Hybrid Selling Model
on Amazon
Expand your Reach by Combining the Strengths of 1P, 2P, and 3P Models - All in One!
EXPERIENCE VERSATILE SELLING WITH AMAZON'S
HYBRID APPROACH
In the Hybrid Selling Model, you sell different parts of your inventory using different selling models: to Amazon, through Amazon yourself and through Amazon via dealers. As such, there are three variations of a Hybrid Selling model: 1P+2P, 1P+3P and 2P+3P.
Each of these models combines the benefits and drawbacks of the models it comprises, which makes room for more opportunities while inevitably making things a bit more complicated.
THERE ARE FOUR WAYS FOR SELLERS TO ARRANGE THEIR WORK THROUGH AMAZON, FOUR SELLING MODELS YOU CAN CHOOSE FROM.
If you want to reap the benefits of several models at once and are ready to face the challenges that come with each of them, then one of the Hybrid Selling Models will surely meet your needs.
HOW WE CAN HELP
Amazon Account Management
Regardless of the type of account you plan to use, you need to first register and then manage it. Neither of those things is easy: having an account registered requires loads of forms filled and documents provided; managing your account calls for mastery of all the tools it grants access to.
We know how to do both of those things. Here’s the list of our Amazon account management services:
Seller Monitoring
If you sell on Amazon through dealers, you will inevitably need to keep an eye on how they work. Not all of them will remain diligent, for they first and foremost think about earning money. Besides, some sellers might adhere to all the policies and still bring more harm than good to your brand, not to mention unauthorized sellers who will bring nothing but harm.
Here’s how we can help you monitor your sellers:
Amazon Advertising
Regardless of the selling model you choose, advertising remains an invaluable tool that can increase your revenue by a good margin. Both you and your dealers can benefit from it, which makes it a worthy investment in all scenarios. With that being said, advertising is a tricky field that might as well consume your resources without bringing anything in return. In order to keep this investment profitable, you need expertise. Expertise that we possess.
Here’s how we can help you with your advertising campaigns:
Catalog Managemen
Whether you manage your own catalog or want to establish a listing design that will be used by Amazon and dealers, you’ll want to get the most out of Amazon’s toolkit. For that, you’ll need expertise in Amazon marketing tools, design, SEO, copywriting and other marketing-related spheres.
We have an excellent command of all those branches and thus are ready to help you manage your catalog in the following ways:
PROS & CONS OF HYBRID SELLING MODELS
1P+2P (FIRST PARTY + SECOND PARTY)
BALANCED PROFIT MARGINS:
While selling as a first-party seller to Amazon means lower profit margins due to Amazon’s demand for wholesale discounts, the second-party aspect of this hybrid model allows you to set your own profit margins. This added control may help balance out the lower margins from the 1P model and potentially increase overall profitability.
ACCOUNT SUSPENSION RISKS:
In a 1P+2P selling model, there is an increased risk of account suspension. You need to comply with all of Amazon’s constantly changing policies while closely monitoring inventory levels you sell to Amazon to avoid chargebacks and listing bans. You will need to spend even more time than with either of the two original models.
BRAND IMAGE CONTROL:
As a second-party seller, you have the exclusive right to alter product information and manage your own catalog, ensuring your product descriptions and visuals align with your brand image and convey your brand story and principles. You can do the same for the products you plan to sell to Amazon since the platform won’t necessarily change the listings if they are already optimized and look well. It’s easier to negotiate with Amazon than monitor the consistency of dozens of dealers.
TEAM NECESSITY:
The 1P+2P selling model still requires a team to manage both the 1P and 2P selling processes effectively. Managing a 2P business model in itself requires significant expertise and resources. You will also need a person who will keep tabs on the inventory for Amazon. This can be costly and not every brand can afford it.
VALUABLE DATA:
The hybrid 1P+2P model provides access to valuable data from both selling models. 1P sellers get access to Amazon’s Retail Analytics tools, whereas 2P sellers can gain insights into their operations from a Seller Central Account. You can use this wealth of data to optimize listings and promotional campaigns, adjust your marketing strategies and make decisions regarding products.
TIME AND EFFORT:
The 1P+2P selling model requires more time and effort from the sellers compared to the 1P model alone. You will need to manage both wholesale supply to Amazon and selling through the platform at the same time. Mastering the tools provided by Amazon Seller Central can also be challenging and time-consuming.
REDUCED INVENTORY RISKS:
First-party sellers typically enjoy reduced inventory risk as Amazon purchases products in large quantities. In contrast to that, second-party sellers have the flexibility to manage their inventory single-handedly. If Amazon runs out of stock and demands a new batch of products from you, you can just reallocate the inventory you sell through Amazon.
DEPENDENCY:
The 1P+2P selling model includes the idea of a dependency on Amazon, as the seller relies on the platform as a buyer and means of selling. Since you do not rely on dealers to distribute your goods, Amazon becomes your only partner. Whereas it shows no signs of going anywhere, it’s also been known to cease its partnerships with 1P sellers without giving them time to prepare.
1P+3P (FIRST PARTY + THIRD PARTY)
EASE OF OPERATION:
In a 1P+3P selling model, sellers can rest on their laurels while Amazon and the dealers do all the work. With some of your products handled by Amazon and others managed by a network of dealers, there is nothing left for you to do but supply them with goods. All the pricing, fulfillment, customer service and returns will be handled by them. This can significantly reduce the operational load for sellers.
LOWER PROFIT MARGINS:
Amazon purchases products at wholesale prices, often after having negotiated discounts. Selling to dealers does not guarantee higher margins either. You will have to sell your products at a lower price to allow dealers to make a profit from reselling them and stay competitive.
SUPERIOR REACH:
The 1P+3P selling model ensures an increased reach for sellers. You have Amazon’s extensive customer base and established infrastructure together with the customer bases of your dealers to work with. Thus, you have the widest reach of all Amazon selling models, hybrid and non-hybrid.
MAP VIOLATIONS & GRAY SELLERS:
If you sell through dealers, there is no avoiding MAP violations and gray sellers. Even authorized sellers can violate Minimum Advertised Price policies to gain an edge over other sellers, not to mention people who sell counterfeits. Such gray sellers can obtain products through unofficial channels, potentially compromising your quality control standards and negatively affecting your brand image.
RISK MITIGATION:
You either sell your products in bulk to Amazon or to your dealers, which significantly reduces the risks of inventory-related issues. You pass on the risks of unsold inventory to the dealers and the platform while enjoying immediate revenue. You also don’t need to worry about the logistics and customer service.
LACK OF CONTROL:
The 1P+3P selling model leaves brand owners with the least degree of control over their brand image and catalog in general. Amazon will control the retail price of products you sell to it and can edit the texts and visuals of product listings as it sees fit. Moreover, each of the dealers may use its own version of a product detail page, which means less consistency in brand image. They also set their own prices, which you can only change if they violate your MAP policies.
REDUCED MARKETING COSTS:
The 1P model grants access to additional marketing and promotional opportunities through Amazon Vendor Central. But with the 3P selling model, you delegate marketing to the dealers, which means your products are still advertised and promoted, but by other people. This reduces the need for brands to allocate resources to these activities.
LONG PAYMENT TERMS:
Amazon typically has long payment terms for 1P sellers, which means you will get your money less frequently than in the 2P selling model. Dealers will also buy from you in bulk, but won’t return unless they are sold out or some particular model is selling well. They might not return at all if the sales go poorly. All these factors contribute to your cash flow being much less frequent.
2P+3P (SECOND PARTY + THIRD PARTY)
RISK MITIGATION:
The 3P component makes this selling model much safer for brands. Your dealers purchase part of your inventory upfront, which decreases inventory-related risks right away. The inventory you fail to sell through Amazon you can also sell to them. In this model, dealers basically work as a safety net.
FULL TEAM NECESSITY:
If you plan to sell your products directly to buyers, regardless of the bulk, you will need a team of experts who can manage every aspect of your operations on Amazon. Account management, listings, advertising and customer service – all that calls for a lot of resources and time, and not every brand can afford this.
GREATER PROFIT MARGINS:
Whenever 2P comes into play, it means greater revenue. You can sell some products, like a new apparel line, directly to customers to maximize the potential revenue. At the same time, you can sell some of the older models to dealers to distribute.
INCREASED COMPETITION:
The competition on Amazon is intense, and you should be prepared to become a part of it. It is somewhat counterproductive to sell the same products to customers and dealers since you’ll have a price advantage and your dealers won’t sell much. But even if you plan to sell even one exclusive product, you will have to face the competition.
INCREASED REACH:
By adding the 3P into the equation, you significantly broaden your reach. In addition to the whole Amazon customer base, you also get access, even if indirect, to the established customer bases of your dealers, on and off the platform. That means more potential for sales and more people who can become a part of your brand’s loyal clientele.
MAP VIOLATIONS & GRAY SELLERS:
If you distribute your products through dealers, be prepared for Minimum Advertised Price policy violations and gray sellers. Dealers violate MAP to gain an advantage over other sellers, which can disrupt pricing strategies and your relationship with other dealers. Additionally, there’s the risk of unauthorized sellers who will not adhere to your quality control standards, thus degrading customer experience.
GREATER CONTROL:
In the 2P model, you retain complete control over your branding and how your products are presented and marketed. Those products you sell directly to customers will be showcased on the listings you create and no others. However, if you enroll in Brand Registry, you can ensure even those products your dealers sell will have the listings you’ve created.
COMPLICATED POLICIES:
Amazon has many policies sellers need to adhere to. You will need to comply with all of them to minimize the risk of listing bans and account suspension. Monitoring changes in these policies, which are quite frequent, is another task that needs to be performed regularly.
