Expanding Your Perspective: Who Should Consider Transitioning From 1p to 3p?

a lot of brown boxes stacked high in a warehouse

If your brand is facing challenges selling wholesale to Amazon, transitioning from 1P (first party/wholesale) to 3P (third party/account owner) may be worth considering.

Who should consider making the change from 1P to 3P?

Brands experiencing logistics issues.  Ask yourself, could you do better? Do you have the staffing, the software to analyze inventory, the warehousing, the carrier to act quickly? Or the capital or margin to hire an agency to do all this so you can focus on other things? If so, consider 3P.

Brands who want to tell a story. Are you a brand with a point of difference or are you a group of products? If you’re a brand, 3P has more tools than ever to tell your story to prospective customers. Share your values, use the Posts feature to align with your social, explore the many storefront templates and content modules that Seller provides.

Brands who want data to drive decisions. Seller provides rich demographic analysis & customer shopping data that you can use to drive product development, and understand your competitors better. We have Brands using this data to build out new categories and entire new assortments with different price points or ingredients. If you were a prestige skin care brand, wouldn’t you want to know that your customer is buying a specific grocery store acne product 30% of the time? Imagine how you could re-price, reformulate, or re-market your own acne product. Brands are not getting this type of data from Sephora or Ulta.

Brands who have private equity looking over their shoulder or are looking to exit. In our portfolio, 60% of brands are backed by PE. And PE loves the 3P model because in fact, PE firms are our biggest referrals; we have managed multiple brands from PE investment portfolio. PE loves that in the 3P model, you’re booking top line numbers, so you’re booking 100% of sales, while in the 1P model, you’re booking wholesale which is likely 50%. Your enterprise value just went up. And depending on the product, your margins should be better in 3P which of course the PE firms like, because they are typically more focused on bottom line than top line, because they are looking at overall financial health of the business so they can sell you at a high multiple, and that’s determined by your bottom line.

Brands who want to know the identity of unauthorized resellers and identify the leaks in your supply chain. Amazon’s gated Premium Beauty may make your resellers invisible on your Amazon listings, but that doesn’t stop your product from leaking and being resold at a discount. If resellers can’t list your product on Amazon, they sell it on Walmart or another marketplace. Without identifying where the leak came from, you’re just moving product around the resale circuit. If you go 3P, you can partner with a brand protection expert to enable product tracking, identify the source, and enforce adherence to your distribution agreements.

Brands where the Vendor Manager has disappeared and brands are on their own. Amazon themselves have admitted a growing reliance on AI that has replaced functions once performed by Vendor Managers. If you are navigating Amazon’s advertising, PO management, and listing maintenance yourself because no one will answer your emails, you may no longer be a priority to the Vendor team. On 3P, you’ll be in control of your inventory flow and your pricing, and the right agency will make you their priority. If your vendor manager doesn’t cooperate,  get an agency who knows logistics, and account management and filing cases, or consider a consultant who knows how to navigate Amazon senior leadership.

Optimizing logistics operations on Amazon is essential for brands looking to succeed in today’s competitive marketplace. If you’re facing challenges such as staffing shortages or difficulties with carrier management, transitioning from 1P to 3P solutions can be a game-changer. At Market Defense, we specialize in providing comprehensive 3P solutions to help brands like yours overcome these challenges and thrive on Amazon. Our team has years of experience navigating the Amazon platform and optimizing supply chains for maximum efficiency. Contact us today to learn more about how we can help your business achieve success on Amazon.