You intend growing your business to Amazon and you keep asking yourself – How much will this cost me?
Amazon is growing faster and faster and competition becomes bigger. To sustainably grow on the platform, every seller needs to take advantage of every opportunity using automations, marketing and new features.

First and foremost you need to know the different business models for selling on Amazon.

Each model is specific and has advantages and disadvantages. Every company needs to sets its goals first to be able to choose the suitable business model for its development.

Main difference between the 3 models is who will provide the services, labor and resources!

1. Amazon Retail – Amazon First Party (1P) Platform

In this model Amazon plays the role of a middleman – you sell the stock to Amazon and then Amazon resells it at a higher price. Here you operate in Vendor Central and you can monitor your inventory levels, download reports and manage purchase orders. The benefits working with Amazon Retail are that you sell your stock in bulk and you do not work directly with customers. Amazon handles fulfilment on your behalf plus the sales taxes where applicable. Working with this model will give you less control over listings details, pricing, inventory storage. So you have to determine exactly what your goals are.

2. Third Party Sellers (3P)

This model is very similar to the first one – you sell your stock to another entity that then resells it on Amazon marketplace for a higher price. You again receive your money in advance selling in bulk as in 1P model – the difference is that you have grater control over the price and you choose the 3P company that you want to work with. With the 3Ps you have better communication than with Amazon Retail and you can count on future orders and forecasts. Another advantage is that using this model, you are free of paying any fees to Amazon – the 3Ps takes care for all fees. Nowadays 3Ps specialize on marketing services – when done well, increases sales significantly with minimum cost increase thus improving profitability – which is a mutually beneficial service for both the manufacturer and the retailer.

3. Direct-to-Consumer (DTC) Model

With this selling model you have full control over your stock, listings, supply chain, marketing – you are both the manufacturer and the seller to end customers. Having this full control of course means more responsibilities, costs and efforts from your side. You have to provide the workforce, the resources, expertise and time fulfilling all orders and dealing with customers. It is highly recommended that you hire an experienced personnel and your expenses rise abruptly due to wages, benefits and other costs. The same is with marketing – if you deal internally with advertising your brand, you need to be sure that you have qualified personnel and you are prepared for all the marketing costs. Another important prerequisite that you have to consider is the supply chain – do you have all the knowledge, tools, and
personnel necessary for managing your business’s supply chain from your warehouse to the end customer. Supply chain is one of the most extensive and significant obstacles to direct selling, which is why many manufacturers turn to third-party sellers, Amazon Retail, or agencies to outsource that segment of their business. Your solution – outsource to an agency. Most often scenario is how brands start managing internally their Seller Central account and then discover through their experience that they do not have the knowledge and resources to handle it. So the solution is that brands can hire agencies and all the services be fulfilled by it and usually it will cost less then hire a team in-house. It’s a cost-effective approach that can drive profitability and sustainable growth, giving brands time and capital to pursue their short-term and long-term goals.

You want to know which model best serves you?

After you read about the differences between the three models – Amazon Retail (1P), Third-party agencies (3P) and Direct-to-Consumer (DTC) selling, you will find out that each model has its benefits and choosing one depends only on your resources, goals and priorities.

• If you are interested in selling in bulk – then you will be satisfied with the Amazon Retail model.
• If you are interested in a retail model but you want more control over the inventory, pricing and distribution – than your model is the 3p model.
• If you are interested to have full control over your ecommerce business – then you need a DTC model – choosing to work independently supplying labor, expertise, and resources internally or work with an agency or consultant to outsource labor, expertise, and resources.

We, from SSB-PLUS Consulting, can help you with your 3P or DTC models. You only need to contact us so we can discuss your opportunities and future priorities.