits it comes with and then as quickly as possible move to Seller Central, and make sure on the Seller Central, you're actually using your brand, right, because if you're not building your own brand, it's very difficult to justify , you know spending all that time and energy and effort, it's kind of your only source of protection is having your own brand and your own trademark that people identify with. Then it doesn't matter what the selling channel is.

Kevin - 8:13

So you mentioned that Amazon kind of controls the purchase orders and they can turn

that faucet on and off at will but if you start with Vendor Central and you're successful and you want to change to the Seller Central to me that would be to Amazon's detriment. And you'll also experience some bully tactics even then when they say, No, we're gonna make it difficult for you to switch or what have you experienced?

David - 8:42

Yeah, I haven't actually experienced that yet. It's always been smooth. We've only done it twice. So I don't know the answer to that. If anybody listening does again I'd love to figure the feedback and get more insight into this. But generally speaking, it's been okay switching between Vendor and Seller Central. And I just believe your recipe to success is building your own brand and being the master of your own destiny. And that's why I think Seller Central versus Vendor Central is probably in the long run, the best way to go. And of course, definitely with Brand Registry, you don't wanna be in a space where you're not using Brand Registry where you're protected on your trademark on the platform. Otherwise, you just have nothing you need to differentiate about.

Kevin - 9:33

And there is protection in that too even long term, even if you would change to another platform, another selling platform like Etsy or Spotify or whatever that is, that you would have that brand recognition. Even on your own side yeah.

David - 9:47

Exactly, and that's the key and especially with Amazon because Amazon, you don't get access to the customers or the clients. So you don't actually get to build your mailing list, but if you've got your brand and people liked it and they are interested in it, they will find you online and you know, hopefully, you know, opt into something you have to offer and start a direct relationship with you. And that's for brands, which is so critical and so important. Then it's important not to kind of get roped into Amazon's personal growth strategy, right? In terms of special deals on Vendor Central, if you do this if you do that, and, and get caught up in it, because their goal is to aggressively grow their market share in these spaces, and they use the brands to do that. And they use companies to do that. Whereas your goal is to build a brand and build your client list, right? So sometimes they're not aligned.

Kevin - 10:43 

I mean, you mentioned just a minute ago about, you know, maybe the strategy is, we can start Vendor Central and then shift to Seller Central. Can you just kind of outline real quickly maybe the steps in doing that or, you know, you said you've done it a couple of times are there specific steps you have to take you have to kind of ramp-up to make that change or is it just flip the switch overnight?

David - 11:04

Well, you know, you don't do it overnight, you have got to do it gradually because you need to first clear out the inventory that Amazon has committed to and that are selling. And, you know, once it's cleared out, one writes a new purchase order. You know, that's when you kinda wanna have a conversation with them saying, look, we're looking to move to Seller Central. We can't get enough inventory. We don't want to burden you with that. I wouldn't necessarily position in a way that you're not happy with Vendor Central if that makes sense.

Kevin - 11:34

Absolutely yeah. That's, yeah, it's, I can imagine you frame it. Amazon, hey, look, I want this to be a win-win for us this is for your benefit but allow me to do this. So.

David - 11:48

Exactly, exactly. But I mean, it's a big argument to be had the fact that they're buying and committed to the stock. So I think it does need to be assessed on your individual situation and how much stock you carrying and sounds like a good idea. They're willing to commit to it and get started, you know, take advantage of it. But I do think the long term play does need to be Seller Central.