The Struggle with Amazon Vendor Central Is Real. Should You Move to Seller Central FBA?

Adam Wilkens

Published:

Amazon started off with its “retail program” known as Vendor Central. This program which they refer to as 1P (first party) represents a program whereby Amazon orders goods from manufacturers directly and stocks them in their warehouse. Its owned goods program, amazon pays for the freight from the manufacturer to the Amazon warehouse and they also pay all of the pick, pack, and ship fees to the end user customer. In exchange for these services typically there is a vendor agreement between Amazon and the manufacturer or distributor to buy products at specific terms. These terms include an MDF marketing fund, a freight allowance, and a damage allowance but can also include payment terms and other discounts which vary.

It sounds wonderful right?

There is also a line of people hopeful for an invitation, thousands of manufactures on the 3P Seller Central want in, but the grass is not greener.

The Amazon Vendor Account, at one point in time was top of the food chain. The ultimate aspiration and benchmark achievement for an established business on amazon. Now many of the original inhabitants want out, even more have migrated over to Seller Central FBA within the last five years. At the same time there are whispers internally of the program ultimate deprecating in favor of the 3rd party platform. The fact of the matter is Vendor Central has become very unfriendly for many reasons, including:

  1. Reduction of Vendor Managers
  2. Removal of the VSP program
  3. Vendor Support Problems
  4. Reduced Reporting Metrics
  5. Rising Cost of COOPS
  6. Shadow banning of products as a result of CRAP (cannot realize any profit)
  7. Confusing Regulations and Vendor Certificate Requirements
  8. Operational Chargebacks
  9. Shortage Claims
  10. Inability to Raise Wholesale Prices
  11. Problems creating new items
  12. Problems fixing / editing content even when you are the Brand Registry rights owner
  13. Twister/Variations break constantly

Seemingly they are trying to push you out the door, and we believe it is not coincidence. The fact of the matter are Amazon’s passive moves to massage you closer and closer to the Seller Central platform is not a matter of chance, they want you out. Amazon is losing money on the Vendor Central side, in order to compensate they have to play all of these games which make you want to pull your hair out. Much of this is the result of pandemic related cost increases in their overhead, riding fuel and delivery costs (freight), and their algorithmic programing forcing the retail offers to match low prices from other ecommerce websites such as Wal-Mart, Target, Home Depot, Wayfair and others. There do not appear to be clear answers, or are there?

Where there is a will, there is a way!

If you really want to hold onto your Vendor Central account, possibly because your freight costs relative to the item selling price create a loss on seller central, there are ways which you could compensate for the faults in Vendor Central and use them to your advantage. The truth is nine times out of ten, you really do not need a vendor manager to be successful on Vendor Central. What you need is a good agency partner, like ourselves. A group of Amazon experts who have a lot of experience navigating Vendor Central and have experiences a lot of the same gripes over and over. We like some others, have discovered some of the work arounds which can make your life much easier in navigating the treacherous waters of Amazon retail.

For example, the fact that your cost increase proposals are being rejected is likely the result of your selling price. Amazon will analyze all internal and external offers and cross reference the last few months of selling price history to determine if your new ask allows to maintain or grow margin %. The path to success is to first work on increasing the selling prices for your ASIN’s at other retailers online, exclusive eBay or grey markets sites. Once google shopping reflects a higher price, you should see the selling price of your item increase on Amazon. Wait 4 weeks once the new higher MSRP has been published, then attempt a cost increase again. The system will not accept large increase of double digits per attempt, so you do need to be both conservative and realistic with your ask but the results may surprise you.

You could also be facing the same or similar issue when attempting to create new items. The old assumption of 30-40% margin for Amazon does not work anymore. You need to keystone or better every new item build. This means if you are setting up a brand new asin to the site and the wholesale cost is $10, the MSRP needs to be $20 or over. Ideally $25-30, the reason is because Amazon needs legs, they need room to go down. This is the assumption, prices fall. The assumption is sort of offensive, but knowing this is how the system is programmed you must work with the cards you have.

They know $30 might be $20, for two reasons;

Reason 1 is because the system might have to match another retailer. What happens If you create the same item on a competing site and they do rollbacks or discounts, Amazon needs wiggle room to match your price.

Reason 2 is because the item might be a slow seller, which means any inventory they buy could at some point be unhealthy causing them to reduce the selling price to rid themselves of weeks of cover. They don’t want to lose money, but if they do price reductions from $30 to $20 they would ideally like do to this without going into the red.

Shortage Claims are another dark sore spot for most in Vendor Central –

What are Shortage Claims on Vendor Central you may ask?

Amazon can, and does, claim a certain percentage of units shipped using their collect or your prepaid freight account are missing for random purchase orders. We are under the firm belief that this is by design, otherwise they have had severe operational flaws upon check-in of retail inventory for the better part of two decades. It would be hard to believe Amazon has check-in flaws on retail only inventory this far into the existence of vendor central. This means it is intentional. We believe Amazon does this in order to aid overall profitability for their retail division. Originally, they created this POD (proof of delivery) system whereby they asked you to submit invoice, packing list, delivery receipt for the shipment to prove they received it. Once enough vendors figured out the paperwork, they needed to continue claiming shortages so they developed the SDP (shortage dispute process). Amazon then decided that the original means of proving the units arrived to their warehouse, did not prove anything. It has been very confusing and complicated to keep up with for most.

What Do I Need to Provide Amazon to Be Paid On Shortage Claims?

At this point Amazon needs to see several documents:

  1. Packing List which includes PO, invoice #, The asins, the wholesale prices, your company info, the shipper, and the tracking number
  2. Invoices which includes PO, invoice #, The asins, the wholesale prices, your company info, the shipper, and the tracking number
  3. The Bill of Lading which includes PO, invoice #, The asins, the wholesale prices, your company info, the shipper, and the tracking number
  4. The Delivery Confirmation Signature or Seal, showing who signed for the goods.

The only flaw left in the system is that many times the containers are dropped off, there is no longer a delivery signature. Amazon may harp on this if you provide the correct documents. The next step after rejection of these documents is to make a case in Vendor Central and demand payment…or else. The or else will be the threat that you will stop or hold all future PO’s. Once you demand payment 1-2 times back in reply, you will begin to see they magically locate the inventory and decide to pay you in the next 1-2 payment cycles.

These are just a taste of some of the hassle of Vendor Central. If you are an active Vendor, you can continue to make it work and stay at the party as long as the lights are still on. Ultimately if they force you out, there will be ample notice so that you can setup on Seller Central, we imagine there will be some help integrating you when the time comes. We don’t know when this will be, but the writing is on the wall.

If you are in Seller Central and hoping to join Vendor Central, I am afraid this ship has sailed. They are no longer accepting new invitations to Vendor Central. Internally the pathway to send or request an invite for a new vendor is no longer there, so the long of the short of it is that you cannot become a vendor any longer and you must stay with Seller Central. To be quite honest the tools in Seller Central are better and easier, overall, the seller support is also considerably better. You can frequently reach someone by phone, many retail vendors cannot.

If you are struggling with Vendor Central and need some help, please learn more here and reach out to us anytime.