Many sellers dream of directly supplying their products to Amazon as an official vendor. While stringent requirements limit vendors, the benefits of selling to Amazon directly can be immense. This comprehensive guide covers how the Amazon vendor program works, qualifying as a vendor, pros and cons, and maximizing revenue when selling direct to Amazon.
Table of Contents
What Does It Mean to Sell to Amazon Directly?
Brands approved as an Amazon vendor can sell products directly to Amazon for resale on a wholesale basis. This differs from the Amazon Seller marketplace where sellers ship inventory to customers themselves.
As a vendor, you supply bulk quantities of inventory upfront to Amazon. Amazon then handles storage in their fulfillment centers and direct-to-consumer ordering, packing, shipping and customer service.
The vendor relationship lets you tap into Amazon’s retail capabilities while focusing on manufacturing and supply chain. But you give up control over sales and distribution by letting Amazon fulfill orders.
How the Amazon Vendor Program Works
The process of selling to Amazon as an approved vendor partner:
- Negotiate vendor terms like wholesale pricing and quantity commitments. Sign legal agreements.
- Forecast demand and supply bulk purchase orders to Amazon fulfillment centers.
- Amazon stocks inventory and lists products for sale on the Amazon.com site.
- Amazon handles all packaging, shipping and customer service for orders.
- Amazon deducts their vendor fees then pays you the negotiated wholesale rate on each item sold.
- Monitor inventory levels and sales using Vendor Central dashboard. Replenish based on demand.
Amazon vendors must be able to reliably supply products in large volumes to maintain adequate inventory for sales.
Benefits of Becoming an Amazon Vendor
Selling directly to Amazon as a wholesaler provides major advantages:
Expanded Market Reach
Instant access to millions of Amazon customers in one marketplace.
Reduced Fulfillment Work
Amazon handles storage, packing, shipping, returns, customer service.
Potential Volume Orders
Ability to sell high quantities with a single vendor deal.
Prime Eligibility
Automatic qualification for Prime 2-day shipping incentives.
Merchandising Opportunities
Eligible for Amazon promotions, discount initiatives, spotlight deals.
First-Party Data Insights
Gain Amazon’s internal data on customer searches, browsing and buying behavior.
Dedicated Support
Get an assigned vendor manager for support and contract negotiations.
The scale of distribution offered by selling through the Amazon vendor channel is extremely compelling for eligible brands.
Requirements to Apply for Amazon Vendor
Amazon has strict standards for vetting vendor applicants:
- Established Brand – Proven products with positive reviews and organic sales history on Amazon.
- High-Quality Products – Well-designed, functional and innovative products.
- Supply Capability – Able to reliably provide thousands of units with sufficient safety stock.
- Consistency – Strict quality control and production standards.
- Packaging – Retail-ready, sturdy packaging designed to avoid damages.
- Production Timelines – Fast turnaround on purchase orders.
- Responsiveness – Rapidly resolve any product issues or customer complaints.
Given the demands, the vast majority of vendor applications are rejected. Amazon selectively partners with brands that complement their catalog strengths and meet excellence thresholds.
How to Apply to Become an Amazon Vendor
Sellers wanting to supply products directly to Amazon must submit extensive applications for consideration:
- Visit Services.Amazon.com – Complete an application to pre-qualify as a vendor.
- Provide All Company Details – Amazon will review capabilities and products during the screening process.
- Accept Amazon Terms – Agree to Amazon’s formal vendor requirements and code of conduct.
- List Products to Pitch – Select specific products you want to sell through the vendor program.
- Send Samples If Requested – Provide prototypes or finished product samples if asked.
- Undergo Screening – Amazon examines company history, supply readiness, product demand.
- Sign Contracts If Approved – Finalize legal wholesale vendor agreement covering terms and scope.
Given the logistics required, vendor accounts make the most sense for established brands rather than small startups – but companies of any size can apply if requirements are met.
Selling to Amazon as Vendor vs Seller
Weighing the tradeoffs of becoming an Amazon vendor versus selling as a marketplace merchant:
| Vendor | Seller | |
|---|---|---|
| Fulfillment | Amazon handles | Seller responsibility |
| Profit Margins | Lower markup | Higher margins |
| Quantity | High volumes | Lower limits |
| Agreements | Contracts required | No approval needed |
| Prime Eligibility | Automatic | Optional (FBA) |
| Negotiation Power | Set terms with Amazon | Amazon standard program |
| Analytics | Vendor-specific data | Shared marketplace data |
Vendors prioritize high scale distribution over margins. Selling yourself allows customization but more work. Evaluate which fits your strategy.
Pros and Cons of Selling to Amazon as a Vendor
Pros of Selling Direct to Amazon
- Massive distribution reach instantly
- Focus on supply chain and manufacturing
- Reduced overhead by leveraging Amazon’s infrastructure
- Advance notice of promotions and insights into first-party data
Cons of Selling to Amazon as a Vendor
- Lower profit margins selling wholesale
- Limited control over merchandising and pricing
- Forecasting supply needs can be challenging
- Changes require extensive coordination with Amazon
- Must invest heavily upfront in inventory
Becoming an Amazon vendor trades control for unmatched scale and reach. Ensure the deal structure aligns with your business priorities.
Negotiating Your Amazon Vendor Contract
If accepted into the vendor program, pay close attention negotiating the terms:
- Pricing – Amazon will press for lowest possible wholesale costs to maximize their own margins. Push back based on production expenses and desired markup.
- Minimum Supply Requirements – Requirements for forecasted demand and minimum safety stock levels may be high. Get realistic based on actual production capabilities.
- Exclusivity Clauses – Amazon may request exclusive distribution rights or restrictions from selling certain product lines elsewhere. Analyze carefully.
- Promotional Commitments – Be prepared to offer periodic discounting or bonus inventory for promotions. But don’t allow overdiscounting that devalues brand.
- Inventory Liability – Hash out where financial liability sits for unsold stock if forecasts are inaccurate.
Don’t feel pressured into agreeing to unrealistic terms that don’t make financial sense for sustaining your business. Negotiate the best deal possible.
How Does Amazon Pay Vendors?
As an Amazon vendor, your wholesale products are purchased directly by Amazon upfront when stocking inventory.
You receive payment from Amazon for those purchases typically within 15 days of delivering purchase orders to their fulfillment centers. This functions like any traditional wholesale supplier relationship.
Then as Amazon sells through units to consumers online, they remit scheduled payments back to you for the vendor revenue share amounts based on the negotiated wholesale price. For instance, getting paid each month for items sold the previous month.
Terms like revenue share schedule, return periods, reimbursements for damaged stock etc. are detailed in the supply agreements. Strive for the most favorable payment timelines when negotiating vendor terms.
Vendor Central Dashboard
Once approved as an Amazon vendor, you get access to the Vendor Central dashboard for managing your vendor relationship:
Key features:
- Review purchase order status and history
- Initiate purchase orders for inventory replenishment
- Access inventory data across Amazon fulfillment centers
- View sales metrics and reports
- Download custom analytics reports
- Contact vendor support
- View merchandising schedules
- Manage user access permissions
Vendor Central provides crucial inventory, sales and ordering visibility needed to sync supply with Amazon’s demand.
Top Selling on Amazon as a Vendor Tips
Beyond securing favorable contract terms, vendors should focus on:
- Streamlining Logistics – Smoothly supply Amazon using lean processes and logistics tools like multi-channel inventory management software.
- Forecast Accuracy – Work closely with Amazon to refine demand forecasting and supply planning to minimize waste.
- Review Monitoring – Closely track product reviews and defect feedback. Implement continuous quality improvement.
- Leverage Marketing Support – Fully utilize Amazon’s marketing resources and channel expertise to boost sales.
- Restock Promptly – Ramp up production and expedite purchase orders to avoid stockouts during key promotions or seasonal spikes.
- Expand Offerings – Once established, work with Amazon to supply additional products and categories.
Maximize the opportunity by becoming closely integrated with Amazon’s vendor operations and retail sales initiatives.
Mistakes to Avoid as an Amazon Vendor
Some common vendor mistakes include:
- Taking on more product supply than can realistically be fulfilled
- Underfunding inventory needs and letting stockouts occur
- Failing to react quickly to negative product reviews and issues
- Declining or dragging feet on promotional pricing requests
- Overpromising on supply lead times
- Not leveraging provided sales and advertising support sufficiently
By proactively managing expectations and committing only to what your operation can reliably achieve, vendors set themselves up for success selling directly through Amazon’s platform.
Amazon Vendor Fees and Commissions
Amazon charges commissions and fees for vendors:
- Referral Fee – Percentage of each item’s sales price, ranges from 4-20% depending on product category.
- Variable Closing Fee – Applies to certain underperforming products, up to 10% per item.
- Storage and Fulfillment Fees – Charges for storage space and order fulfillment based on size tier.
- Return Processing – Fees for handling customer returns.
- Damage and Reimbursement – Vendor reimburses Amazon for unsellable stock.
Factor commission structures and fees into negotiated wholesale rates you supply inventory at to ensure profitability on your end after Amazon’s cut.
Is Selling to Amazon as a Vendor Worth It?
Becoming a wholesale vendor only makes sense under the right conditions:
Good Fit If:
- Your brand aligns with Amazon’s catalog strengths
- You can reliably manufacture and supply at scale
- Wholesale margins remain profitable despite commissions
- Drive for distribution reach outweighs loss of control
- Poised to quickly address any product issues
Poor Fit If:
- Brand doesn’t meet Amazon vendor criteria
- Production volumes remain limited
- Seeking higher retail margins selling yourself
- Relying on selling unique products rather than staple commodities
If your business can readily supply Amazon while benefiting from their distribution breadth, the vendor relationship offers lucrative upside that outweighs drawbacks for many large brands. But also know when it’s not the right path forward based on your product mix and priorities.
Alternatives to Selling to Amazon as Vendor
If the vendor requirements don’t fit your business, consider these alternative approaches:
Sell as Independent Seller
Become a Marketplace merchant. Handle fulfillment yourself or use FBA. Full control and retail margins.
Explore Amazon Accelerator
Covers onboarding costs for new products. Higher margins than vendor.
Sell on Multiple Channels
Don’t depend only on Amazon. Maintain your own site and expand to other marketplaces.
Build Partnerships
Partner with vendors selling on Amazon already. Co-brand products or supplement their catalog.
Focus on Direct D2C Sales
Forgo wholesale channels to focus on first-party sales. Own the customer relationship.
Vendors sacrifice control over distribution for volume and reach. But hybrid or multichannel strategies provide flexibility.
Becoming an Amazon Vendor – FAQs
Here are answers to some frequently asked questions about selling directly to Amazon:
Does selling to Amazon as a vendor eliminate competition?
No, your products will still face competition from other vendors and third-party sellers listing identical or similar products. However, vendor sales may be featured more prominently in search results.
Can I sell on Amazon through FBA and also be a vendor?
No, once approved as a wholesale vendor you assign exclusive selling rights on those specific products to Amazon. You cannot double dip by also selling vendor items yourself as a merchant.
How much inventory is required for the vendor program?
Minimum supply requirements vary by product, but generally Amazon expects thousands of units per month with additional safety stock. You must be able to sustain adequate inventory across their fulfillment network.
Does becoming an Amazon vendor guarantee sales?
No, there are no sales guarantees or commitments. However being featured on Amazon does provide much greater distribution potential. Smart vendors actively boost visibility with promotions, advertising and organic efforts.
Am I required to offer the lowest wholesale prices to Amazon?
No, but Amazon will leverage their scale and sales data during negotiations, so vendors must find ways to maintain reasonable profit margins through competitive wholesale pricing reflecting their production costs and capabilities.
Conclusion
Key takeaways about selling to Amazon as a vendor:
- Direct vendor relationship provides mass distribution but requires large, reliable supply
- Rigorous screening means most applicants are rejected – must prove brand value
- Lower margins but potential for far greater overall sales volume
- Leverage Amazon’s platform capabilities but retain production control
- Carefully negotiate terms for a mutually profitable partnership
- Ongoing effort required to forecast demand and maintain stock
- Alternative approaches like multichannel sales if vendor plan not feasible
While becoming an authorized Amazon vendor is highly selective, brands meeting the criteria gain access to unmatched scale. Define your priorities, then leverage or work around Amazon’s programs accordingly.
