I share the experience of a direct Amazon Vendor in the move from purely 1P to a hybrid strategy using a 3P agency.

1. David Hindle
Switching from 1P to 3P
PART 2

2. Background
• 15 years online account management experience
• 10 years with Amazon as a direct (1P) vendor

3. Why switch from 1P to
3P/Hybrid?

4. What does that mean?
• 1P = direct supplier to Amazon
• 2P = sell directly on Amazon Marketplace
• 3P = sell through a 3rd party on the Marketplace
Hybrid = being both 1P and 2P
or 3P

5. The Pain of 1P
1P Terms
• “Terms can’t go backwards”
• You’ll never get back what you give away now
• Automatic Marketing
• Bids against you on Google Adwords
• ‘Damage Allowance’
• You pay for their shipping, handling, loss of and damage to your products
• Trading Terms are not negotiable
• Some of largest brands refuse to sign & still trade
• Terms are visible to every Amazon Vendor Manager across EU
• No opportunity to set different pricing or terms in each locale

6. The Pain of 1P
• Pricing
• You have no control of the sell price
• Extra Marketing Investment
• Amazon will annualise extra ‘one off’ investments
• Marketing is expensive and hard to pin down
benefits
• AMS works – But retail doesn’t really count that
investment
• Orders:
• Multiple orders for the same product for the
same FCs
• Multiple orders for the same FCs
• Below MOQs

7. The Pain of 1P
Vendor Central
Development Budget
Vendor Central Call Centre

8. The Pain of 1P
• Cost Price Increases
• Extremely hard – maybe if market-wide or you have key
product
• Always ask for same % reinvestment back into marketing
• = net 0 for you
• They may just refuse
• Resource Impacts:
• Processing orders
• Processing invoices, payments, PODs
• Warehouse pick costs
• E.g. Only 1 product per pallet – only 2 pallets in a stack
• Impact on bottom line

9. Benefit of 1P
• Direct contact with Vendor Manager
• You will get growth and insights
• They will help you invest more money to get more growth
• Access to senior category managers
• Access to key marketing initiatives for big launches
• Erm…
• Can be profitable if :
• You get pricing right at the beginning
• You manage your margins over growth
• You don’t let them bully you

10. DO NOT BECOME A
PURELY 1P VENDOR

11. Why 3P?
• You control your sell price
• No annual JBP
• Commission, FBA fees are fixed costs
• Access to same Amazon Advertising
• Fewer & optimised shipments to FCs
• Amazon compensate you for damages
• Seller Central gives more control
• Sell across Europe from one account

12. Shifting to Hybrid
Model- Objectives
• Maintain current sales via 1P
• Rejuvenate tail products
• Launch new products
• List across Europe, globally
• List products we don’t sell to
Amazon
• Gives us a walk-away position

13. Options
• DIY
• Starting from scratch
• Use Agency
• Faster time to market
• End to End service
• Cover channels other than Amazon
• Weekly reports
• Monthly shipment to Amazon

14. Working with An Agency

15. What we did:
1. Formed a project group
2. Set up regular calls
3. Sent small FBA order, former top 8, 4- 6 weeks stock
4. Used Amazon FBA label 15p each
5. Updated content
6. Priced at RRP or price to win Buy Box
7. Created Amazon sponsored Ads
8. Agreed review after 4 weeks

16. Results
• 6/8 product booked in correctly
• 1 lost for 14 days – then ‘found’
• 1 lost for 5 days then booked in.
• 1 ASIN – case Qty. changed - contacted sellers
• Some went straight to Buy Box at RRP = adverts
= traffic = sales
• Others were suppressed – i.e. dead
• Took a few weeks to get Buy Box again
• After 4 weeks all suppressed ASINs were live
again and selling with increasing sales rates.

17. Results
• Lowered our admin overheads
• Sellers dropped away
• Lowered frustration!
• We made a higher net margin!

18. Learnings:
• Process was simpler than direct 1P
• Products at RRP or higher than old sell price
• Partner got sales going again of ‘dead’ ASINs
• WE decided to send replenishment and 10 more ASINs as 1 full pallet
of each
• No pick cost
• No pick errors
• Lower freight costs – 1 or 2 FCs
• FBA warehousing costs cheaper than our 3PL
• No chargebacks for missing items
• It works

19. Thank You!

20. Questions?

21. Can I Help You?
• Available for consultancy
• Amazon
• Channel Management
• Distribution
• Export
• Brand Protection
• Tel: 07912 286624
• Email:davidhindle1st@gmail.com
• Via LinkedIn