I took inspiration from a recent article published in the Toy World Magazine about Vendor Central vs. Seller Central or the Hybrid Model as it is often referred to. The Hybrid Model is a concept that has been around for many years but has become a more favourable way of working with Amazon recently. Amazon has notoriously been treated as a second-tier account by many brands, and as their importance grew in the market and the pandemic hit, Amazon could no longer be ignored. Sales and marketing strategies had to evolve to make room for a new way of working, the Amazon way. 

What is the hybrid model?

With the hybrid model, brands can enjoy the best of both the Vendor and Seller Central worlds. Brands have a variety of options available to them, both practically and strategically. However, you must meet the criteria of being a vendor on Amazon, and you also need to manage a Seller Central account full time.

Why should brands adopt a hybrid model?

Historically brands have assumed the best strategy for managing Amazon is through either Vendor Central or Seller Central. However, a sound Amazon retail model is a hybrid one. It places you as a brand in an advantageous position where you have a great tool at your disposal in challenging situations. Adopting a hybrid model comes with benefits and disadvantages – the biggest being your relationship with Amazon.

Amazon often refer to “Net PPM” – Net Pure Product Margin and will constantly evaluate their Net PPM against your products. If there are challenges to this margin, Amazon will have difficult conversations with the business in helping restore the margin. This is often out of most vendors’ control – or – unprofitable for a business to restore.

Trading Terms

Amazon is renowned for its tough stance when it comes to trading terms. Through Seller Central, there are no trading terms negotiations, and if you do not have access to a Vendor Manager, your agreements will auto-renew. With no one to fight on your behalf, incremental increases will go unchallenged, and Amazon will push to grow its profit margins. Negotiations must be skilfully handled, taking a comprehensive approach to your business and considering both current and future activities across the board.

If Amazon demands an increase in terms, this no doubt poses profitability challenges for your business.  If negotiations are “stuck” and there is no “win-win” solution, transitioning to a hybrid model will improve your control of business profitability.

CRAP lines

CRAP = cannot return a profit… If a product is popular but unprofitable (for Amazon), Amazon will not store it in any of their warehouses, and they will stop taking the line. Unprofitable lines will simply get CRAP’ed. You can funnel the CRAP list lines through your Seller Central account – it is all about taking the relevant lines that are not on Vendor Central and putting them on Seller Central.

Amazon does not acknowledge the hybrid model. They would rather you did not use it, in all honesty. Seller Central and Vendor Central are two teams within Amazon. They are also likely to discourage hybrid selling because it compromises their ability to control the end-to-end customer experience. The Born to Run programme was conceived about two years ago, and rumour has it that it was Amazon’s attempt at discouraging a cross-over to the hybrid model. However, The Born to Run programme is a great tactic to use to launch new ranges through Vendor Central.  

Importance of logistics strategy when defining these models.

When defining if the hybrid model is suitable for your business, logistics will be pivotal in this decision-making. Through Seller Central, there are two methods of fulfilment, either FBA (Fulfilment by Amazon) or FBM (Fulfilment by Merchant). FBA can be more expensive, but the service is far more comprehensive. Amazon will pick, pack, ship, handle returns and deal with customer queries. Your sole responsibility will be to send the items to Amazon.  FBM is a little different. You sell directly to customers through the Amazon platform, and the handling of all logistics and enquiries resides with you as a brand. You will be paying reduced fees.

So, if you opt to move to a hybrid model, you will have to consider what is the correct logistics strategy by analysing profitability and capabilities.

Importance of resources to help manage these models.

A hybrid model takes time to set up, and it is necessary to have adequate internal logistics in place. You need the right people in the right jobs across the business to manage your Amazon account. And that ranges from Account Management to data analytics to strategy creation and implementation.

Amazon is not just a sales account or a marketing platform. It cannot be treated as just another marketplace to sell your goods on. Amazon must be forefront and centre when planning out your e-Commerce strategy as a whole. You need an Amazon mindset to fuel and inspire your Amazon-first approach.

For more information and support on how to adopt the hybrid model, come to Etopia.