Understand the differences between the 1P and 3P models on Amazon and make the right decision for your business success on the world’s largest marketplace.
Jens Vittrup
Choosing the right sales model on Amazon can be pivotal for your business’s success on the platform. As a seller, you face a fundamental choice between selling directly to customers or becoming a supplier to Amazon itself. Each model has its own advantages and disadvantages, and your decision will impact everything from daily operations to your long-term earning potential.
Amazon’s ecosystem offers a variety of ways to sell, tailored to different business models and levels of ambition. Whether you are an entrepreneur with a single product or an established company with a broad range, there is a route into the world’s largest online marketplace that suits your needs.
In this article, we examine the different Amazon seller models and vendor opportunities, so you can make an informed decision about which approach best supports your business objectives.
When it comes to understanding Amazon’s ecosystem, the most basic distinction is between the 1P (first-party) and 3P (third-party) sales models. These two approaches represent fundamentally different relationships with Amazon and have far-reaching consequences for your business operations.
Amazon 1P, also known as the vendor model, means you act as a supplier to Amazon. You sell your products wholesale to Amazon, which then resells them to end customers. This is a wholesale model where Amazon is your customer, and they have full control over sales, pricing, and customer service. Your products appear as “Sold by Amazon”, which provides a certain level of credibility in the eyes of consumers.
In contrast, the Amazon 3P model allows you to sell directly to consumers via Amazon’s marketplace. You retain ownership of your goods until they are sold and have control over pricing, product descriptions, and inventory. In this case, Amazon primarily acts as a platform and takes a fee for each transaction.
The key differences between these models include:
Your choice between Amazon 1P and 3P should be based on your business’s size, resources, product type, and long-term strategy. Many companies start as 3P sellers to test the market and build a track record before potentially transitioning to or supplementing with a 1P relationship.
The Amazon 1P model represents the classic supplier-retailer relationship, where as a manufacturer or distributor you sell your products wholesale to Amazon. This model is managed through Amazon Vendor Central, a platform-specific portal designed to handle all aspects of the supplier relationship.
As an Amazon vendor, you receive regular purchase orders (POs) from Amazon based on their forecasts and stock needs. You then send the goods to Amazon’s distribution centres, and Amazon takes care of the rest – from storage to marketing, sales, and customer service. This allows a “set-and-forget” approach, where you primarily focus on fulfilling Amazon’s orders.
The main benefits of operating as an Amazon vendor include:
However, these benefits come with significant challenges:
Becoming a vendor typically requires an invitation from Amazon, although some companies can apply through specialised Amazon consultants or agencies. Amazon generally selects vendors based on established brands, unique products, or strong sales history as third-party sellers.
The Amazon 3P model allows you to act as an independent seller on Amazon’s vast marketplace. You create and manage your own seller account through Amazon Seller Central, where you have direct control over product listings, prices, inventory, and customer interactions.
As a third-party seller, you have two main options for handling logistics and shipping:
When you register as an Amazon 3P seller, you must choose between two account types:
The advantages of the Amazon 3P model include:
The challenges of the 3P model include:
For many businesses, Amazon FBA is an attractive part of the 3P model, as it combines the flexibility of third-party selling with the logistical efficiency of Amazon’s fulfilment service. It also provides access to Prime customers, which can significantly increase sales.
To make the right decision about your Amazon sales model, it is essential to understand the practical differences between the two main platforms: Seller Central and Vendor Central. These platforms have different interfaces, features, and benefits that match their respective business models.
Amazon Seller Central is designed for third-party sellers (3P) and serves as a complete management system for your Amazon business. The platform provides tools to:
Seller Central is user-friendly and gives direct access to most features without intermediaries. You receive payments regularly (typically every 14 days) minus Amazon’s fees, which provides a more predictable cash flow.
In contrast, Amazon Vendor Central is designed for first-party suppliers (1P) and acts more like a B2B portal. Here you will find tools to:
Vendor Central is generally less intuitive and has fewer self-service features. Many processes require approval or involvement from your Amazon vendor manager. Payments follow traditional wholesale terms, often 60-90 days after delivery.
A crucial difference between the platforms is price control. In Seller Central, you set the retail prices yourself and can change them at any time. In Vendor Central, Amazon determines the retail prices, often based on algorithms and competitive pricing, which can lead to unexpected price reductions.
Your choice between Amazon Seller Central vs Vendor Central should be based on your specific business objectives, resources, and desired level of control. Some companies find that the complexity of Vendor Central is justified by the reduced administrative burden, while others prefer the direct control offered by Seller Central.
For many companies, the choice between 1P and 3P is not an either-or decision. Instead, they implement an Amazon hybrid model, combining elements from both the vendor and seller approaches to maximise benefits and minimise the drawbacks of each model.
A hybrid strategy can be implemented in several ways, depending on your product portfolio, market situation, and business goals. Some common approaches include:
The benefits of the Amazon hybrid model are significant:
However, a hybrid approach also brings increased operational and administrative complexity. You must maintain two separate platforms, each with its own processes, reporting systems, and requirements. This can demand more resources and specialised expertise.
To implement a successful hybrid strategy, it can be valuable to work with experienced Amazon consultants who can help develop a tailored approach based on your specific circumstances. They can also assist in navigating potential challenges, such as MAP (Minimum Advertised Price) conflicts, which may arise when selling the same product through both channels.
Becoming an Amazon vendor is usually an invitation-only process, where Amazon identifies promising brands and invites them to become suppliers. This makes vendor status more exclusive than becoming a third-party seller. However, there are several ways to obtain an Amazon vendor account if your business is interested in this model.
The traditional path to becoming an Amazon vendor begins with Amazon discovering your company either through:
If you wish to be considered for Amazon vendor registration without a direct invitation, you can:
To be approved as a vendor, your business typically needs to meet the following requirements:
The setup process for an Amazon vendor account typically involves:
Many companies find it beneficial to engage an Amazon Vendor Central agency to guide them through this process and help negotiate favourable terms. These specialists can also assist in optimising your presence on the platform after approval.
Third-party selling on Amazon is the most accessible way into the Amazon ecosystem and offers significant flexibility and control. This model allows businesses of all sizes to reach millions of customers while retaining ownership of their products and pricing.
As a third-party seller, you essentially operate as an independent retailer on Amazon’s platform. You set up your own shop, upload your products, set your prices, and handle your own customer service. Amazon acts as a marketplace, bringing customers to your shop and facilitating transactions for a fee.
The core process for third-party selling includes:
Amazon charges various fees to third-party sellers:
A key choice for third-party sellers is the decision between an Amazon individual seller vs professional account. The individual account has no monthly fee but charges a fee per unit sold and offers limited features. The professional account carries a fixed monthly fee but provides access to advanced tools, bulk upload features, and the ability to compete for the Buy Box, which is critical for high sales volumes.
Another important decision is the choice of fulfilment method. With Fulfilled by Merchant (FBM), you handle the shipping of your products to customers yourself. This provides maximum control but requires logistical capacity. With Fulfilled by Amazon (FBA), you send your products to Amazon’s warehouses, and they handle packing, shipping, and customer service. This gives your products Prime eligibility and can increase visibility and sales, but also comes with extra fees.
Third-party selling requires active management of your Amazon presence, including monitoring competitor prices, optimising listings, handling reviews, and maintaining strong seller metrics. Many successful sellers invest in Amazon marketing and advertising to boost their visibility and accelerate sales.
For companies operating under Amazon’s vendor model, the Amazon vendor manager plays a pivotal role in the business relationship. This person acts as your primary point of contact at Amazon and can have a significant impact on your success as a supplier.
An Amazon vendor manager is an Amazon employee responsible for managing the relationship between Amazon and a portfolio of vendors within a specific product category. Their main goal is to optimise assortment, inventory, and profitability for their category, while ensuring smooth operations with suppliers.
The typical responsibilities of a vendor manager include:
The quality of your relationship with your vendor manager can vary greatly. Some vendor managers are proactive, engaged, and act as advocates for your products internally at Amazon. Others may be overloaded with many suppliers, resulting in less personal attention and more transactional communication.
To build a positive relationship with your vendor manager, you should:
It is important to note that not all vendors are assigned a dedicated vendor manager. Smaller suppliers may be managed by a team or through automated systems. In these cases, a clear understanding of Amazon’s processes and expectations is even more important.
Many companies find it valuable to engage a specialised Amazon agency to act as an intermediary and “translator” in communications with Amazon vendor managers. These specialists speak the same language as Amazon’s internal teams and can help navigate complex negotiations and processes.
For serious businesses aiming to establish a strong presence on Amazon, a professional seller account is typically the preferred choice. This account type provides access to advanced tools and features that can be critical to building a successful business on the platform.
An Amazon professional seller account differs from an individual account by offering a broader range of tools and options in exchange for a fixed monthly fee instead of a fee per item sold. This makes it ideal for sellers expecting to sell more than 40 units per month.
The main benefits of a professional seller account include:
The costs of a professional seller account include:
The comparison between Amazon individual seller vs professional is fairly straightforward. The individual account is best suited for occasional sellers with few products and low sales volume. The professional account offers value to sellers with higher volumes, a broader range, or ambitions for rapid growth.
To maximise the benefits of your professional seller account, you should invest time in mastering the platform’s many features and tools. This includes optimising product listings, implementing effective pricing strategies, and making use of Amazon’s advertising platform. Many professional sellers also find value in participating in an Amazon course to accelerate their learning curve and avoid costly mistakes.
One of the most important decisions for Amazon sellers is choosing between handling your own logistics or using Amazon’s Fulfilment by Amazon (FBA) service. This decision will affect everything from operating costs and customer experience to scalability and competitiveness.
As an Amazon seller, you basically have two options for fulfilling orders:
FBM gives you maximum control over the entire process. You decide how the products are packed, which shipping method is used, and how customer service is handled. This can be advantageous for:
On the other hand, Amazon FBA offers significant benefits:
The decision between Amazon seller vs FBA should be based on a detailed analysis of:
Many successful Amazon sellers actually use a hybrid approach, employing FBA for their best-selling products and during peak seasons, while handling speciality or slow-moving items through FBM. This provides flexibility to optimise both costs and customer satisfaction.
To make an informed decision about the right fulfilment strategy, it is valuable to calculate the full costs of each model for your specific products, including hidden costs such as returns, customer service, and long-term storage fees.
Amazon Vendor Central is the dedicated platform where first-party vendors manage their wholesale relationships with Amazon. Unlike Seller Central, which is designed for third-party sellers, Vendor Central functions as a B2B interface between suppliers and Amazon’s purchasing department.
Access to Vendor Central is limited to invited or approved vendors, making it a more exclusive platform than Seller Central. Through this system, vendors handle all aspects of their business relationship with Amazon, from order receipt to invoicing.
The primary features of Amazon Vendor Central include:
Vendor Central is typically less intuitive than Seller Central and offers fewer self-service features. Many processes require email communication with support teams or vendor managers, which can result in longer response times. The platform is primarily designed to facilitate efficient delivery of products to Amazon’s warehouses rather than providing detailed control over product presentation and pricing.
One unique advantage of Vendor Central is access to premium content options such as A+ Content, Vine Reviews, and Amazon Livestream. These features can help improve product presentation and build credibility, potentially leading to higher conversion rates.
However, these advantages come with challenges, including:
Many companies find value in engaging a specialized Amazon Vendor Central agency to help navigate the platform’s complexity and optimize their presence. These agencies can assist with everything from setup and product optimization to negotiating better terms with Amazon.
Selling directly to Amazon warehouses is at the heart of the vendor model and requires an understanding of Amazon’s purchasing processes and expectations. As a supplier, your primary responsibility is to deliver quality products to Amazon’s distribution centres in accordance with their specifications and timelines.
The process for selling to Amazon warehouses typically follows these steps:
To be a successful supplier to Amazon warehouses, it is crucial to focus on the following areas:
Amazon also requires its suppliers to comply with various certifications and compliance standards, which may vary by product category. This can include safety certifications, environmental requirements, or specific labelling rules.
Negotiating favourable terms is a critical aspect of selling to Amazon warehouses. This includes not only prices, but also:
Many companies find it valuable to work with specialist consultants who can guide them through the process of selling to Amazon warehouses, especially in the early stages of the relationship. These experts can help establish effective processes and avoid costly mistakes.
The fundamental choice between selling for Amazon as a third-party seller or selling to Amazon as a supplier affects nearly every aspect of your Amazon business. Both models can be profitable, but they require different approaches, resources, and expertise.
When you sell for Amazon as a third-party seller (3P), you retain control over your brand experience and customer relationships. You decide how your products are presented, how they are priced, and how customer service is handled. This gives you flexibility to adapt your strategy based on market conditions and feedback.
In contrast, selling to Amazon as a vendor (1P) means handing over these areas to Amazon. Your role becomes primarily delivering quality products to Amazon’s warehouses, with Amazon handling the rest of the process. This can reduce daily workload but also means less control.
Here are some strategic considerations to help you make the right decision:
Many companies start as third-party sellers to test the market and build a track record on Amazon. This provides insights into customer demand, the competitive landscape, and market dynamics before potentially considering the vendor model.
A hybrid approach can also be valuable, where different product lines are sold through different channels based on their unique characteristics and market situation. This requires more complex administration but can maximise the benefits of both models.
Regardless of the model you choose, it is essential to invest in Amazon advertising and optimisation to ensure your products are visible in Amazon’s increasingly competitive search results. Both models require strategic marketing to achieve maximum visibility and sales.
Becoming an Amazon seller is a relatively accessible process, but requires careful planning and preparation to ensure a successful launch. The following step-by-step guide will help you navigate the process from setting up your account to your first order.
After launch, it is important to focus on building positive reviews and maintaining strong seller metrics. Amazon’s algorithms favour sellers with high customer satisfaction, fast shipping, and low return rates.
Continuous optimisation is key to long-term success. This includes regular analysis of:
Many new sellers find value in joining an Amazon course or engaging a consultant in the early stages to accelerate their learning curve and avoid common pitfalls. This can be especially valuable for understanding Amazon’s complex algorithms and best practices.
A third-party seller on Amazon is any business or individual that sells products directly to consumers via Amazon’s marketplace. Unlike first-party vendors, who sell their products to Amazon as a wholesaler, third-party sellers retain ownership of their products until they are sold to end customers.
Third-party sellers actually account for the majority of all sales on Amazon, with over 60% of the platform’s total sales volume. These sellers range from individuals running small side businesses to large international companies with millions in turnover.
As a third-party seller on Amazon, you are responsible for:
Third-party sellers can operate under different business models:
Amazon provides third-party sellers with a range of tools and services to run their business, including:
The benefits of being a third-party seller include flexibility, control over pricing and branding, direct access to customer data, and typically higher margins compared to selling to Amazon as a vendor. However, this model also requires more active daily management and may require greater marketing investment to achieve visibility.
Becoming a successful third-party seller on Amazon requires a combination of product knowledge, Amazon SEO expertise, effective inventory management, and strategic pricing. Many sellers find that investing in specialist knowledge or partnering with an Amazon agency is crucial for navigating the platform’s complexity and achieving long-term success.
At WeMarket, we offer businesses a benchmark report that compares their marketing efforts with their key competitors. You decide which competitors we should compare against.
We specialise in selling physical goods online and growing webshops – and now you can benefit from this expertise, even if you’re not already a client.
It’s completely free.
