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 shift from Amazon's 1P to 3P model is accelerating, with 3P sellers now accounting for 62% of paid units, reflecting a strategic move by brands to gain more control.
Switching to 3P gives brands direct control over pricing, brand messaging, and inventory management, protecting brand equity and preventing the price erosion common in the 1P model.
The 3P model offers higher retail margins but introduces new costs like referral, FBA, and advertising fees, requiring a complete recalculation of profitability.
Migrating to 3P is a major operational challenge, requiring brands to manage their own logistics, customer service, and inventory forecasting, which can lead to sales dips if unplanned.
A successful transition from 1P to 3P requires a detailed strategic plan covering inventory sell-down, account setup, logistics, and a robust advertising launch to regain sales momentum.
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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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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
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