There are two primary ways you can make money on Amazon: sell your products to Amazon or sell directly to the consumer. Amazon Retail is similar to wholesaling your goods to Amazon, while Amazon Marketplace functions as a storefront platform with customers.
When determining your Amazon strategy, you want to consider how your products, margins, skillset, and future growth will contribute to the Amazon selling route you choose.
What Is Amazon Retail?
Amazon Retail uses the Vendor Central interface. You wholesale your products directly to Amazon, where Amazon would then act as the distributor for your goods. Think of it like adding Amazon as a retail trading partner or storefront.
You negotiate a wholesale price per item and then Amazon purchases the goods. Amazon then merchandises and resells the products on the Amazon.com website under the “Amazon” name. To the consumer, the platform looks the same as the Amazon Marketplace; the only difference is that the “seller” will be listed as Amazon.com.
What Are The Pros Of Amazon Retail?
As an Amazon Retail seller, your sole focus is keeping Amazon happy. You don’t have to worry about marketing or selling to the customer. You don’t deal with product listing optimization, sponsored posts, customer service, or returns. You simply sell a bulk order to Amazon, send the order to their fulfillment center, and then get paid.
Amazon Retail is usually the easiest for Amazon sellers. Amazon takes on more of the risk and does a majority of the work, like fulfillment, marketing, and inventory. This is a strong option for people who love the logistics side of sourcing but don’t want to deal with the marketing, selling, or customer-side of the business.
Moreover, wholesaling to Amazon often provides a more consistent cash flow at lower energy expenditure.
What Are The Cons Of Amazon Retail?
Often, when determining at what price you’ll sell, Amazon will have the upper hand in negotiations. They usually have some sort of predetermined idea of what they will buy for a specific type of good, and they often don’t budge. Your margins and volume quantities are preset by Amazon, which leaves little room for growth and expansion in your own timeline.
If you are an entrepreneur looking to grow your business, you won’t see the success you want by selling through Amazon Retail. You need the flexibility of the Amazon Marketplace platform.
What Is Amazon Marketplace?
The Amazon Marketplace through the Seller Central interface is direct to consumer. This is where sellers build their own listings to market their products directly to the online customer. Amazon then takes a “referral fee” per sale.
Nearly half of all products ordered and shipped through Amazon are from Marketplace sellers, totaling about $132 billion in sales each year. It’s a common platform for any seller looking to take control of their business.
What Are The Pros Of Amazon Marketplace?
With the Amazon Marketplace, you manage your own price and set your own margins. Thus, Amazon Marketplace has significantly more potential for growth. You control the marketing and customer service, which in turn determines your sales. If you’re good at marketing and selling, you could potentially see endless exponential growth—especially with new forms of marketing like social media. You are, in essence, controlling your own storefront while using Amazon’s infrastructure to streamline operations.
You also have better overall brand control. This is especially important if you sell private label. When you host the listings yourself, you can control the brand image, the pricing, and the distribution methods. You determine if, when, and how there are sales, which is a key determiner for your brand image. You own the customer’s shopping experience and how they interact with your brand. In this case, you’ll want to consider signing up for the Amazon Brand Registry.
Moreover, Amazon Marketplace puts you in direct interaction with your customer. The Marketplace puts you closer to your consumer, so you can better track data of demographics, reviews, and sales. This helps you to understand who your customers are, the items they’re purchasing, and how often customers are buying products. This can allow you to make changes moving forward to determine the correct path for growth.
Ultimately, the benefits are:
- Control of growth
- Control of price (higher margins)
- Control of brand
- Control of sales velocity
- Control of customers
If you want future growth, greater revenue, and a better relationship with consumers, Amazon Marketplace is the right option for you.
What Are The Cons Of Amazon Marketplace?
Amazon Marketplace is significantly more work than Amazon Retail. You are responsible for merchandising, marketing, selling, and customer service. However, this doesn’t mean you need to do all the work yourself. You can outsource fulfillment to FBA and marketing and optimization to Seller’s Choice to reduce the time spent on your business.
Basically, with Amazon Marketplace, you can grow at a higher rate and build a customer-facing business.
The Bottom Line
You can choose one vantage or a hybrid of both depending upon the needs of your business. If you want a consistent cash flow with minimal work, wholesaling through Amazon Retail may be right for you. If you want to maintain control of your brand and growth by selling direct to consumer, you’ll want to focus on Amazon Marketplace.