Implementing a Winning 1P to 3P Transition Strategy

Rachel Olsen

August 16, 2023

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Please note, any references to MAP pricing, price control or similar do not apply in countries outside of the U.S. and should therefore be disregarded by readers outside of the U.S. Please contact us with any questions.

In recent years, we’ve seen a huge shift in brands making the 1P to 3P transition on Amazon. It’s clear that common 1P issues we’ve seen for years are starting to become more apparent in the general market—things like price erosion, the Profitability Death Spiral, and losing brand control to unauthorized sellers. If you’re seeing these issues and are ready for a 3P model, it’s a great time to make the switch.

As a top Amazon seller and global ecommerce accelerator, Pattern is the #1 expert for the exclusive 3P model. We know which resources you need to succeed, how to regain control of your brand on the marketplace, how to drive profitable, long-term growth, and how to use your Amazon success as a foundation for growth across international marketplaces.

So, what do you do next once you’ve decided to make the switch? Here are 6 of our top tips for making a smooth, successful 1P to 3P transition.

Why are Brands Making the 1P to 3P Transition?

Before we jump into the tips, let’s review why this change is a great move for many brands. A 3P relationship with Amazon gives you significantly more control over your pricing so that it’s clean across all channels. This allows both your profitability to increase and your brand’s reputation to improve.

As a 1P seller, you give a lot of control to Amazon, and that can be harmful to your brand. For example, in March 2019, Amazon suddenly halted purchase orders for a large number of 1P sellers, creating concern and panic among vendors who could do little to control it.

Transitioning from 1P to 3P gives your brand more flexibility, control, insight, and long-term success on Amazon. In a 3P relationship, you control your listings, pricing, inventory, and brand representation. You avoid the stresses of AVN, 1P backend costs, and unauthorized listing or content changes. And, 3P sellers are allowed more in-depth customer data that can indicate things like the effect of advertising on sales.

1. Remember 1P is Best for Some Brands

For many brands, 1P relationships with Amazon work really well for their business, and discussing 3P selling is unnecessary.

There are a lot of advantages to 1P in certain scenarios. For example, if you’ve got a lower average selling price, say $10, FBA fees can cost you 30-40% margin. In cases like these, 1P is the more affordable option and probably best for your success.

Additionally, third-party sellers pay 15% in commission to Amazon, so businesses selling products in a complex environment or selling products that are less expensive may find 1P the preferable model.

2. Find an Experienced 3P Partner

We recommend brands not make the switch to 3P by themselves. One reason is because Amazon has policies in place that block certain manufacturers from running their own 3P businesses.

For scenarios like this, it’s crucial to know your options and learn what all of your options are before putting the time and resources into making the switch. Working with an experienced 3P partner like Pattern is one way that the transition to 3P can be simplified.

3. Understand Common 1P to 3P Transition Misconceptions

Many of the brands Pattern works with experience some trepidation when it comes to switching from 1P to 3P on Amazon. Some common misconceptions include:

  • 1P sellers experience better organic rankings.
  • Amazon has deeper pockets and can therefore fulfill bigger orders.
  • Switching to 3P will cause sales to drop once brands start fulfilling orders directly to consumers.

In reality, sell-through is driven by digital marketing principles around organic placement and paid advertising and ability to drive sell-through there. In our experience, your Amazon traffic, conversions, and price control efforts will be much more effective with a 3P model.

4. Expect a Transition Period

Switching from 1P to 3P won’t be completely stress-free—it’s still a transition your brand should navigate with forethought and anticipation. Through our experience helping 100+ brands convert to 3P, we’ve learned that a lower-performing transition period is often necessary, especially when brands are facing control issues.

The cost, however, is well worth it to be able to reach true profitability and escape the price erosion and Profitability Death Spiral many brands are facing on marketplaces. An experienced, high-performing 3P seller will be able to guide you through the transition period as smoothly as possible.

5. Reduce Inventory Risk

Switching from selling 1P to 3P on Amazon means that, rather than selling product to Amazon, brands now sell directly to the consumer, effectively taking on any inventory risk.

Many brands, when they switch from 1P to 3P, are rightly concerned about the dangers of running out of product. Going out of stock is very detrimental to your Amazon performance—it can drive your rankings through the floor.

The key is to have enough stock in both the 3P channel as you do on the 1P channel before you make the transition.

To mitigate these risks, Pattern buys your inventory up front (just as much as Amazon would have bought), and makes sure your product is selling together.

6. Set Your Sights on Long-Term Growth

Switching to 3P is worth it for brands who are looking for profitable, sustainable growth on Amazon. Being a 3P seller gives brands much more control over their pricing and branding—essential components of a successful ecommerce strategy. If you’re looking for long-term success, you’ll need to put in the work that can deliver those results.

Discover if a 1P to 3P Transition is Right for You

Ready to take back control of your profitable growth on Amazon? We’ve guided close to 100 brands through the 1p to 3p transition process to reach true success on the platform. With our expert teams, proprietary technology and unmatched data analysis, you can make the switch to 3P for greater control and performance on Amazon.

Ready to make the switch from 1P to 3P? Pattern can help. Contact us below to set up an appointment.

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