Amazon 1P vs 3P: Why Brands Are Switching to Seller Central
Is your brand still selling TO Amazon or ON Amazon? The shift from the 1P vendor model to 3P selling is accelerating. We explore the data-backed reasons why brands are making the switch, trading POs for control, and what it really takes to succeed.
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Introduction
It used to be the golden ticket for brands: the coveted invitation to become a first-party (1P) vendor for Amazon. But a quiet revolution is well underway, and it's reshaping the world's largest marketplace. By the end of last year, third-party (3P) sellers were responsible for an incredible 62% of paid units on Amazon, and that number is only climbing. This isn't a fluke; it's a strategic exodus.
Brands are consciously trading the perceived simplicity of selling to Amazon for the control and profitability of selling on Amazon. They're moving from Vendor Central to Seller Central to reclaim their pricing, protect their brand, and own their customer data.
But this move is far from simple. It’s an operational overhaul that, if done wrong, can lead to sales dips and compliance nightmares. Here’s what you need to know about the Amazon 1P vs 3P shift and how to navigate it successfully.
Key Takeaways
The Great Migration: Why the Shift from 1P to 3P is Accelerating
There's a fundamental shift happening in the Amazon ecosystem, and it’s picking up serious speed. For years, securing an invitation to Amazon’s first-party (1P) vendor program was *the* goal. It meant you had "made it." Amazon bought your product wholesale and handled the rest. Easy, right?
But the tide has turned dramatically. Today, we're seeing an accelerated migration of brands from the seemingly cushy 1P model to the more hands-on third-party (3P) seller model.
This isn't just a hunch; the data tells a crystal clear story. By the final quarter of last year, third-party sellers accounted for a staggering 62% of all paid units sold on Amazon, a notable increase from the 60% mark just the year prior. This isn't a temporary blip. Forecasts show 3P sales growth continuing to outpace 1P through 2027, signaling a huge strategic focus from Amazon itself on expanding its marketplace.
So, why the change of heart? Brands are waking up to the fact that the control they sacrificed for convenience in the 1P model comes at a very steep price. They're choosing to trade the predictability of Amazon's purchase orders for something far more valuable: direct control over their pricing, inventory, branding, and ultimately, their own destiny.
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Amazon 1P vs 3P: A Clear Breakdown of the Models
Before we dive deeper into the ‘why,’ it’s so important to understand the fundamental differences between these two ways of selling on Amazon. It's not just a minor distinction; it's a *completely different business relationship.*
Vendor Central (1P): Selling TO Amazon
In the 1P model, you are essentially a wholesaler. Amazon sends you purchase orders (POs), you ship them the product, and they pay you on net terms (typically 30, 60, or 90 days). Simple enough.
Amazon then becomes the seller of record, which means they control the retail price and how the product is listed. You operate through the Vendor Central dashboard. Think of it as a traditional retail relationship, just with an online behemoth.
Seller Central (3P): Selling ON Amazon
In the 3P model, you are the retailer. You sell directly to consumers through Amazon's marketplace. You control your pricing, your listing content, and your inventory. You manage your business through the Seller Central dashboard and have options for fulfillment... either using Fulfillment by Amazon (FBA) or handling it yourself (Fulfillment by Merchant, or FBM). You can learn more about the old 1P model in our previous post about the new reality for Amazon vendors.
Here’s a simple table to break it down:
Feature | 1P (Vendor Central) | 3P (Seller Central) |
|---|---|---|
Relationship | You are Amazon's supplier. | You are the direct seller to the customer. |
Pricing Control | Amazon sets the retail price. Can lead to price erosion. | You set your own retail price. |
Inventory Management | Fulfill large purchase orders from Amazon. | You manage your own inventory levels (FBA or FBM). |
Listing Control | Amazon controls the product listing, often overwriting brand content. | You have full control over listing title, bullets, and images. |
Customer Data | No direct access to who is buying your product. | Access to valuable customer analytics (demographics, buying patterns). |
Profit Margins | Wholesale margins. Often squeezed by Amazon's chargebacks and fees. | Retail margins. Higher potential, but you pay referral and fulfillment fees. |
The Allure of Control: Key Benefits Driving Brands to 3P
The number one reason we see brands making the switch from 1P to 3P is the burning desire to reclaim control.
When you're a 1P vendor, you're essentially a passenger in your own brand's journey on Amazon. Moving to 3P puts you firmly back in the driver's seat.
Pricing Autonomy
This is huge. In the 1P model, Amazon can and will change your product's price at will to compete for the Buy Box. This often leads to a "race to the bottom" that devalues your brand across all retail channels.
As a 3P seller, you set the price. Period. This allows you to maintain MAP (Minimum Advertised Price) integrity and protect your hard-earned brand equity.
Brand Representation
Ever spent weeks perfecting your product detail page, only to have Amazon's algorithm overwrite it with suboptimal, generic content? It's a common (and infuriating) frustration for 1P vendors.
With a 3P account, your listing is your own. You have full control over the title, bullet points, product description, and images. This allows you to tell your brand's story effectively and optimize for conversion, a core tenet of good Amazon SEO.
Inventory and Data Mastery
As the experts at Feedonomics aptly put it, “Many brands are looking to reclaim margin and data by transitioning from 1P to 3P, turning reliance on POs into direct control of fulfillment.”
No more waiting for Amazon's unpredictable POs. You decide how much inventory to send in and when, which is critical for preventing stockouts during peak seasons.
Even more importantly, 3P sellers gain access to a wealth of customer data that 1P vendors never see. You can analyze who is buying your products, when they're buying, and what else they're buying. These insights are invaluable for marketing and product development.
Trading POs for Profit: The Financial Realities of 3P
While control is a major motivator, the financial upside is often the real tipping point. The math seems simple at first glance: moving from lower wholesale margins to higher retail margins should equal more profit. It's often true, but the equation has more variables than many brands initially realize.
The potential is undeniable, though. We saw this firsthand with a client: in late 2024, a mid-sized kitchenware brand we work with migrated from 1P to 3P. By regaining control over their pricing and optimizing their shipments, they reported a 15% higher net margin after just two quarters. That's a game-changer.
Recalibrating Your Profit Margins
Success as a 3P seller requires a complete financial reset. You're no longer just looking at your wholesale cost vs. Amazon's PO price. You have a new set of fees to master. As one expert from Envision Horizons noted, “Unlike Vendor, 3P fees and costs are different, and sellers need to carefully recalculate profit margins post-transition.”
Your new P&L will now include:
Referral Fees: A percentage of the total sale price, typically around 15%.
Fulfillment Fees (FBA): Costs for picking, packing, and shipping your product.
Storage Fees: Monthly fees for inventory stored in Amazon's warehouses.
Advertising Costs: You are now solely responsible for funding your PPC campaigns.
While this seems daunting, the transparency is actually a huge benefit. You see exactly where every dollar is going, allowing you to optimize for true profitability rather than getting nickel-and-dimed by the hidden chargebacks and co-op fees common in Vendor Central.
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The Operational Overhaul: What It *Really* Takes to Succeed as a 3P Seller
This is where the rubber meets the road. The transition to 3P is not just a change in sales models; it's a complete operational transformation.
The benefits of control and margin come with a significant increase in responsibilty. Brands that underestimate this shift often struggle, and it can get ugly fast.
As one research paper from Feedonomics warns, “Brands moving to the 3P model take on inventory forecasting and fulfillment responsibilities, risking stockouts if not carefully planned.” This isn't just a risk; it's a common reality. Industry surveys show up to 25% of transitioning brands report temporary sales drops of 10-20% in their first two quarters due to these operational missteps.
Your New Job Description
When you become a 3P seller, you’re basically starting a new direct-to-consumer business unit. Here are some of the new hats you'll be wearing:
New Responsibility | Key Considerations |
|---|---|
Inventory Forecasting | You must now predict demand and manage stock levels. Overstocking leads to fees; understocking leads to lost sales and ranking. Utilizing modern Amazon inventory forecasting tools is non-negotiable. |
Fulfillment & Logistics | You must decide between FBA, FBM, or a 3PL. This includes prepping products, shipping to fulfillment centers, and managing returns. A robust fulfillment and logistics partner can be a lifesaver here. |
Customer Service | You are now responsible for answering all customer inquiries, managing reviews, and handling return requests promptly to meet Amazon's standards. |
Multi-State Tax Compliance | You must manage sales tax collection and remittance in states where you have economic nexus, a complexity that grows as you sell more. |
The learning curve can be steep, especially for brands accustomed to Amazon's internal systems handling everything. A succesful launch depends on having the right team, tools, and processes in place before you make the switch.
Navigating the Compliance and Brand Protection Maze
With great power comes great responsibility, and in the Amazon world, that means stricter rules. The freedom of the 3P model is balanced by a more rigorous set of performance metrics and compliance requirements.
As one expert from AMZ Dudes highlights, “Compliance requirements are stricter for 3P sellers—account health metrics and listing standards can result in swift suspensions if not vigilantly managed during the switch.” This isn't an exaggeration. We've seen that over half of sellers report increased compliance and suspension risks after moving to 3P, according to surveys from last year and this year.
The Account Health Dashboard: Your New North Star
Your Seller Central account health is... everything. Amazon closely monitors several key metrics, and failure to meet their targets can lead to listing suppression or even account suspension. You have to watch these like a hawk:
Order Defect Rate (ODR): Must remain below 1%.
Late Shipment Rate (LSR): Must be under 4% (for FBM sellers).
Valid Tracking Rate (VTR): Must be above 95% (for FBM sellers).
Pre-Fulfillment Cancel Rate: Must stay below 2.5%.
Winning the Fight for Your Brand
Ironically, gaining full control of your listings also exposes you to new threats. Unauthorized sellers and counterfeiters can more easily target your brand unless you take proactive steps.
This makes enrolling in Amazon Brand Registry an absolute necessity. It gives you access to powerful tools to protect your intellectual property, remove hijackers, and ensure the customer sees the authentic brand experience you've created. Robust Amazon brand protection services become critical infrastructure, not an optional add-on.
What if a brand prefers a hybrid approach?
The choice between 1P and 3P doesn't have to be an all-or-nothing decision. For many brands, especially those with diverse catalogs, a hybrid strategy offers the best of both worlds.
This is a more advanced tactic, for sure, but it’s becoming increasingly popular as brands look to optimize their channel strategy on a per-product basis.
How a Hybrid Model Works
In a hybrid model, a brand operates both a Vendor Central (1P) and a Seller Central (3P) account at the same time. This allows them to strategically place different products in different models based on their specific goals and characteristics.
Best for 1P: High-volume, "never out of stock" hero products with stable demand. The convenience of large, regular POs can be very efficient for these core SKUs.
Best for 3P:
New Product Launches: Test the market without needing Amazon's buying approval or commitment.
Seasonal or Niche Items: Maintain total control over pricing and inventory for products with fluctuating demand.
High-Margin Products: Maximize profitability by capturing the full retail margin instead of giving it away.
Is It Right for You?
The hybrid approach provides incredible flexibility but also adds a new layer of complexity. It requires careful management to avoid channel conflict, where your 1P and 3P listings for the same product end up competing against each other (a big no-no).
However, when executed correctly, it allows a brand to maximize the benefits of each model while minimizing the drawbacks. This is an area where having expert Amazon Vendor services can make a significant difference, helping you build a cohesive strategy that prevents cannibalization and maximizes your total profit.
Making the Leap: A Strategic Transition Plan
Successfully migrating from Amazon 1P to 3P requires more than just opening a Seller Central account. It’s a deliberate process that needs careful planning and execution to avoid disrupting your sales and cash flow. Rushing the process is a recipe for disaster.
Based on our experience helping brands navigate this exact shift, here are the critical steps for a smooth transition:
1. Inventory Wind-Down and Planning
The very first step is to manage your exit from Vendor Central. You'll need to stop accepting POs and work with your vendor manager to sell through any remaining inventory held by Amazon. Simultaneously, you must build a detailed inventory forecast for your 3P launch to ensure you have stock ready to go live the moment your 1P listings run out. Don't get caught in a stockout gap... it can kill your momentum.
2. Account Setup and Optimization
Get your Seller Central account set up and fully verified well in advance. This includes setting up your banking info, tax details, and enrolling in Brand Registry. Use this time to create fully optimized listings for your products. Don't just copy-paste from your old 1P pages. Re-write titles, bullets, and descriptions using thorough keyword research to maximize your organic visibility from day one.
3. Logistics and Fulfillment Strategy
Decide on your fulfillment strategy. Will you use FBA, FBM, or a combination? If using FBA, plan your initial shipments to Amazon's fulfillment centers, being mindful of storage limits and lead times. If you are considering FBM or a 3PL partner, ensure their systems are integrated and ready to handle orders without a hitch.
4. Launch and Advertising
Once your 1P inventory is depleted, switch your 3P listings to active. But don't just sit back and wait for sales to happen organically. You'll need an aggressive advertising strategy from day one to regain sales velocity and climb the search rankings. Allocate a healthy budget for Sponsored Products and Sponsored Brands campaigns to kickstart your growth.
This entire process can feel overwhelming, which is why many brands turn to an ecommerce accelerator. Having a partner to manage the operational complexities allows you to focus on your brand while ensuring a seamless and profitable transition to the 3P model.
Conclusion
The move from Amazon 1P to 3P is more than just a trend; it's a strategic pivot toward greater control, higher potential profit, and a much more direct relationship with your customers.
While the Vendor Central model offers a certain simplicity, it often comes at the cost of your brand's pricing, messaging, and invaluable data.
The 3P model, though operationally demanding, hands the keys to the kingdom back to you.
Success requires a clear-eyed understanding of the new responsibilities, from inventory forecasting and logistics to compliance and customer service. It’s not an easy switch, but for brands committed to long-term growth and building real equity, it's increasingly the right one. The question isn't just about 1P vs. 3P; it's about deciding whether you want to be a supplier *to* Amazon or a brand that sells *on* Amazon. The difference is everything.
Sources
BigCommerce. “Amazon 1P vs 3P.” https://www.bigcommerce.com/articles/b2b-ecommerce/amazon-1p-vs-3p/
Christurtonecommerce.com. “How to Move Your Brand from Amazon Vendor (1P) to Amazon Seller (3P).” https://www.christurtonecommerce.com/how-to-move-your-brand-from-amazon-vendor-1p-to-amazon-seller-3p/
Feedonomics. “Transitioning from Amazon Vendor Central (1P) to Seller Central (3P).” https://feedonomics.com/blog/amazon-1p-vs-3p/
Forceget. “How Many Sellers Are on Amazon: 2025 Key Statistics.” https://forceget.com/blog/how-many-sellers-are-on-amazon-2025-key-statistics/
Statista. “Amazon: 1P vs 3P E-commerce Sales Value 2022–2027.” https://www.statista.com/statistics/1309709/amazon-e-commerce-retail-sales-business-models/
AMZ Dudes. "1P to 3P Transition Strategy: 6 Successful Steps in 2025." https://amzdudes.com/1p-to-3p-transition-strategy-6-successful-steps-in-2025/
Envision Horizons. "Amazon’s Vendor Termination: How Brands Can Survive the Transition from 1P to 3P." https://www.envisionhorizons.com/amazons-vendor-termination-how-brands-can-survive-the-tranisition-from-1p-to-3p/
Webinterpret. "From 1P to 3P: What Amazon Vendors Need to Know." https://webinterpret.com/en/blog/from-1p-to-3p-what-amazon-vendors-need-to-know
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