08 Nov Is a Vendor account on Amazon really profitable?
- A Vendor account on Amazon allows manufacturers and suppliers to increase sales quickly by offering products to millions of users.
- In the Vendor mode, Amazon invites the brands it is interested in and takes care of the sale to the end customer, assuming all the management and logistics costs.
Being present on Amazon means showing products in the best ecommerce showcase that exists worldwide to reach millions of users. Selling through the platform is a relatively simple task that does not require the creation of your own online store, but allows you to use a marketplace that already has the trust of buyers who visit it daily.
However, depending on the particularities of each business and the type of account you have on Amazon, entering Jeff Bezos’ global store can be a more or less profitable option for the seller. It is not the same to sell products to the end customer with a Seller account as it is to become an Amazon Vendor so that it is the company itself that buys items in bulk to sell them directly to its users.
Why is it profitable to open a Vendor account?
Only brands that receive an invitation from Amazon can be a Vendor, either because they are already well-known, because they have already obtained a large volume of sales on Seller or because they manufacture products that may be of interest to the American company.
Amazon is the one who buys the products from the vendors. To do this, it opens the account for them after contractually agreeing on certain conditions. They will only have to assume additional costs to access certain associated services that offer a multitude of advantages, such as, for example, premium reports from Amazon Retails Analytics, Amazon Premium Vendor Services or advertising campaigns in Amazon Marketing Services or Amazon Media Group.
Unlike Sellers, Vendors become Amazon wholesalers, so they invest less of their own resources and do not worry about management, logistics costs derived from shipping to the end customer, failed deliveries or returns that the end customer makes. Although they will have to keep their own control of the goods they send to Amazon, assume the costs of sending their products to the warehouses from where they request the goods or the expenses derived from the returns that they make if, for example, after the period of time established in the contract they have not sold all the items that are already located in their warehouses.
Another advantage of being a Vendor is the ease of reaching a higher volume of sales more quickly, since Amazon is interested in prioritizing the rotation of these products to facilitate the removal of stock from its warehouses. Products that appear on the platform labeled “Sold and shipped by Amazon” have a better chance of getting the Buy Box, apply to the Prime program and can benefit from other services or special promotion campaigns that increase sales, such as the Deals of the Day.
However, in order to assess the profitability of the Vendor modality, it is also necessary to know that brands lose control of the stock and prices of their products. Although it is true that a recommended selling price must be established, it is Amazon’s algorithm that decides the final price that the customer must pay to receive it at home.
This condition, together with the impossibility of sending a larger quantity of products to Amazon if they are not expressly requested, is key when deciding whether or not it is advisable to have a Vendor account. Amazon may go for a while without placing orders with brands or establish a lower sale price than the one they themselves have decided to put on the products they sell on their own website or in the other channels they use.
If you are considering the possibility of expanding your business, at Nozama we can advise you on how to open a Vendor account on Amazon.