🛑✋ Stop making this mistake:

Searching for the magic profitability bullet with hashtag#Amazon.

𝗜𝘁’𝘀 𝗮 𝗳𝗮𝗶𝗿𝘆 𝘁𝗮𝗹𝗲 𝘁𝗼𝗹𝗱 𝗯𝘆 𝗮𝗴𝗲𝗻𝗰𝗶𝗲𝘀 𝗮𝗻𝗱 𝘀𝗲𝗿𝘃𝗶𝗰𝗲 𝗽𝗿𝗼𝘃𝗶𝗱𝗲𝗿𝘀.

I see this all the time:

1P sellers are told that a 3P business would be more profitable.
3P sellers are advised that 1P is the solution to keep scaling.

Brands that have tried both are told a DTC approach with Buy with Prime (BwP) is the way to higher profit margins.

But here's the problem:

🚩 1P doesn't scale if you don't know how to negotiate,
🚩 3P is not automatically more profitable than 1P, and
🚩 DTC requires a very different skill set.

None of these generic recommendations should be taken seriously in the first place.

This is because each model serves different organisational constellations for brands with different capabilities.

So just because your #1 competitor is adopting a hybrid strategy with Amazon, don't assume copying their decision will lead to better margins.

The opposite is true if your operating setup and internal capabilities are just an inch different.

Instead, make sure you consider »your« unique setup:

𝟭- 𝗖𝗮𝗹𝗰𝘂𝗹𝗮𝘁𝗲 𝗰𝗼𝘀𝘁 𝗰𝗼𝗺𝗽𝗮𝗿𝗶𝘀𝗼𝗻𝘀 𝗯𝗲𝘆𝗼𝗻𝗱 𝗴𝗿𝗼𝘀𝘀 𝗺𝗮𝗿𝗴𝗶𝗻𝘀

Different sales models come with different hidden cost requirements.

A 3P account requires you to manage pricing and inventory yourself. With a DTC account, you must factor in the cost of maintaining and regularly updating the underlying technology.

These are all costs you must bear yourself or outsource via service providers, which can quickly add hidden cost centres to your P/L.

When evaluating the business case, make sure you go beyond a line-by-line comparison of existing costs.

𝟮- 𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱 𝘆𝗼𝘂𝗿 𝗶𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝘀𝘁𝗿𝗲𝗻𝗴𝘁𝗵𝘀

Instead of chasing the next "big thing" that may not even fit your team's existing strengths, your Amazon strategy needs to look at where you can leverage an existing competitive advantage.

Most audits I see that recommend moving from a 1P to a 3P setup are mainly concerned with commercials but ignore the available capabilities in an organisation.

And when implementing these recommendations, brands risk ignoring the opportunity costs of misaligning their future strategy with current competencies.

𝟯- 𝗧𝗲𝘀𝘁 𝗯𝗲𝗳𝗼𝗿𝗲 𝘀𝗰𝗮𝗹𝗲

Don't go at it all at once when changing your Amazon business model.

The enforcement of strict policies can limit your ability to move from an existing 1P or 3P setup.

I have seen countless manufacturer brands banned from selling on 3P directly or indirectly because they just wanted to escape trade negotiations with their Vendor Managers.

A better approach is to test your hypothesis in the market and not follow theoretical advice that may not stand up to the reality of selling on Amazon.

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What's your experience evaluating different sales models with Amazon?

Let me know in the comments!