Are you ready to sell on Amazon but need to decide whether to go 1P vs 3P? You're not alone!
Over 60% of Amazon's marketplace sales come from third-party sellers, while first-party sellers deal directly with Amazon as suppliers. Understanding the difference between these two selling models can significantly impact your strategy and success on the platform.
In this article, we'll break down the key differences between 1P vs 3P, the pros and cons of each, and which might be best for your business. Keep reading to make an informed decision!
1. What is Amazon 1P (First-Party Seller)?
Amazon 1P, or First-Party Seller, refers to businesses that sell their products directly to Amazon. In this model, Amazon acts as the retailer, purchasing inventory from the seller at wholesale prices, and then reselling it on its platform. Sellers using 1P are invited to join Amazon Vendor Central, where they manage their wholesale relationship with Amazon.
Pros | Cons |
|---|---|
Amazon handles inventory and fulfillment – Once Amazon buys your stock, they handle all logistics, giving you more time to focus on your business. | Limited pricing control – Amazon sets the retail price, which could result in lower margins. |
Access to Amazon’s retail expertise – You benefit from Amazon’s vast distribution network and marketing power. | Lower margins – Since you sell at wholesale prices, your profit margins may be thinner compared to direct sales. |
Prime eligibility – Products sold directly by Amazon are eligible for Prime, leading to increased visibility and trust. | Potentially high demands – Amazon may order large quantities, but they expect strict compliance with delivery timelines. |
2. What is Amazon 3P (Third-Party Seller)?
As a 3P seller, you list and sell products on Amazon through Seller Central, Amazon's platform for third-party sellers. This model allows sellers to control their pricing, inventory, and branding.
Pros | Cons |
|---|---|
Full control over pricing – As a 3P seller, you set your own prices, allowing you to adjust for market trends and optimize profit margins. | Responsibility for fulfillment – You need to manage your own shipping, unless you opt for Fulfillment by Amazon (FBA), which comes with its own fees. |
Higher potential profit margins – Since you aren’t selling to Amazon at wholesale, you can keep a larger portion of your revenue. | Customer service – Handling customer inquiries, returns, and complaints is entirely your responsibility, unless you use FBA. |
Flexibility with inventory – You can decide how much stock to list and manage your own inventory levels. | Competition for visibility – You’ll need to invest time and resources in marketing, optimizing your listings, and managing advertising to stand out in a crowded marketplace. |
Access to Amazon's marketplace tools – As a 3P seller, you can use Seller Central’s data, reports, and tools to optimize sales strategies. | Fees and costs – Even though you have control, 3P sellers face various costs like Amazon selling fees, FBA fees (if applicable), and advertising costs to stay competitive. |
3. Choosing Between 1P and 3P
Choosing Between 1P and 3P
Deciding whether to sell as a 1P vs 3P seller depends on your business goals and operational capacity. Here are key factors to consider:
- Control vs. Convenience: If you prefer more control over pricing, inventory, and branding, 3P may be better. However, 1P offers convenience by offloading logistics and pricing management to Amazon.
- Profit Margins: 3P often allows for higher margins since you set the prices. With 1P, you're selling wholesale to Amazon, which could limit profits.
- Fulfillment Responsibility: Besides learning the Amazon display ads, 1P sellers also benefit from Amazon's fulfillment, while 3P sellers can choose between Fulfillment by Amazon (FBA) or handling fulfillment themselves.
4. FAQs
Here are some common questions sellers have when choosing between 1P and 3P:
- Which model is more profitable?
- 3P generally offers higher profit margins since you have more control over pricing, but 1P provides stability with wholesale purchases from Amazon.
- Can I switch from 1P to 3P or vice versa?
- Yes, but transitioning between models may involve operational changes and Amazon's approval.
- Which model offers more visibility?
- 1P sellers benefit from Amazon's direct marketing, while 3P sellers need to optimize listings and manage advertising for visibility.
5. The Final Verdict
In conclusion, whether you choose to sell as a 1P vs 3P seller on Amazon depends on your business priorities and resources. If you're looking for convenience and don't mind relinquishing control over pricing, 1P might be the way to go.
On the other hand, if you prefer higher profit margins and greater control over your brand and pricing, 3P could be a better fit. Assess your operational capacity, goals, and market strategy to make the best choice for your Amazon business success!
