Amazon’s platform offers great sales opportunities. Every seller can find a form of selling tailored to them. Selecting the right sales model is critical, and your decision may depend on which marketplaces you will be selling, and what you are selling.
Amazon offers two main selling models: Vendor and Seller.
An Amazon vendor account is by invitation only. Selling is done on the basis of supplying Amazon with wholesale quantities of products, with Amazon responsible for the sale to the consumer, so this is a Business to Business (B2B) relationship.
The vendor proposes the cost price per product, which should include all landed costs and the margin it wishes to achieve before Amazon fees.
An important aspect is that customers are informed that the sale is carried out directly by Amazon. This reinforces a sense of confidence in the quality and value of the product.
In terms of the vendor’s role, the main focus is on fulfilling orders to supply wholesale products to Amazon, and ensuring the product listings, A+ content and brand store are updated. In this system, the vendor does not deal directly with customers, this is all handled by Amazon as the seller.
An important point to note, is that the vendor is still responsible for advertising the products, and this should be factored into profitability calculations. There are also other terms in the contract, which can impact profitability if not properly taken account of.
A Seller account is available to anyone interested in selling on Amazon. Unlike the Vendor account, the seller has full control over the pricing policy. This is a Business to Consumer (B2C) model.
There are two types of selling models for this type of account – Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM).
Each sales model have a completely different logistical approach, outlined below.
Fulfilment by Amazon, FBA, gives you the opportunity to store your products in Amazon’s warehouses.
Directly from these locations, Amazon sends products to customers as soon as an order is placed. Amazon handles the process of packaging the products, so that the orders are properly protected during storage and transport.
One important aspect of the FBA model is Amazon’s handling of topics related to returns or complaints. This saves time on the seller’s side in terms of customer service.
For FBA listings, Amazon will show the Amazon Prime badge, which increases credibility and trust when attracting new customers who are not familiar with the product or the seller, and increases your chances of a more prominent position in the search ranking.
There are costs associated with Amazon FBA, such as packaging, shipping, return handling and storage, which are dependent on the product weight, dimensions and country of storage.
Fulfilment by Merchant, FBM, requires the seller to handle all the logistics, from stocking the products on their side, to shipping the products to the customer, to handling returns.
The seller takes full responsibility for customer service. It is also incumbent on the seller in this case to respond to all customer queries and messages within 24 hours.
FBM is a good choice for sellers who offer bulky or damage-prone products, or made-to-order items. It is also a good option where a seller is launching new products, and doesn’t wish to send too much stock to Amazon initially whilst testing the market.
FBM gives you total control, but at the expense of simplicity.
Need Some Help?
Choosing the right Amazon selling model is not always simple. Calculating the FBA fees can be especially complicated if you have many products and marketplaces.
The friendly team here at Boomd has a comprehensive set of tools to help you calculates all of these Amazon fees. Not only that, we help ensure you take account of all costs, such as VAT, shipping, and advertising.
Call us now for a free consultation!