Katie Bishop
Content Director
The invitation-only Amazon 1P vendor program is changing. Once a golden ticket, it now presents complex challenges alongside its benefits. We explore the massive shifts, the data behind them, and how brands can navigate this new reality successfully.
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Introduction
That exclusive "invite-only" email from Amazon used to be a brand's golden ticket. But the ground beneath the Amazon 1P vendor model is shifting dramatically. It’s no longer just about getting the invitation; it's about surviving—and thriving—in a much tougher environment.
For years, becoming a first-party (1P) vendor was the pinnacle of selling on Amazon. You weren't just selling on Amazon; you were selling to Amazon. They bought your products wholesale, and you handed off the complexities of marketing, logistics, and customer service. It was prestigious. It was simple. But recent changes, including Amazon terminating accounts generating under $5-10 million annually, signal a new, more demanding era. Let's break down what being an Amazon 1P vendor means today and how you can navigate it.
Key Takeaways
Understanding the Amazon 1P Vendor Model
Before we dive into the deep end, let's get the basics straight. Being an Amazon 1P vendor means you act as a direct supplier or wholesaler to Amazon. It's a first-party relationship.
The Process
Here’s how it works in a nutshell:
Invitation: Amazon's vendor managers identify your brand and invite you to join Vendor Central.
Negotiation: You negotiate wholesale pricing, marketing co-op fees, and other terms with Amazon.
Purchase Orders: Amazon sends you bulk purchase orders (POs).
Fulfillment: You ship the inventory to Amazon's designated fulfillment centers.
Sale: Amazon takes ownership of the inventory and sells it to customers on the marketplace. Your product page now features the coveted “Ships from and sold by Amazon.com” badge.
In this model, Amazon is your one and only customer. You're not dealing with millions of end consumers; you're dealing with one massive, data-driven retail machine. This traditional structure still accounts for a significant portion of Amazon's sales, with first-party sellers representing approximately 39% of paid units in early 2024, according to Statista.
The Traditional Appeal: Why Brands Coveted a 1P Relationship
For a long time, the 1P invitation was seen as a sign that you had “made it.” The appeal was, and to some extent still is, rooted in a few key areas:
Prestige and Trust: The “Sold by Amazon” badge instills immense consumer confidence, which can lead to higher conversion rates.
Simplified Operations: Instead of managing thousands of individual orders, you fulfill large POs. This simplifies logistics and forecasting, at least on the surface.
Access to Powerful Tools: 1P vendors get access to exclusive and powerful marketing programs, like Amazon Vine for reviews and Premium A+ Content for enhanced product detail pages. For example, Sony Electronics uses Premium A+ Content to showcase intricate product features and proactively answer customer questions, building a richer shopping experience.
The Ground Has Shifted: Amazon's New 1P Playbook
That feeling of prestige is being tested. Recently, Amazon has been re-evaluating its 1P relationships with a much sharper pencil. In a move that sent shockwaves through the industry, reports emerged in 2024 of Amazon terminating Vendor Central accounts for brands generating less than $5 million or $10 million in annual revenue.
Why the change? Profitability. Amazon is relentlessly focused on efficiency. Managing tens of thousands of smaller vendor accounts is resource-intensive. By culling these smaller accounts, Amazon pushes brands toward the self-service 3P model (Seller Central), where the sellers bear the operational costs. It’s a classic 80/20 rule application: focus resources on the top 20% of vendors that drive 80% of the revenue and profit.
Navigating the Margin Squeeze
For those who remain 1P vendors, the pressure is mounting. It's not just about meeting a revenue threshold; it's about surviving increasingly tough negotiations. A recent survey of 1P suppliers by Consulterce revealed some startling trends:
Aggressive Cost Reduction: Amazon requested vendors to slash their cost prices by an average of -6.25% year-over-year.
Punitive Measures: A staggering 40% of 1P vendors reported experiencing punitive measures from Amazon, such as delisting products when cost increase requests were submitted.
Increased Spending: To maintain their partnerships, 51% of vendors felt compelled to increase their trade spending with Amazon for the upcoming year.
These aren't just negotiation tactics; they represent a fundamental shift in the power dynamic. This has led many brands to re-evaluate their reliance on the platform, with some even exploring an eCommerce Accelerator model to diversify and scale more effectively.
The Enduring Benefits of Being an Amazon 1P Vendor
Despite the intense pressure, many major brands remain committed to the 1P model. Why? Because when it works, it works at an incredible scale. A recent survey found that 73% of vendors still manage to meet or exceed their net margin targets, proving that profitability is achievable for those who can navigate the system.
Let’s look beyond the challenges and focus on the unique advantages that keep big players in the game.
Credibility and Conversion
The single biggest, non-negotiable benefit is the stamp of approval that comes with “Ships from and sold by Amazon.com.” This isn’t just text on a page; it's a powerful psychological trigger for shoppers. It signals authenticity, reliability, and eligibility for Prime shipping, which can significantly lift conversion rates compared to a lesser-known third-party seller.
Simplified Logistics at Scale
For large brands moving massive volumes, the 1P model is operationally simpler. Instead of picking, packing, and shipping thousands of individual customer orders, your team is responsible for fulfilling a predictable cadence of large purchase orders from Amazon. This streamlines warehousing and logistics, allowing you to focus on manufacturing and product development rather than direct-to-consumer fulfillment.
Exclusive Merchandising and Content Opportunities
Vendor Central unlocks a suite of tools that simply aren't available to most 3P sellers. These are designed to help brands tell their story more effectively.
Premium A+ Content
This is A+ Content on steroids. It allows for richer media, including full-width imagery, video modules, and interactive features. Brands like Sony use it to create an immersive, almost microsite-like experience right on the product page, which helps justify premium pricing and differentiate from competitors.
Amazon Vine
While now available to 3P sellers, Vine has its roots in the 1P program. It allows you to get early product reviews from a vetted group of top reviewers, which is critical for launching new products and generating social proof.
Unlocking the 1P Marketing & Advertising Advantage
Perhaps the most potent benefit of the 1P model lies within Amazon's advertising ecosystem. As an Amazon 1P vendor, you gain access to data and tools that can create a significant competitive moat, especially through Amazon's Demand-Side Platform (DSP).
The Power of Amazon DSP
Amazon DSP allows brands to programmatically buy ads both on and off Amazon, reaching shoppers wherever they spend their time. It's an omnichannel powerhouse, so much so that Forrester named Amazon Ads a leader in omnichannel DSPs. While available to 3P sellers, 1P vendors often have a deeper, more integrated relationship with the teams and data that fuel these campaigns.
Case Study: HEYDUDE's Explosive ROAS
A fantastic example of this in action is the footwear brand HEYDUDE. By combining Amazon DSP with Buy with Prime, they were able to reach relevant audiences across the web and direct them to their products. The result? An incredible 11.4x return on ad spend (ROAS), as highlighted in an Amazon case study. This showcases the immense power of leveraging Amazon's first-party data to drive sales both on and off the platform.
Deeper Integration and Insights
Being a 1P vendor often means having a dedicated Vendor Manager. This relationship can provide deeper insights into upcoming promotional opportunities, beta programs, and category-level data that isn't readily available to the public. This intel can be invaluable for planning marketing calendars and getting a leg up on competitors, especially during high-traffic events like Prime Day and the holiday season.
This tight integration can be a game-changer, but it comes at a price—literally. The negotiation of trade terms and co-op fees is often where the real battle for profitability is won or lost, a topic we've explored in our own analysis of the Amazon profit margin crisis.
The Downsides: What You Give Up as a 1P Vendor
The benefits are compelling, but they come with significant trade-offs. For every perk, there's a potential pitfall that can seriously impact your brand's health and profitability. Understanding these disadvantages is critical before committing to or continuing with a 1P relationship.
Total Loss of Price Control
This is the big one. Once Amazon buys your inventory, they can sell it for whatever price they want. Amazon's pricing algorithms are notoriously aggressive and will automatically match or beat any competitor's price, on or off Amazon. This can lead to a 'race to the bottom' that devalues your brand and wreaks havoc on your pricing integrity across all retail channels (your brick-and-mortar partners will not be happy).
Relentless Margin Compression
As we've seen, Amazon is constantly looking to improve its own margins, often at the expense of its vendors. The constant demand for lower wholesale prices, increased damage allowances, and hefty co-op fees can feel like a death by a thousand cuts. The negotiation cycle is grueling, with a Consulterce study showing that for 75% of vendors, these negotiations last anywhere from 1 to 6 months.
Strict and Punishing Operational Demands
Amazon holds its vendors to incredibly high operational standards. Any deviation from their strict packaging, labeling, and shipping requirements can result in significant financial penalties known as chargebacks. These can quickly eat into your profits if your logistics aren't perfectly dialed in.
1P vs. 3P: A Head-to-Head Comparison
To make the differences clear, here’s a breakdown of the two models across key business functions:
Feature | Amazon 1P Vendor | Amazon 3P Seller |
|---|---|---|
Pricing Control | None. Amazon sets the retail price. | Full control. You set your own price. |
Customer | Amazon (Wholesale) | End Consumer (Retail) |
Inventory Management | Fulfill large POs from Amazon. | Manage your own stock levels (FBA or FBM). |
Marketing Tools | Access to exclusive programs (Premium A+, etc.). | Robust toolset, but fewer exclusive perks. |
Logistics | Ship in bulk to Amazon warehouses. | Responsible for DTC fulfillment (or use FBA). |
Margins | Wholesale margins, subject to negotiation pressure. | Retail margins, but responsible for more fees. |
Case Study: The Financial Allure of a 3P Switch
Talking about the pros and cons is one thing, but seeing the numbers in black and white is another. The potential financial upside of moving from a 1P to a 3P model can be staggering, as it puts two of the most important levers—pricing and margin—back in your hands.
An eye-opening case study from GoAmify tracked an apparel brand's performance as it shifted a product from Vendor Central (1P) to Seller Central (3P). The results are a powerful illustration of the financial trade-offs.
The Side-by-Side Comparison
Let's look at the per-unit economics for the exact same product sold through both channels.
As a 1P Vendor: Amazon paid the brand a wholesale cost of $35.00 per unit. After accounting for various fees and allowances totaling $4.81 (like co-op fees, chargebacks, etc.), the brand's net revenue per unit was $30.19.
As a 3P Seller: The brand set its own retail price at $70.00. After deducting Amazon's selling fees and FBA fulfillment costs totaling $22.24, the brand's net revenue per unit was $47.76.
The result? By making the switch to 3P, the brand increased its net revenue per unit by $17.57, which is a massive 58% increase. This wasn't achieved by selling more units, but by capturing a healthier margin on every single sale.
Why Such a Drastic Difference?
The primary driver is regaining control over the retail price. As a 3P seller, the brand was able to price its product based on its perceived value, not just Amazon's competitive algorithm. This allowed them to capture the full retail margin, even after paying Amazon's fees. For brands feeling the Amazon profit margin crisis firsthand, this level of control can be the difference between a profitable channel and a loss leader.
Should Every Amazon 1P Vendor Consider a Hybrid Strategy?
Seeing the potential margin uplift in the 3P model, you might be tempted to abandon your 1P relationship entirely. But it's not always an either/or decision. A more nuanced, and increasingly popular, approach is the hybrid model, where brands operate on both Vendor Central and Seller Central simultaneously.
It's not just a niche strategy; it's rapidly becoming the norm. The latest Consulterce vendor study found that 44% of 1P vendors are already adopting a hybrid strategy. This indicates a clear trend towards a more flexible and resilient approach to the Amazon channel.
Why Go Hybrid?
Operating both 1P and 3P accounts allows you to get the best of both worlds and mitigate the risks of being overly reliant on one model. Here’s what makes it so appealing:
Strategic Product Segmentation
You can use the 1P relationship for your core, high-volume products (your “hero” SKUs) that benefit from the scale and “Sold by Amazon” badge. Meanwhile, you can use your 3P account for:
New Product Launches: Test new items without needing a PO from Amazon. You get immediate sales data and can prove a product's viability before pitching it to your Vendor Manager.
Long-Tail or Niche Products: Sell products that Amazon may not be interested in carrying as a 1P vendor.
Controlling Pricing on Key SKUs: For products where brand value and price integrity are paramount, selling them via 3P gives you absolute control.
Building a Resilient Business
The recent culling of smaller vendor accounts serves as a stark warning: your 1P relationship can disappear. Having an established 3P presence acts as a vital insurance policy. If your 1P account is ever terminated, you can transition your products to Seller Central without a catastrophic interruption to your sales.
Improved Data and Insights
Running both accounts gives you a more complete picture of your performance. You can compare sell-through rates, profitability, and customer feedback across both channels, leading to smarter inventory and marketing decisions. This dual perspective is something we champion when working as a Direct Wholesale Partner for brands looking to maximize their marketplace presence.
Actionable Strategies for Today's Amazon 1P Vendor
The message is clear: the passive, set-it-and-forget-it days of being an Amazon 1P vendor are over. Success in this new environment requires a proactive, strategic, and data-driven approach. Whether you're a multi-million dollar vendor or fighting to keep your account, you need a plan.
For Existing 1P Vendors
Your goal is to increase your value to Amazon while protecting your own profitability.
Master Your Negotiations: Don't just accept Amazon's terms. Come to the table armed with data on your own profitability, your brand's market power, and your operational performance. Remember, 64% of vendors received cost-price reduction requests. Be prepared to defend your position or negotiate for trade-offs in other areas, like marketing support.
Achieve Operational Excellence: Make yourself easy to work with. Minimize chargebacks by adhering strictly to Amazon's operational guidelines. A clean record strengthens your position and reduces profit leakage.
Build Your 3P Fallback: If you don't have a Seller Central account, open one now. Start by listing a few products to learn the system. This is your strategic safety net.
For Brands Considering a 1P Invitation
If you've just received the invite, congratulations! Now, do your homework before you sign.
Analyze Your Margins: Can your business sustain a wholesale model with potential for 5-10% annual cost pressure? Model out the best and worst-case scenarios.
Assess Your Operations: Are you equipped to handle bulk EDI (Electronic Data Interchange) orders and meet Amazon's strict compliance requirements?
Evaluate the Control Trade-Off: Are you comfortable ceding control over retail pricing? If brand equity is tied to a specific price point, 1P could be dangerous.
Strategic Planning Table
Here’s a simple guide to help you decide on the best path forward:
Your Brand's Situation | Primary Strategy | Key Action |
|---|---|---|
Large, established brand with high volume | Optimize 1P & Develop Hybrid | Negotiate hard on terms; use 3P for new launches and price control. |
Mid-sized brand feeling margin pressure | Aggressively Pursue Hybrid | Transition lower-margin or key brand items to 3P immediately. |
Niche or luxury brand with new 1P invite | Prioritize 3P or a Cautious Hybrid | Start with 3P to maintain price control. Use 1P for select, high-volume items only. |
Brand whose 1P account was terminated | Full Transition to 3P | Focus on mastering FBA, 3P advertising, and inventory management. |
No matter your position, the future for an Amazon 1P vendor is one of active management. The brands that succeed will be those that treat Amazon not as a simple sales channel, but as a complex and demanding partner requiring constant strategic oversight.
Conclusion
The allure of being an Amazon 1P vendor has fundamentally changed. The prestige of the “Sold by Amazon” badge now comes with serious strings attached: relentless margin pressure, a loss of pricing control, and the very real risk of being cut off. Success is no longer guaranteed by the invitation alone; it's earned through sharp negotiation, operational perfection, and strategic agility.
For many brands, the path forward isn't a simple choice between 1P and 3P but a blend of both. A hybrid approach offers the resilience and control needed to navigate Amazon's demanding ecosystem. Your next step should be a candid assessment of your brand's goals, margins, and operational capabilities to decide if you're truly equipped for the new reality of being an Amazon 1P vendor.
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