In early March of 2020, doom was on the horizon for businesses large and small as retail came to a screeching halt in the name of public safety and stay at home orders to ward off the spread of the novel coronavirus. What was once bustling with foot traffic and wallets, brick-and-mortar stores—and the brands that thrive in them—had to act quickly to salvage whatever cashflow they could.

For many brands, this meant finally investing time and energy into navigating online marketplaces, namely Amazon, who reported doubling profits and a 40% growth in sales.

As you can imagine, the largest U.S. e-commerce marketplace/merciful retail overlord, Amazon, enjoyed their share of success, reporting doubled profits and a 40% growth in sales despite the ensuing economic collapse.

A situation where jobs and lifestyles are at stake isn’t exactly the most accommodating when attempting a calculated landfall onto Amazon, so newcomers were caught in a desperate scramble rather than a thoughtful approach. And when your brand is on the precipice of unforeseeable loss, a fast and easy wholesale relationship with Amazon sounds pretty damn good.

Even though 1P relationships may take weight off your shoulders compared to 3P, the unfortunate majority of scrambling brands didn’t consider four unwritten terms of the agreement.

Relationship/Losing the Upper Hand

While 3P sellers enjoy a blank canvas for driving revenue through good old-fashioned digital marketing and advertising, sellers in a 1P or “sold by Amazon” deal operate at the whim of Amazon. On a long enough timeline, brands continuing under a 1P relationship lose control of their presence on the platform as Amazon twists its hand to eventually offer lower margins from wholesale pricing, longer payment windows, and a tendency to tease your brand’s MAP policy.

Not only does a 1P deal give Amazon leverage over your listings, but the website is fundamentally designed to promote traffic using 3P sellers through the Flywheel. A building block to Amazon’s growth-centric business model, the Flywheel states that conversion is derived from the positive experience of having several choices throughout the purchase journey.

1P sellers take the hit because Amazon is now more than happy to promote your competitors, who may or may not also have a 1P relationship, to give the customer more options.  Thus, the Flywheel spins to prioritize the growth of their website, not your brand.

Brand Integrity/Identity Theft

If you’re going into Amazon with a brand that consumers trust and value, a 1P relationship will make quick work of it. Giving Amazon control of the profound effect price has on perception, without the promise to scrape through the internet for the most competitive price, a seller in a 1P relationship is taking their hands off the wheel controlling the value associated with their product/brand.

It’s not just price either, in a wholesale relationship, brands have little say in how Amazon’s shiny promise of “24/7 customer service” interacts with customers in scenarios like returns or scathing reviews, and any gaps in Amazon’s experience reflect poorly on brands. 

As for the products themselves, the product line dimensions your customers have grown accustomed to, perhaps from other sales channels, can be severely altered by Amazon at will, as the invite-only 1P contract is specific to a set list of SKUs. Even in cases of the marketplace running rampant with 3P imposter listings or mismanagement of inventory, the freefall of a brand’s integrity is continuously at the mercy of Amazon’s approach.

That obviously isn’t ideal, but Amazon does offer brands the ability to at least control how they appear visually on the platform, granting limited dominion over the experience shoppers have throughout engagement.

Experience/Run Over by the Flywheel

Ever since Amazon has offered its platform to other brands, innovative methods for fortifying listings and the holistic site experience have been regularly introduced. Reconsidering the Flywheel, which is propelled by positive experiences, brands looking to go all-in on the platform can understand the opportunity in having high-quality content that is pleasant for shoppers to inform themselves with. Be it 360o images, EBC/A+ content, or even supplemental videos, it all improves customer experience and are unlikely to be included in a 1P relationship.

But as we know, the experience doesn’t stop at the conversion. For example, once a customer receives a product from a premium brand, they expect premium packaging to match through inserts and thoughtful design. Should something go wrong, a thoughtful brand should be able to manage the deployment of a replacement using Seller Fulfilled Prime or FBA-Onsite, and you guessed it, that isn’t promised on 1P.

Without the ability to monitor the experience customers have from introduction to acclimation, brands on a 1P deal risk the good grace of shoppers and their seat at the table, missing out on valuable sales data.

Data/Its My Sale, and I Need It Now

Arguably more valuable than the profits awaiting Amazon sellers, the immense pool of online sales data offers brands perspective into the health of their business, and trends to focus on. As any 3P seller with brand registry would have you know, Amazon’s Seller Central experience offers performance data and reports beyond your wildest dreams. And while the comprehensive data sets and relaxed look-back windows are impressive, the true empirical benefit to a 3P relationship comes from the concept of owning the sale.

In a 1P relationship, you never make a single sale to a shopper, Amazon does. Meaning the valuable internal sales information such as your brand’s most successful products, technically belongs to Amazon, only to be translated to you at their discretion. Meanwhile 3P sellers can internally record useful information like their hero products and successful customer demographics, of which they can utilize internally to make changes to their eCommerce presence by the accord of their agility.

Conclusion/An Agile Brand is a Successful Brand

Back in the early spring, when the stampede onto the Amazon marketplace was at full force, too many brands assumed it would be enough to just be there. If mere existence is good enough for your brand, then by all means, take the 1P deal. If you manage a brand that’s conscious bout its integrity, the deals they take, the experience customers have throughout engagement, and the power Amazon sales data can offer, then a 3P relationship is the only way to go.

Like most things in life, success on Amazon dictates that if you want something done right, you have to do it yourself. Proper upkeep of a 3P account offers brands complete sovereign operation, using outside data interpretation and marketing to succeed. Rather than falling to the wayside of Amazon’s machine, brands who see the potential in Amazon can use a 3P deal to maintain agility that 1P sellers can only dream of.

Without the agility a 3P relationship offers, it is impossible for a brand to maximize results on the platform, and when a once in a hundred year pandemic is putting your passion in jeopardy, taking the time to execute a meaningful breakthrough onto the marketplace really is your only option.