Amazon 1P vs 3P: Which is best for your brand?

Selling on Amazon can be overwhelming. Two main paths exist: 1P (Amazon sells your product) and 3P (you sell your product on Amazon). Whether you’re contemplating Amazon’s first-party (1P) or third-party (3P) selling model, understanding which path aligns with your business goals is crucial for driving growth and achieving top performance. Each has its pros and cons. Let’s break it down.

1P: Amazon Takes The Reins

In the 1P model, Amazon is the retailer. They purchase your products wholesale, becoming the owner of the inventory. This approach can feel like handing over the keys to your business, but it also comes with some perks.

AMAZON 1P PROS

• Amazon’s Brand Power: Leverage the Amazon halo effect to boost your product’s visibility. As a 1P seller, your products are positioned alongside Amazon’s trusted reputation, boosting credibility and driving high-performance results with the full weight of Amazon’s global reach behind you. Harness this to accelerate your brand’s growth and increase your sales.
• Fulfillment and Logistics: Let Amazon handle the heavy lifting of shipping and returns. By choosing the 1P model, you tap into Amazon’s state-of-the-art infrastructure, ensuring swift, reliable delivery and top-notch inventory management. This allows you to focus more on scaling your brand and driving growth.
• Prime Eligibility: Automatically qualify for Prime, a major advantage in today’s fast-paced market. By gaining Prime eligibility, you place your products in front of millions of loyal Prime members who demand fast, free shipping. Enhance visibility, drive higher conversion rates, and maximize your brand’s revenue potential.
• Potential for Bulk Orders: Tap into lucrative bulk order opportunities with Amazon’s 1P model, where you can capitalize on Amazon’s purchasing power to secure large-volume sales. Amazon might place larger orders, potentially improving your production efficiency.

AMAZON 1P CONS

• Less Control: You surrender pricing power and inventory management to Amazon. This shift requires you to adapt and strategically navigate the trade-offs to ensure alignment with your brand’s vision and objectives.
• Profit Margins: Expect lower profit margins due to wholesale pricing. You’ll need to strategically manage costs and leverage Amazon’s extensive reach to drive high-volume sales.
• Dependency: Your success is tied to Amazon’s decisions, which can be unpredictable and can impact your control over product positioning and strategy.
• Risk of Delisting: Amazon can drop you as a vendor at any time. To mitigate this risk, stay vigilant and proactive by continuously optimizing your product listings, monitoring performance metrics, and swiftly addressing any issues.
• Chargebacks: When working with Amazon as a 1P seller, you may encounter some hidden fees due to fulfillment issues or dissatisfied customers.

3P: You’re in the Driver’s Seat

As a 3P seller, you maintain ownership of your inventory and control over your brand. While this offers more freedom, it also comes with increased responsibilities.

AMAZON 3P PROS

• Control: You set prices, manage inventory, and control your brand messaging. Use this opportunity to strategically tailor your approach, optimize your product listings, and directly influence your brand’s performance.
• Profit Margins: Enjoy potentially higher profit margins compared to 1P, as you set your own prices and retain more control over your revenue.
• Flexibility: The 3P model grants you greater flexibility in product selection and marketing strategies. This allows you the freedom to swiftly adapt to market trends, experiment with promotions, and fine-tune your approach for optimal results.
• Build Your Brand: Strengthen your brand directly, as you control product presentation, customer engagement, and marketing strategies. Leverage this opportunity to create a compelling brand narrative, differentiate yourself from competitors, and cultivate a loyal customer base. Direct interaction with customers can also strengthen brand loyalty. 

AMAZON 3P CONS

• Competition: Third-party sellers operate in a highly competitive marketplace. This is due to high seller volume, price competition, customer expectations for fast shipping, buy box competition, and more. To excel, you need to bring your A-game: refine your product, optimize your pricing strategy, and deliver exceptional value.
• Logistics: You handle shipping, returns, and customer service. This means you must meticulously manage warehousing, ensure timely deliveries, and handle any disruptions or issues that arise.
• Fees: Amazon charges various fees, including referral, fulfillment, and storage fees.
• Time and Resources: Managing a 3P business requires significant time and resources for managing inventory, optimizing listings, and handling customer service.

Which Path is Right for You?

The choice between 1P and 3P depends on your specific goals, resources, and product category. If you prioritize brand building, control, and profit margins, 3P might be the way to go. However, if you seek rapid growth, leverage Amazon’s logistics, and are willing to sacrifice some control, 1P could be a viable option.

Many brands opt for a hybrid approach, using both 1P and 3P channels to maximize their reach and profitability. By carefully considering the pros and cons of each model, you can make informed decisions to drive your brand forward. Remember, the Amazon can be unforgiving, but with the right strategy, you can dominate.

Luminize can help you navigate the complexities of Amazon, whether you’re a 1P or 3P seller. Chat with an Amazon expert today. 

Written By Madison Layne, Content Strategist