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Amazon Vendor Central: Costs & Challenges

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Recently, news about Amazon pushing Vendors towards Seller Central took many by surprise; but there are a few sellers that are already working with both Vendor and Seller Central. Rather than expanding on speculation, it is the right time to re-think whether to continue with Vendor only or use a hybrid strategy for your business. 

One of the important factors to consider when deciding is the fee structure. A Vendor sells at a wholesale price and there are additional fees with Vendor agreements which include: 

  • MDF/COOP Terms: 10.0% of Net Receipts (i.e. total Receipts fewer returns and taxes) based on Cost Price.  COOP Fees are charged as a way to get back some of their operating costs. Most vendors are required to pay the Market Development Fund (MDF). Usually, there is no clear explanation of how these marketing costs are handled. 
  • 2% Damage Allowance – Allowance applicable instead of returning damaged goods to the vendor
  • 1.0% Markdown – This is related to a claim for reducing the price 
  • Chargebacks include mislabeling, improper packing, late arrival, late PO acceptance etc. There is a lot of evidence of incorrect fees charged by Amazon and they need to be contested with Amazon, which can be a time-consuming process.

By comparison, the main Seller Central fees include:

  • Referral fee – charged as a percentage of the retail price, or at least the price paid by a customer less any discounts. The percentage depends on the category (15% for most categories).
  • Fulfilled By Amazon (FBA) – includes pick and pack fee, and monthly storage fee, depending on product size and weight. Full details >>

Getting the figures correct is often difficult, and more often than not sellers may not actually know if they’re making money. We tend to see the money coming in at the time and forget about fees. 

Recently, we spoke with many Vendor sellers who raised lots of serious questions, which you can find below with our answers.

Some of the common issues raised by Vendors in our contacts were: 

#1 Moving between Vendor and FBA – potential pros and cons?

Pros:

a/ Increased profit – you sell at retail price

b/ Price control – you can sell at a price of your choice 

c/ Inventory control – send stock in a small number 

d/ Faster payment of 15 days

e/ Don’t have to wait for Amazon to generate PO during product launch

f/ Reduced time wastage in dealing with chargebacks

Con:

a/ Sales volume is less as is it B2C

b/ Support team required to communicate with customers

#2 Amazon Vendor direct fulfilment – how to get this to work smoothly

It is a lot of work to process orders one by one via the Vendor Central platform, so the best way to solve this is to take advantage of an EDI (Electronic Data Interchange) integrator that allows sellers to process orders in bulk, print shipping labels in bulk etc. If you use a system like Logicbroker they can connect with your ship station to enable easy processing of orders.

Other solution providers are:

#3 Amazon Vendor – Is it possible to limit the number of fulfilment centres serviced to reduce costs? (Amazon support understandably say no)

No.

 

#4 Seller Support is rubbish they often get back to you with queries you always have to answer amazon messages promptly. Also, we haven’t done Vendor Central as our carrier was cancelled – lost sales!

Amazon Vendor has a different level of support system in place. Most of the Vendors don’t have Amazon’s direct support and is usually managed via their case log system. If you prefer to have a direct email contact you’d have to pay an annual fee which is generally affordable for high sellers only.

#5. Amazon Vendor – Frustration-free packaging – Does it really HAVE to be certified if we know it meets requirements?

Certification is part of the process. Please find out more about the process and certification here. 

 

#6. 3P vendors adding poor content and the lack of support from Amazon to remove or update

This is a very common issue we see every day. The best way to work around these issues is to register your brand with Amazon and ask Amazon to gate your brand so if anyone tries to list your product they would need approval. 

Another way to proactively check changes is via the tool https://getreviewbox.com/ which alerts you when there are content changes. Once we have a list it makes it a bit easier to contact support systematically. 

You may have realised by now Amazon is a complex platform and brands need to understand the full ecosystem of Amazon to get the best out of it. Our vendor session gives you an overall understanding of managing the account and its advertising opportunities. It is a practical session, allowing members of your team to create a clear Amazon Growth Plan. 

Find out more about this training session available to Amazon Vendors based in midlands and throughout the UK. 

 

 

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