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The 5 Hidden Costs of Vendor Central

 

Check out our updated Ultimate Guide to Amazon Selling: Vendor Central & Seller Central blog post for the most recent tips and insights!  

 

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This week, we’re revisiting a topic we hit on a while ago: Amazon Vendor Central. We’ve been writing a lot about resellers lately, and now we think it’s worth thinking about Vendor Central in more concrete terms.


Namely, how does selling with Vendor Central differ from working with Seller Central? What about with Whitebox?


 

In fact, there are more costs than you'd expect from Vendor Central. Some of them are more obvious costs, like smaller margins, but others crop up in places you might not expect. Some of them are even fees related to some of Vendor Centra’s best features. Here are some of the ways you might expect to pay for the conveniences of Vendor Central.

 

  1. A+ content isn’t free. The possibility for a visual heavy, enhanced product page is one of Vendor Central’s biggest draws. It’s also expensive and also time heavy, so it won’t be without its costs.

    Keep in mind that there are now ways you can spruce up your product’s page on other Amazon sales channels like Seller Central where it is called "enhanced content" – and at Whitebox, we are offering this to our clients.

  2. It costs more than lower margins. It’s not a secret that Vendor Central means losing a bigger cut of your product, since you’ll be selling it to Amazon at wholesale margins. The profit margins will vary from product, but oftentimes will fall around the ~50% mark.

    And when you only look at the "purchase" price from Amazon you're not looking at the whole picture. They also take out all the marketing fees, remittance fees, pre-payment fees and packaging fees.

    Generally, clients who come to us see increased margins.  We pay you on the sale price of each product minus our fee and all applicable selling fees. There are no hidden fees that pop up later.  Generally the ~30% total fee you pay selling through Whitebox is much less than the cut Amazon takes if you sell directly to them, when all is said and done.

  3. Lack of inventory management may mean missed sales. This isn’t strictly a fee, however, when you sell through Vendor Central, Amazon won’t have access to your other sales channels, which means incomplete data.  This also means that they will not be aware of upcoming marketing campaigns, media appearances and more that could cause an increase in consumers looking for your product online.

    Incomplete data means it’s possible to miss out on seasonal or unexpected rushes, since Amazon is the one in charge of stocking the item. It’s up to them to re-order, and your product may experience out of stock days.

  4. Chargebacks, often without notification. If you miss an important label for your package, don’t wrap your product as specified, or it arrived to Amazon late, you’ll end up getting charged for it. Even worse, Amazon might not even tell you it’s happening and mistaken fees are hard to win back.  Plus, the fees can be charged months after the PO arrived at their warehouses so it is hard to relate it back to a shipment for your accounting purposes.

  5. Co-op Fees are bigger than you think. Most contracts contain the following co-op fees: MDF also known as Market Development Funds, which can range anywhere from 3-15%, a freight allowance of 2-3%, and a damage allowance of 1-2%.  

    Co-op fees are a way for Amazon to recoup some of their operating costs and make a profit… but they definitely don’t help your overall profits when selling through Vendor Central.

So, there you have it folks: some of the extra costs of using Vendor Central.  If you are simply comparing what Amazon buys your product for and Whitebox margins, you are only scratching the surface of what Vendor Central is actually costing you. If you’re still feeling like you don’t quite understand the differences between Seller Central and Vendor Central, check out our most-viewed blog post to date, Ultimate Guide: Why Amazon Seller Central is Better Than Vendor Central.