Thinking of Selling on Amazon? A Retailer Explains Why You Should Consider Going through a Third-Party Seller
A.I. Friedman has been cultivating long-standing relationships with all manner of creative, art-centric vendors for almost an entire century. With decades of experience in both the commercial and retail arena, A.I. Friedman is an expert at strategic positioning.
We recently had the pleasure of speaking to Lauren Haimelin, E-Commerce Buyer at A.I. Friedman, who had a lot of key insights. Below are her 4 vital factors to consider when selling on Amazon and why you should think about going through a third-party seller.
First and foremost, one must understand that a third-party seller (or reseller) is someone who purchases directly from the vendor (in this case, you) and sells their wares to customers through their own Amazon profile. Ideally, once a third-party seller has purchased from you, you would ship your products directly to the Amazon warehouse so that orders can be fulfilled from there. If, as a vendor, you choose not to go this route, one other option is to sell to Amazon, in which case they dictate your prices. The last option is to sell on Amazon yourself, leaving you solely responsible for fulfilment of every individual order, which can be hard to scale. So, why might you go for the first option (selling through a third-party)?
“The possibility of increased brand presence in third-party sellers’ retail stores and e-commerce websites means huge growth possibilities with multiple third-party accounts. This growth will allow you to expand and diversify your product offering and the third-party sellers will continue to deepen your online presence with these new items which will strengthen your reputation and legacy.
“[Another thing to consider is that] FBA (fulfilled by Amazon) listings are more attractive to amazon customers because of Amazon Prime shipping policies. If you fulfill orders from your warehouse, the shipping costs will make pricing unattractive to customers, thereby diminishing sales.”
“The vendor has a hassle-free set up when selling through third-party sellers (barring the extra cost of order processing). This means there is minimal change to how you do business. If you’re set up on Amazon as a vendor directly, you have to be set up to ship to every individual customer in the entire country that places an order, and then deal with the customer service on those orders. We do the customer service on any orders we have. We’re set up with a full customer service team to deal with those issues so you’ll never have to deal with them.
“Additionally, if you’re shipping directly to customers across the country, you’re shipping from your business to a residential address and you’re paying your costs for the goods. You’re also paying a 15-20% (or greater) listing fee, depending on the item, and then you’re also going to have to pay the shipping, so it really cuts down on your margin.
“We have a special deal with FedEx. We don’t have the best deal ever, based on our volume, but we ship orders all day every day. We’re a decent-sized business with a little less than 200, maybe 150 employees, and we don’t even get a great rate with FedEx! If your cost is $4, it’s going to cost $9 minimum to ship across to a residential address and then Amazon’s going to charge you 20% of the $20. You’re already at $16 and you’re making $4 on that order. Whereas, if you sell it to me for, say, $8, you’re going to make that $4 and you’re not going to have to do a thing except ship it to Amazon and you don’t have to worry about any of the other fees.”
“[Going with a third-party seller also means] you’re able to maintain your reputation in the industry and open up for growth because we’re the ones taking on all the risk. You’re just doing what you do by making your product. You don’t have to worry about taking the financial risk of shipping your product across the country from Amazon’s warehouses all over the place, and having to deal with pulling that product back if it doesn’t sell. Essentially, you get all of the benefits of selling on Amazon, without any of the work.”
“Third-party sellers make up the majority of Amazon sellers and account for more than half of all Amazon sales. Amazon trusts us; we have a proven above-average seller rating and we are priority managers of listings, giving us a privilege to correct, maintain, fix and change listings at any time. If a vendor sells on Amazon as a professional seller through their own account, they put themselves in direct competition to us third-party sellers. Also, sales of product that have few sellers [meaning you’re the only one selling your items] are unattractive to Amazon customers anyway.”
The bottom line? When you set yourself up to sell through third-party sellers, you optimize yourself to sell products in bulk to a retailer you know you can trust. This allows you to scale your company at an appropriate pace while growing and maintaining business relationships. Selling directly to or on Amazon means dealing with logistical and financial burdens, ones that, if you’re ill-equipped to handle, can prove to be detrimental to your business.