In the swiftly evolving landscape of e-commerce, Amazon stands as a colossus—offering brands a platform of unmatched reach but accompanied by an array of challenges and complexities. As such, companies frequently confront a pivotal decision: should they manage their Amazon presence internally or collaborate with a reseller?
In this post I will share what brands must know when considering using a third party reseller partner.
Definition of a reseller
Firstly, what is a reseller?
In this context I refer to a company that a brand engages to sell their products on Amazon, often with exclusive rights, as a ‘reseller’. They may operate as a Vendor or Seller on Amazon.
This is sometimes referred to as a “2P model” or second party model, as opposed to a 1P model (selling on a wholesale basis to Amazon through Vendor Central) or a 3P model (selling on the Amazon marketplace).
Separately, there are also unauthorized resellers, who are resellers that a brand does not give explicit permission to sell their products. Unless your brand is gated, there is nothing to stop another seller from selling your products on Amazon. Read more about what we’ve written about unauthorized sellers here.
Resellers usually do not refer to themselves with this term. Here are some examples of resellers and how they describe/described themselves:
- Pattern: an “ecommerce accelerator”
- Front Row (formerly known as the Fortress Brand Group): “marketplace partnership”
- Kaspien: “we partner with leading brands across online marketplaces as their retailer.”
- Packable: “gives ambitious retail sellers the means to connect consumers with their favorite brands wherever they shop”
While the terminology differs wildly, the main differentiator between a reseller and an agency model is that a reseller actually purchases your brand’s inventory, and sells it on Amazon and other marketplaces with their own account. An agency, in comparison, will be granted with limited access to your brand’s own Seller or Vendor account, and manage your brand and products through there. An agency does not buy your inventory.
Why a reseller model is attractive
It’s easy to see why some brands who are new to engaging with Amazon and other marketplaces might seek out a reseller model.
- Expertise in the Marketplace: Resellers often possess a deep understanding of the Amazon platform. They are adept at navigating its complexities, from optimizing listings to handling the nuances of fulfillment. This specialized knowledge can be particularly valuable for brands new to the marketplace or those lacking in-house expertise.
- Reduced Operational Burden: By partnering with a reseller, a brand can offload significant operational responsibilities, such as stock management, logistics, customer service, and handling returns. For brands who have their roots in a wholesale business model, this can be a key point. Expanding from selling pallets of product to selling eaches can be an extremely steep learning curve and transition.
- Quick Market Entry or Expansion: For a brand looking to quickly enter the Amazon marketplace or expand its reach, resellers can provide an instant infrastructure and presence. A reseller's established operations can enable brands to reach a broader audience without the delays inherent in building out their own Amazon capabilities from scratch.
- Risk Mitigation: A reseller can help absorb risks associated with inventory management and sales fluctuations. With the reseller model, brands could benefit from more predictable revenue streams through wholesale agreements, as the reseller assumes the burden of stock not selling or market price variations.
- Cash flow: Often, brands moving from 2P to 3P will encounter objections from their Finance team because of cash flow. The reseller will often pay upfront upon purchase of the inventory of product, which is attractive in terms of cash flow for a brand. In a 3P or 1P direct selling model, sellers will be waiting for their products to sell individually, more like on a consignment model. 1P vendors will be paid based on net terms, so may be waiting 30 or more days for payment on their POs.
All these reasons allow a brand to focus on its core competencies, either “kicking the can down the road” for creating its own marketplace capability, or avoiding the project entirely. But while the reseller model offers several potential advantages, it also entails significant drawbacks that brands should carefully consider.
The case against the reseller model
The drawbacks of contracting with an authorized reseller on Amazon include:
- Loss of Control: Partnering with a reseller could result in losing control over key aspects of the brand's presence on Amazon, including the customer experience, branding, and the overall narrative portrayed to consumers.
- Misaligned Priorities: A reseller may have different goals and priorities that do not align with the brand's objectives, which could lead to a product assortment selection that serves the reseller's interests rather than the brand's strategies. Often, resellers include in their contracts that they have the right to not carry certain SKUs. What happens when you and your reseller partner disagree on what is a “priority SKU” and that product is now not available on an important channel like Amazon?
- Competing priorities: Resellers have their own goals and priorities to pursue. Elevating your brand position and presenting your products consistently will be work that doesn’t generate an immediate financial result for the reseller, so it may be ignored.
- Operational Risks: Relying on a reseller can introduce operational risks and dependencies, such as inventory mismanagement or inadequate responses to market changes that could adversely impact the brand’s reputation and sales performance on Amazon.
- Lack of data Owning customer insights and operational analytics fuels informed decision-making and iteratively refines marketing strategies and product offerings. By outsourcing your Amazon business, you are outsourcing data about who your customer is, their preferences and behavior. This data is priceless. And without your own Seller or Vendor account, and advertising console, you have access to none of it.
Read more: Amazon Releases Free Analytics That Brands Previously Paid $30,000-Plus Per Year For (Forbes)
Not an easy decision to unwind
We often see brands that originally opted into a reseller model because it was viewed at the time as easier. Later on, when they were ready to take back control, they expect it to be a quick and easy untangling. But it very rarely is.
- First, your ability to update product and brand content may be limited. If the reseller obtained “brand registry” rights to your brand, you may be in for a protracted process for Amazon to give you back the rights. This means that you may be unable to update product and brand content.
- Secondly, you lack important data. Amazon has a treasure trove within Seller Central, Vendor Central, the Advertising console, and Amazon DSP that help brands better understand customer demographics, purchase patterns, and more. This data can help make decisions on product selection, marketing messaging, and future growth opportunities.
- Finally, brands will eventually face the challenge of adjusting operational workflows. Where fulfillment of purchase orders to the reseller were likely in larger quantities and at a more measured, regular cadence (ie quarterly), demand planning & shipping as a 3P brand can require time. Establishing sales volume and corresponding warehouse capacity at Amazon’s fulfillment centers generally requires a reset. The brand will also need to determine how to ship frequent shipments of smaller quantities to Amazon fulfillment centers.
As such, I caution brands against considering a reseller a “stepping stone” on their way to eventually having their own brand presence.
It’s hard, but hard things can be worth it
Setting up an Amazon capability - whether you’re a manufacturer with a traditional wholesale business model, or a DTC brand looking to diversify your sales channel - is challenging!
At Acadia, we have helped hundreds of brands launch on Amazon (with their own account) since 2015. So we understand how complex the processes and requirements are.
I urge you not to give up control of your Amazon venue too soon!
ECommerce is no longer just a channel, it's an integral part of branding. Simply relying on resellers is like using pain relievers - it may provide temporary relief, but it's not a long-term solution.
If you're short on time, expertise, management skills, or patience, there are still options to build competency. Consider finding a good agency partner or developing it internally before resorting to relinquishing control as a last resort.
Contact us for a consultation about our Amazon and retail marketplace management services.
I’m biased in saying that Acadia is worth considering - but don’t just take my word for it. Check out our client testimonials and case studies, as well as our Amazon Ads Advanced Partner status.
Julie Spear, Acadia’s Partner, and Head of Retail Marketplace Services.