The Difference Between Third-Party and First-Party Sellers
A first-party (1P) seller is a brand/manufacturer that sells its inventory to Amazon/marketplace, who, then sells it to shoppers on its platform. A third-party (3P) seller, on the other hand, owns the inventory and uses the Amazon marketplace to sell these products to consumers directly. Amazon has a lot of restrictions for 1P selling. In comparison, 3P sellers enjoy autonomy, have more control over what they sell, and can implement dynamic pricing, making it highly popular with sellers and, more recently, with some brands as well.
Understanding the 3P Marketplace
The rise in marketplaces like Amazon, Walmart, and Target has led to a steady increase in third party (3P) sellers. The 3P marketplace is an online channel that enables independent sellers to sell their products to consumers directly. These sellers leverage the reach and trust these established marketplaces build to sell their products. Today, the 3P seller network is in millions and is a significant threat to brands and manufacturers competing to sell to the same audiences.
3P sellers either buy products directly from brands/manufacturers, resellers, or might sell stolen/ counterfeit goods. While they enjoy the profits from selling your brand’s goods, they do not contribute to maintaining your brand integrity or brand image. With millions of 3P sellers selling on global marketplaces like Amazon, it has become imperative for brands to employ strategies to successfully compete against them and maintain and grow their share of search, visibility, and pricing power on marketplaces. This blog post will explore how brands can successfully navigate the 3P seller ecosystem and outperform 3P sellers through data-driven strategies.
4 Ways to Win Against 3P Sellers on Marketplaces
Amazon most likely prefers established 3P sellers over new 1P sellers. Nevertheless, there are ways that 1P seller brands could compete to outperform 3P sellers on the marketplace.
1. Win the Buy Box
A sure-shot way to increase visibility and conversions on Amazon is by winning the buy box. Winning the buy box builds trust with shoppers and gives you the ‘buy box bias’ advantage. Irrespective of whether you are a first-party or a third-party seller, win the buy box with the below strategies:
a. Pricing below your competitors
Sellers with the most competitive pricing have the highest chance of winning the buy box. To get the price advantage, brands must monitor and optimize prices to win advantage over 3P sellers.
b. Ensuring your products are always in stock
You will surely lose the buy box advantage if your product runs out of stock. A solid supply chain and constant visibility into your inventory levels are vital to make it to the buy box and maintain a strong Amazon presence.
c. Maintaining a favorable seller profile
Amazon gives preferences to sellers with solid metrics and positive reviews and ratings. Lower performance metrics, negative reviews, and an unfavorable seller profile can affect the chances of winning the buy box.
d. By having robust fulfillment methods
Amazon expects sellers to meet shipping dates and offer fast, hassle-free delivery. This is an effective way to increase your chances of appearing on the buy box.
2. Control Your Supply Chain
Closely controlling your supply chain can make it difficult for third party sellers to source your products. The first step is to identify the 3P sellers selling your products. Then, find where they source products and close that loop. These steps will significantly reduce the number of sellers selling your products. A few other ways to control the supply are:
a. Closely monitoring and eliminating counterfeit sellers
Third party sellers often sell counterfeit goods or lower quality variations of branded products. Tracking down counterfeiters and MAP violators and taking swift action against them can reduce many 3P sellers. Along with brand dilution, these sellers also eat into your margins and profits by selling low quality product variations. Brands can employ automated MAP monitoring solutions to identify violators and maintain close control over their seller network.
b. Limiting the promotions you run
Many 3P sellers stock up on branded goods by buying in bulk when brands run promotional offers. Once the promotions end, these sellers sell the same products at a lower price for many months to come, undercutting the brand. Hence, brands need to limit the order size per consumer whenever they run promotional offers. This action can effectively hinder 3P sellers from stocking their products for a fraction of the price.
3. Manage Product Variants
Managing and unifying product variants under a single listing can help restrict the third party seller network on Amazon. And in turn improve search visibility and conversions. Brands need to identify and report ASINs of duplicate pages and get them merged into a single listing. Listings with all product variations like sizes, colors, flavors, and no. of units listed under a single listing get more search queries and are proritized by Amazon.
Brands can also request Amazon to merge all 3P ASINs of their products under their own listings, This can help control what listings are shown to consumers when they search for a particular product.
4. Adopt a 3P/Hybrid Selling Model
1P selling has its drawbacks and limitations on marketplaces like Amazon. On the other hand, 3P sellers have much more control and ownership over their listings. Such as using dynamic pricing, better managing their inventory, and building relationships with consumers directly. Hence, many brands today choose to sell their products as 3P sellers or by partnering with 3P enablement partners. Often, they choose a hybrid model, combining the benefits of both 1P and 3P models for better results. With this hybrid model, brands can control their online inventory better. For example, if the 1P listing goes out of stock, it can be quickly replaced with the inventory listed via the 3P listing, thus maintaining optimal inventory at all times.
Leveraging Data and Analytics for a Successful 3P Strategy
Data is a powerful tool for refining and optimizing a 3P strategy. Brands can monitor 3P sellers, track their performance compared to competitors, monitor key metrics, and optimize marketing and pricing strategies by leveraging AI-driven, intelligent analytics.
- Track Performance Metrics: Regularly monitor key performance indicators (KPIs) such as sales velocity, Buy Box percentage, and conversion rates.
- Analyze Customer Feedback: Analyze customer reviews and feedback to identify areas for improvement and innovation.
- Monitor Market Trends: Stay informed about broader market trends, including shifts in consumer behavior and competitive dynamics.
- Optimize Prices: Use intuitive dynamic pricing strategies to reprice products to gain a competitive advantage while protecting your margins.
- Manage Assortment and Inventory: Leverage data to offer the right assortments to shoppers and ensure your products never go out of stock.
Conclusion: Dominating the 3P Marketplace
Online marketplaces are the go-to destinations for a majority of shoppers. A recent survey found that 50% of US shoppers start their product searches on Amazon, making it one of the most powerful online channels to sell your products. While 3P sellers dominate marketplaces like Amazon, brands can regain control of their products and sales by adopting the right tools and strategies.
At Intelligence Node, we provide brands with the tools and insights to succeed in this dynamic environment. Our advanced analytics and Marketplace Intelligence enable you to confidently enact a 3P strategy that drives growth and safeguards your brand’s future across global marketplaces.
