Amazon 1P vs. 3P: Pros & Cons Brands Need to Know

Akta Bavalia

October 6, 2022

1P vs 3P

Whether you’ve been selling your products on Amazon for years or you’re just starting out, you’ve probably wondered if 1P or 3P is the best selling model for your brand. As the top ecommerce accelerator, and 3P seller, with deep experience on Amazon, we know there’s no “best way” to sell on Amazon—it depends on your products, long-term goals, and  capabilities.

In a 1P, or first-party relationship, Amazon buys your product wholesale and handles most of the selling details. In a 3P, or third-party relationship, you’re an independent seller on Amazon’s marketplace, which gives you both more control over your brand and more responsibility for logistics.

Deciding between 1P and 3P requires weighing the various pros and cons for your business. Brands should consider several factors before choosing which strategy makes sense. Here is more information about the pros and cons of both 1P and 3P so you can make the best decision for your brand.

1P Pros and Cons

Pros:

  • Amazon is a well-trusted brand and consumers may trust your brand more if it is sold by Amazon.
  • Your products are automatically eligible for Amazon Prime and two-day shipping.
  • Amazon handles all the logistics: taxes, ASIN, optimization, and customer service.
  • Amazon gives exclusive benefits, such as placement priority and advanced analytics tools, to 1P sellers.
  • Selling your products through Amazon 1P could be the most price efficient option for your brand.
  • You are basically free of inventory risk.

Cons:

  • Amazon has the control to sell your product at any price they see fit, even if it’s below your established Minimum Advertising Price (MAP).
  • You may lose profit margins.
  • Amazon will pay you less frequently than a 3P relationship.
  • You will have little control over availability of inventory on Amazon at any given time.
  • Amazon can drop you as a 1P seller at any time.

Many brands choose to sell on Amazon in a 1P relationship so they do not have to manage most of the logistics and simply prefer Amazon to do it.. In addition, having  a well-trusted brand sell your product is another top consideration in a 1P seller relationship..

3P Pros and Cons

Pros:

  • Gives you more flexibility and control in every aspect of the selling process.
  • Strengthens your brand presence.
  • Helps you gain better access to data.
  • Provides more control in the selling process (pricing, inventory, and product listings).
  • Offers complete control over how much inventory to list.
  • You can share inventory across marketplaces, when necessary.
  • Creative control to  develop listings with better optimized content to tell your brand story.

Cons:

  • Inventory risks.
  • Responsible to create purchase orders and handling inventory logistics.
  • You are responsible for your own customer service.
  • Brand must pay additional fees to Amazon for being a 3P seller.
  • Can be subject to account suspension.

Selling on Amazon in a 3P relationship  is an increasingly popular option for brands, and it’s easy to see why. Even though becoming a 3P seller may seem like more work upfront, it ultimately gives you more flexibility and control, a stronger brand presence, and better data access.

How Do I Become an Amazon 1P or 3P Seller?

You can only become a 1P seller through a direct invitation from Amazon. To become a 3P seller, the first step is setting up a Seller Central account. You’ll then provide relevant information and verifications before getting your account approved and finally listing and shipping your products.

3P Partners and Other Selling Model Strategies

While deciding between a 1P or 3P relationship is a solid start, selling model strategy is a bit more complicated than that. In fact, there are 7 common selling models brands may consider. Two of these models are the basic 1P and 3P models we’ve already discussed.

Other models include the following:

  • 3P Unmanaged: no active management of your brand
  • 2P: Fulfilled by Amazon (FBA) model
  • Hybrid: leverages both 1P and 3P strategies
  • 3P Network: you create a network of authorized sellers
  • 3P Partner: you partner with one exclusive ecommerce seller

Selling Model Strategies

Pattern Proves the 3P Partner Model Works for Brands

In our experience, the ecommerce executives benefit most from a 3P partner model because it provides the most freedom and marketplace control on Amazon, without having to worry about complex logistics. Pattern executes  a 3P exclusive seller model because it gives our partners  the freedom and control unavailable through a 1P relationship while also taking on the stock, management, and risks that make 3P selling intimidating.

Not all 3P Sellers Are Created Equal

With Pattern as your authorized wholesale partner, we buy your stock and resell the products on Amazon as an authorized seller. Once we buy your product, we’re responsible for all inventory risk, and help you optimize your content and advertising while maximizing your brand protection and brand global distribution. Our sophisticated inventory forecasting, fulfillment, and logistics systems help us predict and manage your inventory, and our experienced teams handle everything from taxes to customer service.

Unlike a 1P Amazon seller relationship, we’re eager to involve your brand every step of the way, including when it comes to branding, promotion, channel strategy, and new product launches. We respect your brand by following all brand pricing guidelines and committing to never drop below MAP policies.

Interested in increasing your margins by transitioning to a 3P relationship and partnering with Pattern? Get in touch today.

To learn more about the differences between 1P and 3P strategies, watch our recent webinar.

 

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