Vendor Express/Vendor Central
These two sales methods function in a very similar way. In both of these instances Amazon no longer acts as a marketplace but becomes a distributor for a company’s products. Rather than owning the inventory as with the FBA and Merchant Fulfillment programs, in these two sales methods, Amazon submits purchase orders directly to companies and buys inventory for resale. These methods require that companies are willing to sell their product to Amazon at some discounted, wholesale-like, price.
The difference between these two methods is the access for companies. Vendor Express is a program that companies can apply for directly and are often accepted if their products meet certain Amazon contractual requirements. Vendor Central is more exclusive and is an invite-only program. Amazon uses Vendor Central to handpick brands and companies they want to distribute for.
If a company uses either of these methods, Amazon takes responsibility for a majority of the sales process once a purchase order is fulfilled by the company. Companies are not charged storage fees or fulfillment fees since the items have been purchased by Amazon.
These methods reduce some risks to companies because they no longer carry the inventory cost once Amazon purchases the items. Amazon also allows for their Vendor Central and Vendor Express partners to access special marketing opportunities under certain conditions. Some of these marketing opportunities include the Amazon Vine Promotion Program and A+ Product Page Content.
For payment, Amazon will often write into their contract a payment on terms requirement. In many cases this means that a seller will receive purchase orders from Amazon that will be paid using Net 60 terms. Amazon also frequently includes, what are called Co-op fees, in their Vendor Central and Vendor Express contracts.
There are three main types of Co-Op fees:
- Market Development Fees
- Freight Allowance Fees
- Damage Allowance Fees
Thus Vendor Central and Vendor Express merchants receive payments based on the terms of the purchase orders they receive minus any Co-Op fees, and the top-line revenue takes a wholesale price strategy rather than the higher retail pricing available to companies selling directly to customers using Merchant Fulfillment or FBA.
There is much more detail and nuance to each of these sales methods, but the bottom line is that the Amazon Marketplace, with over 50 million Prime Members in the US alone, is a marketplace that can make a significant impact on your business if managed correctly.