Is Amazon Breaking Up With You?
Amazon Terminating 1P Vendor Accounts: How to Protect Your Brand and Navigate the Uncertainty
What is Happening?
In a massive shakeup of longstanding Amazon relationships with 1P Vendors (Brands and Sellers selling wholesale directly to Amazon), Amazon announced that as of November 9th, 2024, they will abruptly stop issuing POs and discontinue sourcing products from many 1P Vendors operating on the platform. They have also communicated that they will not sign on to any new Vendor Central agreements or extend existing agreements beyond that date, though they will continue to sell through existing stock levels through the end of the year. There is no good time to receive such news, but this is particularly painful timing given it is directly in the heart of the Q4 shopping season, providing Vendors little time to consider and execute their next steps.
While Amazon did not publish a list of the Vendors with whom they are severing ties or how many Vendors were impacted, the currently available information suggests that those impacted were Vendors with an annual revenue of less than $10 million USD on Amazon, with no exceptions or protections for particular categories. Amazon has yet to explicitly communicate when Vendors will no longer be able to access their Vendor Central accounts, and this is something we will continue to monitor in the coming weeks.
A screenshot of Amazon’s message to those Vendors can be found below:
Why is Amazon Doing This?
The move by Amazon to terminate these Vendor relationships is considered part of an “internal strategic realignment” and further reinforces that Vendor relationships are exclusively for enterprise level brands and what Amazon considers strategic growth brands. At BirdDog, we read this as a component of Amazon CEO Andy Jassy’s continued push towards focusing on profitability, allocating resources towards the largest relationships, and funneling all other brands and sellers to the self-service 3P Seller Central Platform. It also allows Amazon to reduce their inventory and warehouse space exposure to only those relationships which are most important to them. Our expectation is that this is a trend which will continue to impact more Vendors and not simply a one-time adjustment. Regardless of Amazon’s motivations, though, the most important thing is making sure your brand is best set up for success going forward.
What is the Difference Between 1P Vendor Central Relationship and 3P Seller Central?
Before jumping into making a decision about how to move forward, it’s useful to understand the different types of relationships a brand or seller can have with Amazon. A 1P Vendor relationship is a traditional wholesale partnership whereby a company sells their products to Amazon, which then acts as a retailer to end consumers. 1P Vendors negotiate terms, pricing, and assortment with a buyer, agree to a Vendor Central agreement, and then satisfy purchase orders (POs) from Amazon as Amazon submits them in Vendor Central. In this dynamic, Amazon owns the inventory and has control over pricing and stock levels.
A 3P Seller relationship entails selling products directly to end consumers on the Amazon Marketplace, paying a referral fee (commission fee) to Amazon for each sale. 3P Sellers set their own prices, control their own assortment, determine inventory levels, choose their own fulfillment methods, and manage their business through a separate platform called Seller Central.
What are the Options for Impacted Vendors?
While receiving a notice from Amazon terminating your 1P relationship just before Q4 is not pleasant, it doesn’t mean your business is dead on Amazon. You have a number of paths to consider in terms of how to continue serving your customers and building your brand on Amazon. There is no one “best” or “correct” path, as it depends on the circumstances of each individual business.
Transition from a 1P Vendor to a 3P Seller: The most likely route impacted Vendors will take is to transition their business relationship on Amazon from operating as a 1P Vendor to a 3P Seller. For those Vendors already operating with a “hybrid model” (operating simultaneously as both a 1P and 3P) this will be more straightforward. Operating a 3P Seller Central account successfully demands having dedicated and experienced in-house resources, an expert agency, or both.
Leverage a 3P Wholesale Reseller: For those brands which do not have the capabilities or resources to operate as a 3P Seller themselves, they can wholesales to a 3P reseller (often referred to as accelerators). These resellers will then serve as the Seller of your products, as well as the products of other brands in their portfolio, to your end consumers.
Discontinue Selling on Amazon: While we’re putting this option here because it is technically available, we don’t recommend this path. We firmly believe that brands need to meet their shoppers wherever they are and Amazon remains one of the most significant online shopping destinations..
What to Consider When Switching from 1P to 3P?
Create a 3P Seller Central account as soon as possible. You’ll need to have all of your business, ownership, and identification documents ready to expedite this process. It’s absolutely imperative to make sure all owners of the company are listed in your account to protect against having a single failure point for account lockout and to prevent delays and friction in setting up your account.
If you are a brand owner and not a reseller, register your brand with Amazon Brand Registry (you can find the eligibility requirements here). The reason this is important is not only to give you the maximum amount of control over how your brand appears on Amazon, but also ensures you can access and market directly to the shopper audience which has already purchased from your brand. You will need to be Brand Registered to manage your Brand Store, A+ content, and get full access to Amazon Advertising functionality.
While you still have access to Vendor Central (remember, Amazon has not yet communicated when they are removing access), download the full list of active ASINs you have in Vendor Central and set them up again in Seller Central. In addition, you’ll want to download all historical sales data, invoices, and POs from Vendor Central while you still have access. You will need these not only for your internal reporting needs, but to help make the transition from 1P to 3P as smooth as possible.
It is not yet known exactly how Amazon will treat “content contributions”, which are the product detail page components such as the title, images, bullet points, descriptions, A+ content, etc. It’s possible that Amazon will continue to surface the content which was submitted through your Vendor Central account or even use a combination of content submissions from Vendor Central and your new Seller Central account. This is another reason it is key to have Brand Registry set up and to make sure all of your ASINs are set up in your Seller Central account.
Look at current inventory levels and forecasted sales velocity for all ASINs which you were offering through Vendor Central. Since Amazon will continue to sell through this inventory even after they stop issuing new purchase orders, they will likely continue to win the “buy box” (the orange add to cart button on the product page) until that inventory is exhausted. You may also want to consider running discounts or coupons in Vendor Central to accelerate that sales velocity and reduce the amount of time before your 3P Seller offer controls the buy box.
Your advertising account in Vendor Central will not automatically transition over or be accessible via your Seller Central account. You will need to download and transition your entire account and campaign architecture from your Vendor Ad Console to your Seller Ad Console. This is likely to result in a negative impact on performance if not executed correctly. The team at BirdDog can help make sure the transition is as smooth as possible so that you do not miss out on any opportunity during the peak holiday shopping season.
Key Takeaway
While Amazon terminating the accounts of 1P Vendors just before Q4 is disruptive, it’s further proof that the Amazon Marketplace is constantly changing, putting brands at risk if they are not supported by an experienced partner. With decades of experience in online retail sales, the BirdDog team is here to make sure your brand is in the best possible position to navigate these challenges and reach your shoppers across the web. To learn more, contact us .
