The 3P marketplace made Amazon the giant in retail, which resulted to Walmart acquiring Jet.Com and eBay following close at Amazon’s heels to share in its market success.

Consumers are actively using Amazon and other marketplaces to find their desired products, and sellers will continue to find ways to meet that demand.

But making your presence felt in the marketplace requires strategy and not just leaving it all to chance – a free-for-all arena.

Greater chances of losing in a free-for-all market

If brands can’t take an active role in managing their value on 3P marketplaces, the unavoidable outcome is that sellers will aggressively compete for the largest share of the buy boxes.

Sellers will “race to the bottom” on prices to secure a deal, which creates a negative impact on the brand’s equity in the long run.

To avoid this, there are brands taking aggressive action to regain control by setting up their own 3P seller accounts, or working with a 3P seller partners who will manage their product lisitngs on the different channel’s platforms while adhering to MAP policies and ensuring products are kept in stock.

Let’s examine the key issues, risks, and trade-offs of managing 3rd party sales internally versus selling through a dedicated 3P marketplace specialist.

How to Manage Multiple Marketplaces

Walmart, Jet, and eBay are all gunning for Amazon and hope to increase their market share. As a result of Walmart’s recent acquisition of Jet, it will continue to capture a share of the growing eCommerce pie. eBay – originally an auction site – now sells over 80% of its items in a non-auction format using their 150 million active buyers to gain market share.

The presence of these new market players complicates things for 3rd party sellers, simply because each market is different and requires a special approach to achieve maximum performance.

3P sellers need to focus on the following to succeed in the market:

  • Invest in quality software that will allow them to manage product feeds, fulfill orders, handle returns, and inventory sync.
  • Attend conferences for each of these marketplaces to stay updated on the latest developments
  • Hire dedicated staff to understand and study the changes on each marketplace

 

Brands that handle 3P sales should expect to invest in software and staff to manage multiple marketplaces. If they choose to sell via a dedicated 3P specialist, these expenses will be paid by the 3P marketplace specialist.

Therefore, brands get a significant advantage to sell via a 3P specialist because they don’t need to invest, manage, and maintain the software and staff.

 

How to manage multiple marketplaces

Pricing Control

Brand owners often receive complaints from 3P sellers about vendors racing to clinch a sale by dropping prices.

When prices drop, market value is impacted, and bricks and mortar retail partners get to suffer the brunt.

Regulating and upholding MAP arrangements is critical for brands.  Brand owners need to find ways and means to take legal action on unapproved vendors from selling their items, while at the same time lessening the number of merchants to only a couple – or in a perfect world- only one expert 3P authority.

On one hand, when brands are sold distributors, control over inventory or estimates can be quite a challenge, and on the other, when there’s no movement, without distributors there are less chances of losing control.

 

The advantages of selling with a 3P Specialist

 

How to Monitor Unauthorized Seller

If a brand’s items are sold through distributors, their items will inevitably fall under the control of 3P merchants who don’t have any association with the brand and could care less about any existing MAP strategies.

Rather, these vendors either work on a plan of action that rely on large volumes with slim margins, or a small one-man business out of a garage for minimal overhead to factor into their cost estimates.

Regularly checking for unapproved sellers can be daunting and tiresome, for which brand owners handling 3P sellers need to invest in resources dedicated to monitoring the market for unapproved vendors.

How to Manage Product Reviews

Managing product reviews and making it a prominent part of your eCommerce strategy can in fact be beneficial. Reviews engage more customers and further demonstrate confidence in the brand.

An integrated product review system can also have positive SEO implications. With schema markup product reviews can be displayed on search engine results pages, increasing click-through and helping products stand out in organic searches. Links to product reviews also strengthen your site’s overall and “review”-related SEO.

For brands that sell and build one that customers can trust, embracing product reviews will ultimately work to your advantage. Managing negative feedback tells customers that you stand by your brand and products. Reviews are becoming more important than ever to driving conversions, and by simply including them on your store, it increases your credibility and leads to more purchases.

 

How to Manage Customer Service

Overseeing client benefit is vital to safeguarding brand value.

Effectively managing customer service is vital to preserving brand equity.

Failure to consistently respond timely to inquiries can result in a decreasing share of the buy box, or suspension of your 3P seller account entirely.

When selling on Amazon and using FBA, Amazon assists with many of the customer service issues. However, the 3P seller should expect to deal with customers (or competitors posting as customers) making false claims such as damaged when delivered or getting a fake product.

Brands that handle 3P sales themselves should invest in software and staff to handle customer service, whereas if they choose to sell via a dedicated 3P specialist, this cost will be shouldered by the 3P marketplace specialist.

Yet, what are the advantages of outsourcing this function as compared to just doing it yourself?

Moderate Advantage: Selling via 3P Specialist

 

Optimize Product Listings

Optimizing product listings across multiple 3P marketplaces can significantly drain resources for brands with multiple products.

For every product listing, adequate research should be performed to determine which search terms consumers use to find that product, as well as how best to describe the product in a way that will result in maximum conversions.

High quality images should also be created and included with each product listing.

Once listings are optimized, key attributes could be A/B tested to further improve performance.

Listing optimization requires expertise and/or software investments for:

  • Photography
  • Copywriting
  • Keyword research
  • Split testing

Brands with 3P sellers should expect to invest in software and staff to handle this.

Significant Advantage: Selling via 3P Specialist

 

Create and Manage Advertising Campaigns

Creating and managing advertising campaigns is a key component of your eCommerce strategy.

Listing optimization will help increase your market share, but without effective advertising, expect to see slow market saturation for your new products or worse, get beaten by brands that advertise more.

Creating and managing profitable advertising campaigns across multiple channels requires a very high level of expertise, as well as powerful software. In the absence of either, your advertising campaigns are highly likely to fall far short of expectations.

Companies who are dedicated 3P sellers invest significant time, energy, and resources into improving their ability to create and manage profitable advertising campaigns. Brands can save significant amounts of time and money by working with 3P partners who already posses these skills versus attempting to hire staff to develop those capabilities internally.

Significant Advantage: Selling via 3P Specialist

 

Create and Manage Product Promotions

Promotions are powerful tool for increasing sales on 3P marketplaces. Promotions can be used for:

  • Launching new products
  • Holiday specials (Black Friday, Prime Day, etc…)
  • Quantity discounts

In Amazon, Lightning Deals are among the most powerful ones because unlike regular promotions where special offers might not be seen without a corresponding advertising campaign, a Lightning Deal simultaneously offers the promotion a very high level of visibility that translate to more sales.

Moderate Advantage: Selling via 3P Specialist

 

Multi-Channel Fulfillment

With the Amazon FBA program, fulfillment for orders placed on Amazon is handled by Amazon; however, if you sell your products on Walmart, Jet, and eBay, a fulfillment solution is required as none of these other 3P marketplaces offer fulfillment services.

Fulfillment is a very complex business process that requires an extremely high level of expertise to manage at scale. To succeed, brands should invest significant resources in software and staffing in order to succeed. Alternatively, brands could choose to outsource fulfillment to a 3P fulfillment partner. If outsourcing is the preferred method, brands should still expect to devote a portion of someone’s time to manage that relationship.

Professional 3P sellers who already sell on multiple 3P marketplaces will already have systems and/or a partner in place to effectively manage multi-channel fulfillment. Brands that choose to partner with 3P sellers can avoid the time consuming process of either selecting a 3P fulfillment partner, or of handling marketplace fulfillment internally.

Moderate Advantage: Selling via 3P Specialist

 

Keep Inventory in Sync

When selling across multiple 3P marketplaces, inventory management can become a significant issue because your inventory is going to be located in numerous warehouses. In most cases, this will boil down to inventory in Amazon’s warehouse, inventory in your warehouse(s), and if you use a 3P fulfillment partner, inventory in their warehouse as well.

With products spread across multiple warehouses, keeping inventory in sync is critical and will require investments in software and staff in order to succeed.

Moderate Advantage: Selling via 3P Specialist

 

Reporting & Analytics

Amazon Seller Central provides a large number of reports, though the presentation of the data is not overly user-friendly.

To make reporting more user-friendly generally requires an investment in additional software to parse and present the data in a way that makes it much easier to analyze.

Moderate Advantage: Selling via 3P Specialist

 

Managing Shipments to Amazon

Of all of today’s 3P marketplaces, Amazon is by far the largest and brands should expect the lion’s share of revenue to come from sales on Amazon. As a result, ensuring that products are in stock in Amazon’s warehouse(s) is critical.

Keeping stock in Amazon’s warehouses requires the 3P seller to invest in staff to monitor inventory levels and regularly create shipments to be sent to Amazon.

Depending on the number of SKUs in a brand’s product line, the demands for managing shipments to Amazon can vary from relatively little, to significant. For example, if a brand is going to handle 3P selling internally, they should expect to have to ship every order to at least three of Amazon’s warehouses. If products are sold in multipacks, brands should aslo expect to create any product bundles that are needed.

Alternatively, if brands elect to work with a 3P marketplace specialist, all they need to do is send pallets to the warehouse operated by their 3P partner.

Significant Advantage: Selling via 3P Specialist

 

Tracking Down Lost Items

Amazon is notorious for losing inventory that is shipped to their warehouses, and whenever inventory is lost, you need to provide Amazon with an invoice from your supplier to open a support case.

But what if you are the supplier? There’s less likelihood that Amazon will accept an invoice you issue to yourself. Given how particular Amazon is about documentation submitted, this could be a very significant issue for brands that choose to manage their own 3P selling.

Assuming Amazon will accept your brand’s invoice-to-self, there is still the ongoing time-suck that will inevitably result from having to communicate with Amazon to chase down lost inventory and get a reimbursement.

Significant Advantage: Selling via 3P Specialist

 

Accounting

If a brand decides to handle 3P sales internally, they should expect a significant increase on the burden placed on their accounting department because, instead of only having to deal with a smaller number of large orders as they do now, they are going to have to accurately account for thousands of small orders every month.

Significant Advantage: Selling via 3P Specialist

 

Tax Nexus

Selling on 3P marketplaces may create tax nexus, especially if the brand is storing inventory in Amazon’s (or other’s) warehouses.

Additional tax nexus requires additional tax collection and remittance, which in turn requires an investment in software and staffing to manage the process.

Moderate Advantage: Selling via 3P Specialist

 

Day to Day Involvement

 

Brands that are handling their own 3P marketplace sales should expect to manage a LOT more moving parts than they might think. To succeed, will require investing in software and staffing to manage the following:

  • Product feeds on multiple eCommerce marketplaces
  • Controlling pricing
  • Monitoring listing for unauthorized sellers
  • Generating product reviews and responding to negative ones
  • Customer service
  • Product listing optimization
  • Advertising campaigns
  • Product promotions
  • Multi-channel fulfillment
  • Inventory sync
  • Shipments to Amazon
  • Reporting & analytics
  • Tax nexus
  • Accounting

Significant Advantage: Selling via 3P Specialist

 

Financial Comparison

Would insourcing make economic sense for some brands?

The answer is, “it depends”.

To help you think through the math, let’s consider a few assumptions and examine a few different scenarios for sales on Amazon. Other marketplaces will have similar expenses.

Scenario #1: Brand with $30,000/mo in Amazon sales

If your total sales on Amazon are $30,000 per month, the “additional” gross profit you could hope to earn by handling 3P sales internally would be approximately $3,000/mo; not nearly enough to cover all the software expenses and payroll needed.

Scenario #2: Brand with $80,000/mo in Amazon sales

If your total sales on Amazon are $80,000 per month, the “additional” gross profit you could hope to earn by handling 3P sales internally would be approximately $8,000/mo; just barely enough to cover all the software expenses and payroll needed – especially when you factor in the costs for recruitment, training, and traveling to conferences.

Scenario #3: Brand with $150,000/mo in Amazon sales

If your total sales on Amazon are $150,000 per month, the “additional” gross profit you could hope to earn by handling 3P sales internally would be approximately $15,000/mo; enough to cover all the software expenses, payroll, recruitment, training, and travel expenses needed for one employee – assuming you can get by with just one person handling it all.

Advantage: Varies on Sales Volume and Headcount

 

Conclusion

As you can see, for a brand that wishes to manage their 3P marketplace sales internally, there are a lot of moving parts to manage.

For brands that are considering going the internal route, our hope is that this article has brought some additional insight to your decision making process.

With respect to hiring a dedicated employee, some additional questions you should ask yourself include:

  • How will we find someone for this?
  • As we aren’t eCommerce experts, how will we know if the person we find is any good until many months have passed?
  • What is the cost of a bad hire?
  • Are we willing to accept the risk that the person we hire could leave at any time?
  • Have we adequately considered the costs associated with payroll burden (20-30% of salary) and the expenses associated with traveling to all the conferences that they will need to attend to keep abreast of changes to any of the major 3P marketplaces?

We can Help

At Jim’s Whims, we have demonstrated experience spanning years assisting brands with Amazon.

Additionally, we can bring value to our brand partners by improving Amazon listings optimizations and Pay Per Click (PPC) Advertising campaigns at a very reasonable cost while building your brand with your image. We’re upbeat about the future, and would love to talk further, call us at (469) 487 8221

About Jim’s Whims

We’ve built relationships on trust, results, and a long-term vision for growth and sustainability. Ultimately, we are passionate about creating a business of quality endeavor and connectivity. This is how we seek out partnerships with brands and distributors; a genuine, personal investment in the lives of customers. We will get to know you. You will get to know us. Let’s get to mixing!

By: The Team @ Jim’s Whims