Amazon Vendor pros cons

[globbyglob]

Hi

We've been recently invited to join Amazon Vendor for our brand.

We have quite a lot of lines which we direct fulfil and only a few lines on FBA (with a view to expand most of our range onto FBA this year).

Amazon Vendor require us to submit the entire catalogue and we're slightly nervous about this as we are lost on how to price given that we have a limited understand of the logistics and other hidden costs to when Amazon make purchase orders.

We're also conscious of the fact that Amazon probably will rarely allow price increases so if we mess up pricing the first time (especially when they are demanding our entire catalogue) we're in a dangerous position.

On top of that we constantly read about Amazon bullying vendor's, vendor manager only for a year, worse data, loss of listing control, loss of pricing control, margins and a whole host of other negatives vs 3rd Party FBA. It seems that FBA sellers get everything vendor sellers get with the added advantage of better data and price control.

Anyone here on vendor? Are there any positive things to say about it.

 

[Pish_Pash]

Very current.

I onboarded as an amazon vendor...in late 2017.

They were pretty clear up front that their expected 'charges' (discounts) would amount to about 8% (this is made up of a percentage for them not me sending back customer returns & also a 'marketing contribution @3%). Simples thinks me...I'll just inflate my prices by the mount needed to cover that

Fast forward 6 months & my 'new 2018 terms' arrived for me to agree to...oh, oh - the expected marketing contribution had gone up from 3% to 10%! (over a 3 fold increase). I wasn't forewarned they'd be likely to try & pull this stunt. I negotiated & got them to accept an increase from 3% to 5%..

Fast forward another 7 months & my 2019 terms have arrived (therefore 2 lots of terms in just 15 months) ...again they want the 10% marketing...this time they are playing hardball. I'm baulking.

It hasn't been a pleasant experience...what could have been very rewarding has turned out to be "meh". It was a vast amount of work for my to make code changes to my systems to embrace their way of working (which is totally different from FBA).

Basically you're on the hook for everything...if they order too much (sloppy forecasting), they send it back to you after 90 days - guess who pays for the return shipping (tip ...it's not them!). In essence this makes what they're doing an elaborate sale or return wheeze. Worse still, after sending a products back after 90 days because it didn't sell, their very next PO (a couple of days later) quite often has the same (just returned) item on it...!!! rinse, repeat.

Additionally they expect you to advertise (even though you are already paying them a whopping marketing allowance). I'm now 100% convinced they want new suppliers onboard not for the profit in selling their associated products...but from the massive profit of pressurizing suppliers to spend on advertising.

the other kicker is chargebacks...for example, they set a tight deadline for you to get their requested items (on their POs) to them...it's about 5 days - but get this...I hand my cartons to UPS on the same day that I get Amazon'sPO, UPS are excellent normally 'try' to deliver to the fulfiment centre the next day, but the Fulfilment centre won't give them a delivery slot, this goes on for days...then the 5 delivery deadline passes and I get fined! (that's right, I get fined by Amazon because their FC won't let UPS deliver - talk about a scam/license to print).

Would I do it again...not if I knew then what I know now (but that said, my hand was sort of forced as the overseas brand I represent wanted me to do it) ...would I walk away now? Not intentionally, I'm over-invested from a time perspective (that said if we can't agree terms I might have that decision forced on me & won't be a supplier anymore).

So what I'd say is go into it quoting higher than you think you can get away with (you are right, they seldom embrace price rises from you) & then be fully prepared for the onslaught of 'initiatives' from them to get you & your hard earned parted!

 

[globbyglob]

So what I'd say is go into it quoting higher than you think you can get away with (you are right, they seldom embrace price rises from you) & then be fully prepared for the onslaught of 'initiatives' from them to get you & your hard earned parted!

Thank you for this very detailed reply. It is nice to hear another seller confirm my worst fears!

It would seem that in this case it would just be better to turn down the invitation and stick with the 3P route.

I can only imagine that if we go down the vendor route the setup time and the issues that would arise over the 6-12 month period we would realistically trial it for simply wouldn't make it worth the effort (if the end result is us switching back to 3P only).

On top of that we risk all of the issues you have mentioned above and possible damage to the brand through poor reviews or other stock / sale issues. Not to mention the fact that we are being forced to price our entire catalogue with no understanding of just how many FC's and the order quantities that will be requested of us (I have this fear that Amazon will order small numbers to lots of different FC's and we have no idea how much this will cost logistically and it would be impossible to build this into our pricing model initially).

An associate mentioned the possibility of considering a hybrid-hybrid model where we do vendor, direct fulfilment (drop shipping via vendor) and FBA/3PL. This supposedly would act as a hedge against Amazon being out of stock while maintain a fallback 3P option.

I'm also slightly concerned about how easy it is to leave Vendor if things aren't working out. Amazon seem to be the type of company that might get vindictive (I've read horror reports about people having their seller accounts closed so they are forced to only sell via Vendor) and also how easy it is to get back control of listings to 3P if removing the product from vendor.

I guess the only concern here is the FOMO of wondering "what if", assuming we didn't go down the vendor route, and of course the loss of the invite as I suspect we will be black marked and won't be invited again for the foreseeable future.

I would be most grateful if you could touch upon the points I've mentioned in this post just to pad out my pros/cons list, but of course extremely grateful for the advice you have given so far.

 

[dcart]

Yes, Amazon needs a catalogue of products but if you already have e-commerce then there is no problem. You can integrate your online shop with Amazon using the csv/xml extension for external sources. This way you can sell on Amazon, eBay and Google Merchant.

 

[Pish_Pash]

Oh the FOMO is strong with respect to being an Amazon Vendor...it may work very well for you...if you've got chunky profit margins then it could be an amazing opportunity. I personally think that such could be the post FOMO blues for you, it might still be worth a punt...you'll soon know whether it's viable quite soon from the PO sizes you get in the first few months (& can always bow out)

My problem is, that I hadn't expected them to come back with 3 fold increases (marketing costs) so priced a little to close to the bone. Also I buy in from overseas, so the pound's weakness is not helping (& Amazon won't tolerate price increases!)

I still use FBA ...it doesn't seem to knark them (my justification is that they - Amazon UK - haven't represented all the products I supply via FBA (UK) to EU marketplaces...& I use FBA to EU customers) ...but it's quite useful to keep your FBA account to 'persuade' them to get their prices down, because when they hold a monopoly they can sometimes take the p1ss with price (which means low sales)...therefore, in this scenario I use my FBA account to undercut them, their algos soon price match.

You are quite right to be concerned about the size of the anticipated POs ...again, another wheeze by Amazon, is rather than place one large PO with you destined for one FC, they furnish you with 8 or 9 small ones...all to different FCs. In other words they are getting you as a supplier to do their inter FC distribution for them (which can impact your profitability by the extra shipping cost incurred ...I can send 20kg for £3.79 to an FC, but if they send 8-9 POs weigh 2kg to different FCs, then it'll cost me up to £34.


one thing that was a massive ordeal (& I don';t see mentioned)...is their accounting, frankly it's off the scale from a head trip perspective ( abit like FBA accounting is a head trip...but it's a different head trip!)

Example:-

They ask for 100 items
You send 100 items
Their receiving person only counts 98 items
They still pay you for 100 items 45 days later, but at the same time they then raise an invoice against you for the 2 item shortage.
You protest and say "but I sent 100 items"
they say send in a proof of delivery (along with an invoice that specifically has the courier tracking number on it for that shipment)
If the courier has actually obtained a proof of delivery, you send it in
they then reimburse you for the 2 items some time later

all that has to be accounted for in your accounts software!

...that's just one example...it sumps your time (massively) when you come to reconcile.

My Amazon Vendor setup here is pretty slick now (as I learnt how to code & can semi-automate a lot of their time consuming tasks), but if you are relying on spreadsheets, etc...you'll struggle

on the plus side, you can add video & A+ content to your listings (which increases sales)...getting changes made to the listings is much easier too (as they trust their suppliers vs. any old FBA seller) ....and the biggie - no end customers! (which can be a drain)

 

[Mister B]

As ever, useful replies from Pish Pash, which echo what I've heard elsewhere.

We were hounded relentlessly around four years ago to sign up and purely for the reasons that Pish Pash mentions, stood our ground and refuse to sign up to it. I did have one heated conversation with one of the Vendor account managers which resulted in him asking what my problem was with Amazon-I thought that this conversation may have had a negative impact on our account standing but they simply moved on and left us too it.

At the end of the day, we felt that by participating in the Vendor programme, we would cede all control of our business to them and leave us way over exposed. Granted we're still exposed at the moment, but at least we can control pricing and distribution. I think that the Vendor programme is the final step into the abyss-which we're determined to avoid.

Horses for courses though, I'm sure that it may work for some sellers.

Mister B

 

[Mister B]

Should also add that my concern on pricing wasn't at them setting our products out at too high a price, precisely the opposite. By letting them have control, they could set prices too low so effectively bastardising our pricing policies on other channels, which I'm sure they would have done.

Mister B

 

[Pish_Pash]

Here's a related pricing story, I sold them a product for £4.50 ...they listed it at £5.00 ...clearly a mistake, as after VAT was taken off, they were underwater for about 35p vs the price I'd sold to them at (there were two other products in the same range that they were selling for about £12..which is more like it). So I contacted them & said "you've made a mistake...you're losing money".

The first time they said "don't you dare talk to us about price" (they are very sensitive about suppliers mentioning the word "price", they will cut you off abrubtly if you do)...but I persisted and said "look at the matching products, you're selling those for £12.00" ...they then said "oh, yeah...you're right it looks like a pricing error....leave it with us".

they then corrected the price...about a week later it was back down to £5.00...so I contacted them again...but this time they said it was intentional "occasionally we aggressively discount products to stimulate interest" ...I didn't believe them...it was a pricing mistake in my opinion, so I just stopped supplying them with the product (as it was making it difficult to sell the other products).

So yeah, you surely dance with the devil wrt pricing when you decide to become an Amazon Vendor.

 

[RSR Fulfillment (FR & DE)]

You are dancing with the devil by developing your revenue exposure with amazon at all. If it is the main channel I feel sorry for that vendor. I'd rather pack it in and get a job than need amazon as a partner. We have been chucked off twice but they were never more than 15% of total turnover. So we did not go bust. Any more and we might have done.

 

[Pish_Pash]

You are dancing with the devil by developing your revenue exposure with amazon at all.

It can provide explosive growth, so I guess the business model when getting into bed with them is "make hay while the sun shines" ...just don't expect it to last. I'm now 56yrs old, I've already got a bit of cash sitting in the company coffers (which I will draw down over the following years if/when it all goes Pete Tong) ...the alternative was to be unemployed....so yes, I'm dancing with the devil, but at least someone asked me to dance.

 

[The Byre]

I have a tip for all you Amazon and eBay warriors - look upon it as advertising and not as a conduit for profits.

I went to an eBay shop for some roofing material for a small industrial building. In that shop there was mention of further information about sizing and tech. details available on their website. I went there and simply ordered direct. No PayPal fees, no eBay fees. I phoned and they gave me a discount for dealing directly with them.

I bought a wood-burning stove from this funky young company - same thing. I phoned and dealt directly with them. https://www.stoveworlduk.co.uk So far I have bought two stoves and will buy another in a couple of weeks.

Amazon - same deal.

I bought three sets of made-to-measure blinds this week, but went to the vendor's own on-line shop, where there is a wider choice.

Make sure your own on-line shop is killer and the bees knees. Only you get to control it!

P.S. I look in eBay first and not Amazon and if I do buy from Amazon, I prefer to buy from 3rd party vendors who mail directly from them to me.

 

[Mister B]

It can provide explosive growth, so I guess the business model when getting into bed with them is "make hay while the sun shines" ...just don't expect it to last. I'm now 56yrs old, I've already got a bit of cash sitting in the company coffers (which I will draw down over the following years if/when it all goes Pete Tong) ...the alternative was to be unemployed....so yes, I'm dancing with the devil, but at least someone asked me to dance.

I empathise with you entirely.

I'm 53 now and like you, have a fair old stash in the coffers which I'm slowly starting to draw down on, primarily through changing our product portfolio.

Again, like you, for us, Amazon provided an easy route to explosive growth, something that they're very good at. It all goes swimmingly well until they suspend you, (like they did with us last year,) or when your products get ripped of to buggery and all of a sudden you're in trouble.

We're now happy to dance with the devil, but no matter how hard it is to establish business outside of Amazon, we're committed to doing it. It may be tough, but it's doable-we're now developing products that we won't sell on Amazon at reduced prices to compete with Chinese tat. It's full margin only or we won't bring the goods in.

Mister B

 

[Taobao agent]

1. Amazon Vendor could be a best way to make profits if you are not good at on operating the Amazon Seller central. What you need to consider which is your profits.
2. Your products have "Amazon" sign. It ensures your brand get more Data.
3. Most of the promotion is done by Amazon.
4. Freight charges are borne by Amazon.
Hope the information above can help you.

 

[Pish_Pash]

3. Most of the promotion is done by Amazon.
4. Freight charges are borne by Amazon.

Re 3. above ...actually, Amazon expect you to pay a marketing contribution (about 5~10% of cost of goods you furnish them with) ...so they might do the promotion, but it will cost you (& it's not transparent...i.e. how much of this allowance are they actually spending on marketing?). Also, even after you've contributed a high amount of marketing spend...they really (REALLY) want you to pony up on PPC ads too.

Re 4. Not in our case (it will depend on the contract you've in place)...we pay UPS for the cost of getting the goods to Amazon. Fulfilment Centres. Also, Amazon charge us for the cost of carriage for the goods they returned that they overstocked.

 

[microapps consulting]

Very good question here is a short answer.

Pros:

• You sell your products to Amazon itself meaning that automatically your products have an advantage in being positioned higher than others within that category new products
• You are sure that there is a demand of the product
• You do not need to pay warehouse or long storage fees
• you don't pay for the account
• you don't need to take care of shipments to the final customers, feedbacks, reviews, returns etc
• mayority of promotional work is done by Amazon
• for mayority of categories you can set wholsale options (discounts for buying higher volume of products)

Cons:

• hard to enter unless you invited
• hard to get a good contract. By good contract we mean payment conditions, returns, damaged goods agreements, promotional share etc.
• Amazon usually does not want to increment the price on your request so you need to be super careful
• You kind of loose your brand behind since official seller and distributor of your product is Amazon.
• You have no control of final customer price. You can make suggestions but it doesn't matter that Amazon will follow them

There are way more things which can be noted but those are the main ones.

Good luck

 

[Pish_Pash]

Pros:

• You are sure that there is a demand of the products

...not entirely true - most Amazon vendor contracts have a 'return' clause (i.e. if it doesn't sell then they can return it...and Vendor pays cost of return shipping!), then there's no incentive for them to be slick/correct with their ordering (because they can send it back at no cost). This one nearly took my legs out at the back end of last year...now I track their actual sales (vs PO quantities requested) & I only give them 60 days worth. (returns get triggered after 90 days)

Other cons...

• Every year they come back at you with 'new' terms ...& guess what, they're always worse than last year (the classic is their 'marketing contribution'...they onboard you at 3% marketing costs, then after year 1 try to take it up to 10% ...& this is never ending). So make sure you quote them high in Y1, becuase you can expect to keep taking a haircut in successive years.
• Vast admin (vs FBA) ...mainly relating to chargebacks, shortages
• Higher shipping costs ...they'd rather you did their inter-FC distrbution at your cost, so they prefer giving you lots of small POs (some I get weigh no more than 1.5kg when packed!) ...and all to different FCs, vs say with FBA ...a 15kg carton to a single FC.

 

[SonyaD]

I empathise with you entirely.

I'm 53 now and like you, have a fair old stash in the coffers which I'm slowly starting to draw down on, primarily through changing our product portfolio.

Again, like you, for us, Amazon provided an easy route to explosive growth, something that they're very good at. It all goes swimmingly well until they suspend you, (like they did with us last year,) or when your products get ripped of to buggery and all of a sudden you're in trouble.

We're now happy to dance with the devil, but no matter how hard it is to establish business outside of Amazon, we're committed to doing it. It may be tough, but it's doable-we're now developing products that we won't sell on Amazon at reduced prices to compete with Chinese tat. It's full margin only or we won't bring the goods in.

Mister B

Mister B - I'm a reporter with Reuters and I'm looking to speak to Amazon sellers about their experiences. Is there any way I could talk to you? Let me know and I'll send you my email address. Thanks and best regards

 

[RSR Fulfillment (FR & DE)]

They held onto my last week's worth of sales revenue from November 2019, about 1500 quid, claiming I was selling counterfeit products and did not satisfactorily prove I was not. Therefore, they are not obliged to pay me.

I actually sell pattern parts, similar to brake pads and discs etc.

I do my hardest to try and stop people buying and selling on amazon. They are really nasty.