In the e-commerce realm, Amazon is a world apart. More than three million sellers are active, this number is growing every year. The UK is no exception to the phenomenon: so far in 2020, Amazon.co.uk has seen over 21,000 new sellers. So, what does it mean to sell on Amazon?
There are two essential configurations to sell on Amazon: ‘Vendor’ and ‘Seller’. You can decide to distribute your products yourself to consumers (Seller model) or sell the products to be distributed by Amazon (Vendor model)—more info on Lengow’s blog. There is no ‘better’ model, it all depends on your circumstances, internal resources, and plans on Amazon. While the two configurations are often contrasted, they are not incompatible. Sometimes the right solution is both: have you considered the hybrid model?
The “hybrid model” is when a brand or distributor chooses to use the two sales models on Amazon. Rather than positioning itself as a Seller or Vendor, the brand exploits both, combining retail and marketplace. In other words, depending on the products, the brand will supply some to Amazon, who will resell them as a distributor but will also sell certain products itself on Amazon, at the price it wants.
The model is designed for vendors who want to acquire a high degree of flexibility based on their product references and have the skills to devote more resources and time to Amazon in order to get the most out of it.
Operating under the hybrid model gives you more scope and freedom. You can access a multitude of advantages compared to traditional models by alternating Vendor and Seller according to your products.
In particular, you will be able to:
In contrast to the Vendor system, you can sell your product directly on the marketplace as a Seller. This means there is no need to wait for Amazon to place orders on the product concerned, which can take up to several months if the potential demand is insufficient according to Amazon’s algorithms. You define the stock you want to offer and your product is immediately available to be purchased on Amazon. However, you will need to ensure that you have sufficient content and reviews to expect sales.
The issue of price is crucial on Amazon: a price that is too low often puts a brand in trouble with its competitors and if too high, the price will limit sales. In Vendor mode, the price is set by Amazon’s algorithm in the logic of maximizing sales volumes. Amazon’s tool quickly adapts to price changes on other platforms: it often happens that on popular products, the price is revised downwards to recruit interest and volume. The referencing and sales of the product concerned will be more favourable, but it is possible that the price set by Amazon is not the one you would have liked (Amazon is free to set the prices of the products it sells on your behalf). Alternatively, Amazon’s algorithm may not know how to position your product in terms of price, meaning it simply sets the price too high, limiting sales and impacting your brand image.
The hybrid model allows you to secure your pricing policy by selling products where you want to determine the price manually.
From one product to another, the hybrid model will allow you to aim for high sales volumes or, on the contrary, ensure a minimum price that suits you. It is recommended that you segment your catalogue into “risk” and “volume” products. The first are those where there is a high stake in setting your own price to be profitable, the second are those that sell strongly, without any real price stake. This clustering will allow you to define which model is suitable for each of your products, the main idea being not to offer the same products on Vendor Central and Seller Central.
Vendor Central is a comfort, meaning not having to manage day-to-day orders and customer service, with only Amazon as your contact. It is, however, still necessary to track inventory, marketing content and visibility. Vendor gives you the possibility to focus on your brand image through “marketing packages“. These formats, exclusive to the Vendor model, make it possible to communicate on a brand for budgets ranging from a few hundred euros to several thousand (depending on advertising space and category). This is the case, for example, with “flash sales” and “Today’s Deals”.
Before you start with a hybrid model, a few precautions should be taken. While the flexibility of the hybrid model is an undeniable advantage, it would be the default choice of all vendors on the platform if there weren’t a few prerequisites.
Having a wide range of choices leads to greater involvement on your part. Managing your brands will require a greater investment, intelligent management with stock and sales analysis on a daily basis. In hybrid mode, you use both Seller and Vendor Central and therefore have to meet the requirements of both models at the same time. Seller Central requires brands to monitor the account on a daily basis: customer messages, feed monitoring, stock predictions, performance indicators… All these are points you need to keep in mind when choosing the hybrid model.
The hybrid model has many advantages. It allows you to manage your accounts accurately on a daily basis by taking advantage of Vendor and Seller Central depending on the product to be sold. On the other side of the coin, it requires more resources: time, human and financial. Switching to hybrid requires a high investment and a practical approach on your part. You need to make sure you understand every aspect of the hybrid model before you start, and when you get going, the return on investment can be very high.
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