If you’ve recently received an email from Amazon notifying you that they’re ending your vendor agreement, you’re not alone. Amazon is discontinuing its 1P (first-party) vendor agreements with many businesses as part of its plan to streamline operations. By November 9, 2024, thousands of vendors, particularly those with annual sales under $5-10 million in the U.S. and Europe, will lose their ability to sell directly to Amazon through the 1P wholesale model.

Amazon is aiming to simplify its processes, but this decision impacts smaller brands the most. If this change affects your business, now is the time to start planning your next steps and take control of your Amazon sales strategy.

What’s the Difference Between 1P and 3P on Amazon?

In the 1P vendor model, you sell your products directly to Amazon. They buy them from you and then resell to customers. This means you don't need to worry about pricing or how the product is marketed. It's all up to Amazon. While this may sound convenient, the downside is that you lose control over key aspects of your business. Amazon sets the retail prices and can adjust them, often undercutting other retailers or even your Minimum Advertised Price (MAP) to stay competitive.

In contrast, being a 3P seller means you sell directly to customers on Amazon’s marketplace. You have more control over pricing, inventory, and how your products are marketed. You can also choose to have Amazon handle shipping (through Fulfillment by Amazon) or take care of it yourself. The downside is that you’ll need to handle things like logistics and customer service on your own, but this flexibility gives you a better chance to increase profits and adjust your approach to fit your business goals. 

How to Transition from 1P to 3P on Amazon

If you're now facing the shift from 1P to 3P, it might feel a bit overwhelming. Below, you can find some steps to make your transition a bit easier.

1. If you haven’t already, you’ll need to register for a Seller Central account. Choose a Professional Seller plan if you expect to sell more than 40 items a month.

2. Make sure all of your current listings on Vendor Central are optimized for the 3P model. Use high-quality images, detailed descriptions, and consider Amazon’s A+ content features to make your listings stand out.

3. You’ll need to decide whether you want to handle shipping yourself (Fulfillment by Merchant) or let Amazon take care of it (Fulfillment by Amazon).

4. Since you’ll now be setting your own prices, it’s important to keep an eye on market trends and competitor pricing. 

5. In the 3P model, you’ll have more tools to promote your products. You can use Amazon’s advertising services like Sponsored Products and Brands to increase visibility. You’ll also need to be ready to handle customer service and returns directly.

While the shift from 1P to 3P may seem challenging, it’s also a chance to take greater control of your business. With the ability to set your own prices, customize marketing strategies, and build direct relationships with customers, you’re better positioned to align your business with your long-term goals.

Though managing logistics, customer service, and marketing might require more effort, the flexibility and opportunities of the 3P model can lead to increased profits and business growth. By embracing this change, you’re setting the stage for greater autonomy and long-term success on Amazon’s marketplace.