-Hey guys, welcome tothis week’s episode.
And today I’m gonna be talking a little bit about Amazon, in particular, Amazon Australia, and the differences between Seller Central and Vendor Central.
And, you know, some recent (mumbles) that I’ve encountered that I want to share with you.
And hopefully you can get some great takeaways from that.
And I’m here with my co-host, Kevin.
-Hey David, how you doing today? Good, good.
How you doing? It’s good to catch up again.
Anxious to hear the, just the differences in Amazon, you know, in the differentregions of the world where they operate, I mean, to see if there’s consistencies or real differences andhow they’re operating.
Yeah, no, I mean, it’s global and there are a lot of consistencies.
And the one specific becausequite an interesting story was just happened recently and I had a big debatewith somebody over stuff what I’ll share it today and that is, should they be using VendorCentral or Seller Central.
And do you know the difference between those Kevin orshould I explain it? I don’t, you know what? I was gonna ask you that.
So yeah, unpack that for a little bit.
Yeah, so for those who don’t know, Vendor Central and SellerCentral work differently.
Seller Central means you’reselling your products on their platform in the marketplace.
And you kind of managingyour own store on Amazon, you’re responsible forareas of product listings, your advertising, thesales or customer service, the inventory, etc, etc.
The way vendor central works, Vendor Central works reallylike Amazon’s retailer and you’re the supplier, so you’re selling to Amazon, they’re buying the product from you, and then they’re selling the product.
And then they’re selling the product.
So they kind of commit to what they buy, and then they sell it at a margin.
So it’s really a completelydifferent concept.
And I just felt it’s probably worth touching on this a little bit because of Amazon’s launch in Australia.
But I think the principles apply anyway.
You know, the debate came up about, should we be on Vendor Central or should we be on Seller Central or some of our brandsin consumer electronics.
And while obviously it’s very attractive, I think the attraction of Vendor Central is that they’re buying the stock and they’re also proactivelytrying to sell it, so there’s a commitment it’s like supplying a retailer.
But one thing that caught me a little bit cautious and concerned about and by the way, anybody’s got thoughts on this, you know, please comment and send your comments in I’d love to hear it.
Is Amazon has had a bit of a bad reputation in the past, particularly in the US of kind of starting companies or for suppliers off onVendor Central model.
Especially when they’re trying to start a category or start a new market.
And you know, people jump in and get excited and then, you know, they put the kind of whole heart and soul into the businessand then over time, you know, Amazon with all the analytics, see what works, what doesn’t work what’s doing well, whats not doing well with the ratings on the product, and they start droppingsuppliers of lacquer, literally like hotcakeslike a ton of bricks.
And that’s kind of what puts me offset of Vendor Central.
Because you can build this whole business in reliance in dependence on them, and then they just for no random reason other than data just cut you and you don’t really necessarily always have people to talk to, you know, to help me to try again, it’s very much a data driven business.
When you sign on as an Amazon vendor.
Is there a certain period of time that Amazon says we guarantee we will buy from you for 12 months or I mean is that built into the contract or could they just stop tomorrow? They can stop tomorrow.
I think each purchase order is done there’s always the intention to do more.
But you know, each purchaseorder’s a commitment.
So you’re as good asyour last purchase order, so to speak.
What a risk to rampup and Amazon just say, well, you know, we’llbuy from you one time but you’ve ramped up production, Yes and all of a suddenyour buyers are gone.
It is a real risk.
But there is an advantage if they buying the stock, right? Because obviously most people have to carry the inventory themselves.
So you know that of course, that’s where the SellerCentral comes in, right? Is it better to be on Seller Central and kind of manage it yourself, and as long as you’re getting good reviews and your products are selling well, you’re not violating anyof the Amazon policies.
you’ve kind of got your own business.
So it’s the real kind of debate going on Seller Central versus Vendor Central.
And, you know, I know that, you know, I’ve had guys with multimillion dollar Amazon businesses that havebeen on Seller Central and Amazon have approached them very aggressively tomove to Vendor Central, because they want to kind of get a bigger piece of the pie.
And almost to a point where there’s been bully tactics or you know, have strategies to try and force them into aVendor Central situation rather than a Seller Central situation.
Fortunately, they haven’t been successful at that all the time, because the sellers tend to push their price up and then Amazon make this margin so it kind of falls away.
So it’s kind of the question I guess is, what is the right approach? Do you go Vendor Central or do you go Seller Central? So what’s the difference? I mean, kind of average difference between like the marginsbetween these two.
So if you’re doing everything yourself, I mean, is it a 70/30 split, 70 to you 30 to Amazon and if you go the vendor is it like 50/50? What’s the, or do they just buy your stuff at a discount? Well they buy your stock at a discount.
Remember that they’re wanna pay you less and they’re gonna sell it for more.
Sure So it’s probably not a great idea for you but there’s less inventory risk.
With Seller Central, you pay your flat Amazon fee, which ranges roughly 15% so Amazon take their fee and then you know, whatever you selling you can manage and control all of that.
So I kind of feel like my take on it is– and this is what we’ve done with one of our brands is, there was value for us installing on a Vendor Central relationship, specifically becauseAmazon wants to launch that product category.
And they promised us a whole lot of special listing details.
Will hand our ministore with extra banners that promise certain rankings and things like that, and visibility on Amazon which, in terms of marketing dollars is like unbelievable and irreplaceable.
So, you know, we saw the value in that and we started with the Vendor Central.
But what I did say to, you know, colleagues here in Australia I said, start with the Vendor Central.
But be ready and expectto move to Seller Central as quickly as possible so that you don’t build your whole expectation around Vendor Central just kind of launch with Vendor Central.
If you have that opportunity and try and leverage the benefits it comes with and then as quickly as possible move to Seller Central, and make sure on the Seller Central, you’re actually using your brand, right, because if you’re notbuilding your own brand, it’s very difficult to justify , you know spending all that time and energy and effort, it’s kind of your onlysource of protection is having your own brand and your own trademarkthat people identify with.
Then it doesn’t matter what the selling channel is.
So you mentioned thatAmazon kind of controls the purchase orders and they can turn — Yeah -that faucet on and off at will but if you start with Vendor Central and you’re successful and you want to changeto the Seller Central to me that would be to Amazon’s detriment.
And you’ll also experiencesome bully tactics even then when they say, No, we’re gonna make it difficult for you to switch or what have you experienced? Yeah, I haven’t actuallyexperienced that yet.
It’s always been smooth.
We’ve only done it twice.
So I don’t know the answer to that.
If anybody listening does again I’d love to figure the feedback and get more insight into this.
But generally speaking, it’s been okay switching between Vendor and Seller Central.
And I just believe your recipe to success is building your own brand and being the master of your own destiny.
And that’s why I think Seller Central versus Vendor Central is probably in the long run, the best way to go.
And of course, definitelywith Brand Registry, you don’t wanna be in a space where you’re not using Brand Registry where you’re protected on your trademark on the platform.
Otherwise, you just have nothing you need to differentiate about.
And there is protection in that too even long term, even even if you would change to another platform, another selling platformlike Etsy or Spotify or whatever that is, that you have would havethat brand recognition.
Even on your own side yeah.
Exactly, and that’s the key and especially with Amazon because Amazon, you don’t get access to the customers or the clients.
So you don’t actually get to build your mailing list and but if you’ve got your brand and people liked it and they are interested in it, they will find you online and you know, hopefully, you know, opt into something you have to offer and start a direct relationship with you.
And that’s for brands, which is so critical and so important.
Then it’s important notto kind of get roped into Amazon’s personalgrowth strategy, right? In terms of specialdeals on Vendor Central, if you do this, if you do that, and, and get caught up in it, because their goal is to aggressively grow their market share in these spaces, and they use the brands to do that.
And they use companies to do that.
Whereas your goal is to build a brand and build your client list, right? Right.
So sometimes they’re not aligned.
I mean, you mentioned just a minute ago about you know, the maybe the strategy is, we can start Vendor Central and then shift to Seller Central.
Can youYes just kind of outline real quickly maybe the steps in doing that or, you know, you said you’ve done it a couple of times are there specific steps you have to take you have to kind of rampup to make that change, or is it just flip the switch overnight? Well, you know, youdon’t do it overnight, you got to do itgradually because you need to firstly clear out of the inventory that Amazon have committed to and that are selling.
And, you know, once it’s cleared out, one writes a new purchase order.
You know, that’s when you kinda wanna have a conversation with them saying, look, we’re looking tomove to Seller Central.
We can’t get enough inventory.
We don’t want to burden you with that.
I wouldn’t necessarily position in a way that you’re not happy with Vendor Central, if that makes sense.
That’s, yeah, it’s, Ican imagine you frame it.
Amazon, hey, look, I want this to be a win win for us this is for your benefitbut allow me to do this.
But I mean, it’s a big argument to be had the fact that they’re buying and committed to the stock.
So I think it does need to be assessed on yourindividual situation and how much stock you carrying and sounds like a good idea.
They’re willing to commit to it and get started, you know, take advantage of it.
But I do think the longterm play does need to be Seller Central.