WHICH P IS BEST FOR YOU? Identify the Right Business Model and Fulfillment Strategy for Amazon [Velocity Amazon Strategy Series]

Written by Christa Klausner 

As you can imagine, there are many pros and cons to consider when identifying the right fulfillment strategy on Amazon.  There may not be a right or wrong answer, but each brand has a “best answer” scenario:

  • As a 1P (first-party) Vendor, brands and manufactures sell product directly to Amazon at wholesale prices, and Amazon resells the product to the consumer at a marked-up price – much like traditional retailers.
  • As a 3P (third-party) Seller, brands, manufactures, resellers and distributors sell product on Amazon directly to consumers through the Amazon marketplace.
  • A Hybrid model allows businesses to implement both 1P and 3P across their product catalog.

As a 1P Vendor, you have limited control over the sell price and inventory levels, however Amazon handles a majority of the responsibility on the backend including fulfillment to the customer, returns, customer service. 1P is typically more ideal for brands with richer margins.

As a 3P Seller, you have significantly more control over price and inventory levels, however you handle for all backend responsibilities (that is unless you participate in Fulfillment By Amazon). 3P allows you to maintain control of the full supply chain but can be difficult to scale if there are others selling the same product. Also, with 3P, there are restrictions to which Amazon channels 3P Sellers can sell on, restrictions on available marketing programs and placements, and hurdles to winning the Buy Box (more on winning the Buy Box to come later in this series).

With a Hybrid model, businesses are able to supplement additional available inventory for any inaccurate Amazon demand forecasts as well as leverage 3P for pricing terms and negotiations. Hybrid models are often used to build demand for newly launched products that Amazon or other retailers may not yet take.

As outlined by CPC Strategy, there are multiple fulfillment models for Vendors and Sellers.

A quick audit of your internal capabilities and the setup of your warehouse logistics will help determine which business model and fulfillment options are available to you and which are ideal to implement in your current structure. Note, it is possible to move from 3P to 1P and vice versa.

To summarize, 1P and 3P FBA provides the largest opportunity for volume and scale by increasing chances to win the Buy Box, however 3P provides the highest level of control over price and inventory.  

#VelocityKnowsAmazon

At Velocity, we have a simple framework that can help you assess if 1P, 3P or a Hybrid model is right for you. Please reach out to Christa Klausner or Rami Odeh if you are interested in hearing more about Amazon fulfillment or how Velocity can help you get up and running on Amazon.

CES 2019: A Clearer Picture of Our Future

Written by: Joe Scartz 

Last week, Las Vegas was the center of the digital universe, as The Consumer Electronics Show (CES) was held.  Every year, we see astonishing new technology meant to change the lives of people and provide brands new ways to engage with consumers and shoppers.  This year was no different.

The convergence of Personalized, Predictive, Assistive, and Seamlessexperiences was the story at CES; all of the underpinnings are there.

In and of itself there was plenty of innovation…but dare I say, there was no one BIG THING.  And that’s OK.  In fact, maybe that’s better.

As the VELOCITY team walked the floors and had meetings, we found there to be a general, integrated march to personalized experiences that are predictive, assistive and seamless, a confluence of technologies, products and innovations helped to create this story.

In fact, we learned something much bigger than the event itself—it became evident that our lives as human beings really are going to be appreciably different in positive ways over the next five years.

It’s not just about how the myriad technologies work together (life is not just OLED 8K TVs or AI or 5G or IOT, although those technologies were all there in spades) in and of themselves; it’s how they are adapting to fit into our lives in new and exciting ways and in broad strokes.

What the Future Looks Like

To truly understand what that means, let’s first address the technology and trends (check out the links to get a deeper dive):

  1. AI as a lifestyle – Google Assistant and Amazon Alexa were truly the slugfest of the show and were both everywhere and integrated into everything.
  2. 8K OLED foldable screens
  3. 5G will rollout and be available to homes in certain areas in 2019 and more noticeably in 2020
  4. Self-driving autonomous commercial and consumer vehicles
  5. AI-driven and functional robots that provide real assistance
  6. Smart Health devices that integrate data into wider ecosystems
  7. Baby tech and sleep technology were sub themes.
  8. Smarter Homes and increased focus on automation – like a refrigerator that actually recognizes its content
  9. The collapse of walled garden (Apple Homekit on LG and Samsung TVs)

These technologies working in tandem create four themes that point to future:

  1. faster connected world than we’ve ever seen before (5G) where you access information/experiences dramatically faster than previously imagined (a movie in seconds anyone?).
  2. Screens will be more beautiful and “flexible,”delivering delightful experiences and creating new pleasurable interactions with AI, whether through flat screen, foldable screens, AR or VR.
  3. AI devices are as ubiquitous as connected devices are. Alexa and Google Assistant smart speakers and integrated devices are the fastest growing technology since the smart phone.  That means instant answers, instant content, instant home automation, automated automotive, integrated health and based on how these devices learn and adapt, completely personal experiences controlled by voice.  Imagine a world where Google Assistant automates your home’s morning, plots your drive, reminds you when you need lettuce and automatically orders it for you—all the while figuring out how to help you best next.
  4. Technology will aid and support our health.Robots will monitor and help the elderly and sick.   For example, robots watch and report falling episodes and connected devices monitor vital signs to allow for blanket coverage for the elderly and are regular in communication with remote caregivers.

Technology is getting smarter, more automated, more assistive and in doing that is getting more invisible and that is the story of 2019.  The implications on brands and retailers is wide ranging because as technology changes expectations, consumers will evolve their demands with those companies with whom they transact.

What do you think?  Did I miss anything you saw at CES?  Shoot me a note on Twitter and let me know.

MAKING WHOLE FOODS AND AMAZON TRULY WHOLE? FOLLOW THE DATA

Written by: Rami Odeh

 

When you work for Amazon, you rely on two decision-making maxims for everything you do.

First, you must test and gather data.

Second, you must make decisions based on that data.

With the recent announcement that Amazon will expand Whole Foods reach and create new locations, Amazon’s leadership followed this model to a tee.

This is a decision based on what the data was telling people, and people are saying that they want more touchpoints for Whole Foods’ products.  Recently, I wrote an article for Love of Retail  highlighting how predictive artificial intelligence (AI) can impact manufacturers and brands.  Here is a great example of how the data and AI are coming together to create a solution that benefits so many stakeholders.

Amazon and Whole Foods are creating greater access for products sold in the stores.  By having more physical locations, it entrenches more locations for Prime Now customers to get products delivered when and where they want it. But the VELOCITY team sees other opportunities.

Amazon is using the data to solve for supply chain efficiencies on the back end through their confidence in their data. Amazon did not specifically reduce the number of options the customer has, but it is reducing the number of vendors providing those options.

What’s more, this “clean-up in Aisle 7” is a signal that something bigger could be in store (pun intended).  something very different is on the horizon.

At VELOCITY, we believe that the level of efficiency that Amazon is creating on a cost and logistical level indicates that it is paving the way for next-level of ordering, utilizing predictive analytics.  Amazon is going to focus on efficiencies and create an unmatched customer fulfillment model, which in turn will provide savings and convenience to the customers never before seen  in the grocery category.

Although this will seem very new, we’re confident that when managed properly, and mirroring the clear methods that have worked for success on Amazon’s platform in the past, brands and manufacturers have a once-in-a-lifetime opportunity to create a bold brand presence within Amazon’s new system, and dominate market share within their categories.

Reach out to us with any questions on how to be prepared for the coming changes. Let us know on Twitter…or send an email to either Rami Odeh or Christa Klausner.