Is an Amazon Vendor account really profitable?

• An Amazon Vendor account allows manufacturers and suppliers to increase sales quickly by offering products to millions of users.
• In the Vendor mode, Amazon invites the brands it is interested in and takes care of the sale to the end customer, assuming all management and logistics costs.

Being present on Amazon means showing products in the best ecommerce showcase that exists worldwide to reach millions of users. Selling through the platform is a relatively simple task that does not require the creation of your own online shop, but allows you to use a marketplace that is already trusted by buyers who visit it on a daily basis.

However, depending on the particularities of each business and the type of account held with Amazon, joining Jeff Bezos’ global shop may be a more or less profitable option for the seller. It is not the same to sell products to the end customer with a Seller account as it is to become an Amazon Vendor so that the company itself buys items in bulk and sells them directly to its users.

Why is it profitable to open a Vendor account?

Only brands that are invited by Amazon either because they are already well known, because they have already achieved a high volume of sales on Seller or because they manufacture products that could be of interest to the US company can become a Vendor.

Amazon is the one who buys the products from the Vendors. To do so, you open the account for them after contractually agreeing to certain conditions. They only have to pay additional costs for access to certain associated services that offer a multitude of advantages, such as premium reports from Amazon Retails Analytics, Amazon Premium Vendor Services or advertising campaigns with Amazon Marketing Services or the Amazon Media Group.

Unlike Sellers, Vendors become Amazon’s wholesalers and therefore invest less of their own resources and do not have to worry about the management, logistical costs associated with shipping to the end customer, failed deliveries or returns. Nevertheless, they will have to keep their own control of the goods they send to Amazon, assume the costs of sending their products to the warehouses from where they request the goods or the costs derived from the returns they make if, for example, after the period of time established in the contract, they have not sold all the articles that are already located in their warehouses.

Another advantage of being a Vendor is the ease of achieving a higher volume of sales more quickly, as Amazon is interested in prioritising the rotation of these products to facilitate the removal of stock from its warehouses. Products that appear on the platform labelled as “Sold and shipped by Amazon” are more likely to qualify for the Buy Box, apply to the Prime programme and can benefit from other services or special promotional campaigns that increase sales, such as Deals of the Day.

However, in order to assess the profitability of the Vendor mode, it is also important to know that brands lose control over the stock and prices of their products.  While it is true that a recommended retail price must be set, it is Amazon’s algorithm that decides the final price that the customer must pay to receive it at home.

This condition, together with the impossibility of sending Amazon a higher quantity of products if they do not expressly request them, is a key factor in deciding whether or not to have a Vendor account. Amazon can spend a period of time without placing orders with brands or setting a lower selling price than the price they themselves have decided to set for the products they sell on their own website or on the other channels they use.

If you are considering the possibility of expanding your business, Nozama can advise you on how to set up an Amazon vendor account.