Differences Between 1P and 3P Sellers on Amazon

Amazon has two business models for selling products on Amazon: 1P (first-party selling) and 3P (third-party selling). First-party sellers are known as vendors, and third-party sellers are known as retail sellers.

1P Sellers

In the 1P model, Amazon works as a retailer, and the seller wholesales its inventory to Amazon’s warehouse. This means Amazon owns the inventory, and they will handle the listings through Vendor Central. They set prices for the products to be sold on the marketplace. 

This is an invite-only feature from Amazon. Based on the seller’s performance on Amazon, Amazon invites retailers or 3P sellers to join the Vendor Central or 1P  program. Once you have been invited and joined the program, Amazon will make a purchase order. You need to fulfill that purchase order and forward the inventory to the Amazon warehouse. 

All the listings created under the 1P program are labelled as “Ships and sold by Amazon”.

Pros:

• Huge Purchase orders from Amazon.
• The Amazon team handles the listing optimization.
• A wider advertising opportunity.
• There is a flat fee concept in Vendor Central, no referral or fulfilment fee.
• “Ships and sold by Amazon” badge on the listing for trust gaining among customers.

Cons:

• Low margins as you wholesale the inventory to Amazon.
• Limited control over the listings. Amazon sets the prices accordingly.
• In case you fail to meet the stock fulfillment requirements, you may face chargebacks.

3P Sellers

Third-party sellers are a simple business model used by millions of Amazon sellers. Here, you act as a retailer, and Amazon works as a marketplace—nothing else. You will create your product listing in the seller central dashboard and sell it on Amazon.

You have two modes to choose from when selling on Amazon: FBA and FBM. Both modes have pros and cons. In FBM, you need to fulfil the order through carriers and handle customer support. In FBA, you transfer the inventory to an Amazon warehouse. They will handle the shipment for you and provide customer support.

Pros:

• You have control of your products and can regulate pricing and other things accordingly.
• You can decide whether to do FBM or FBA.
• You can control the inventory volume and promotions.
• Instead of doing wholesale, you can generate a good retail margin on every sale.

Cons:

• You need to pay multiple fees, such as referral and fulfilment fees.
• If you are doing FBA, you need to pay storage fees. If your unit does not exhaust within a year, you must pay additional fees to keep inventory in their warehouse.

1P Vs 3P Business Model on Amazon: What is best?

Choosing between 1P (Vendor Central) and 3P (Seller Central) depends on your business goals and resources:

Conclusion

The 1P and 3P selling models on Amazon have different benefits and drawbacks. Vendor Central, known as 1P selling, sells products in bulk to Amazon, generating large-scale purchase orders. Amazon then manages advertising and listing optimization. But there is less control over the listings and less profit. More control over inventory, pricing, and products is possible with 3P selling, also known as Seller Central. Although they charge a referral and fulfillment fee, sellers can choose either Amazon FBA or FBM fulfillment methods. The seller’s preferences and business plan will determine whether to use 1P or 3P.

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