Change within marketplaces

As of January 2024, Amazon is largely shifting to third-party sellers, where previously they had mostly first-party sellers. In this article, we explain exactly what this means.

What are first and third party vendors?

First party sellers (1p): a seller receives a purchase order directly from the marketplace, the marketplace then resells these products to the customer. The selling party handles billing with the marketplace. (Business-to-Business relationship)

Third party seller (3p): sellers sell products through the marketplace platform directly to consumers. The selling party handles billing with the consumer, and the marketplace receives a commission. (Business-to-Consumer relationship)

Why do Marketplaces want to get rid of first-party vendors?

In recent years, more and more marketplaces are focusing on 3P sellers. With 1p sellers, they take a financial risk by having to invest in inventory and warehouse costs. Marketplaces would like to minimize risk, which is why they are shifting to 3p sellers.

On the 1p vendor side, we also see that they prefer the 3p model more often. That way they have more control over the content, offerings and prices on marketplaces. An additional advantage for brand owners and manufacturers is that they make the transition to marketplaces, where they have more control. In doing so, they completely determine their own assortment in which new products are offered quickly.

Another advantage of the shift is that pricing policy is more controllable. Whereas with the 1p model, you see competitive pricing to meet sales volumes, if they are with excess inventory. Is that not the case with a 3p model.

What does that mean for salespeople?

Perhaps this requires an adjustment in your own e-commerce business. Entrepreneurs are forced to focus the business on Business-to-Consumer instead of Business-to-Business. Key points:

1. Logistics (no more outsourcing to the marketplace).

2. Customer service (response within 24 hours)

3. Administration (invoice per customer).

Because of these changes, more and more online entrepreneurs are using a fulfillment company as a result. They take all the extra work off your hands. Keep in mind that fulfillment also charges a margin per product.

Most marketplaces also offer this service. Such as bol.com (LVB), Amazon (FBA and Cdiscount (FBC). Collectively, this is called Fulfilment by marketplace (FBM).

For many business owners, it is attractive so that your department store is not crowded, and you are guaranteed a fast delivery time. That way you easily win the buying block from your competitors.

Source: Vendiro