3P Ecommerce Variants: The Whack-a-Mole of Ecommerce (Updated)

Amazon offers two primary selling models for businesses: 1P (first-party) and 3P (third-party). Understanding the differences between these models is crucial for businesses looking to succeed with the help of an ecommerce sales management platform.

In this article, we will delve into the pros and cons of each model, exploring the benefits and drawbacks of selling on Amazon as a 1P or 3P seller.

What is 3P ecommerce?

3P ecommerce refers to the practice of selling products on Amazon’s marketplace as a third-party seller. This model allows businesses to sell their products directly to customers through Amazon’s platform, while maintaining control over their inventory, pricing, and customer service. Unlike the 1P model, where Amazon acts as the retailer, 3P sellers operate independently, leveraging Amazon’s vast customer base to reach potential buyers.

Benefits of 3P ecommerce

The benefits of 3P ecommerce are numerous and compelling:

• Increased control over pricing and product offerings: As a 3P seller, you have the autonomy to set your own prices and decide which products to offer, allowing for greater flexibility and responsiveness to market trends.
• Access to customer data and feedback: Direct interaction with customers provides valuable insights into their preferences and behaviors, enabling you to refine your offerings and improve customer satisfaction.
• Ability to create a strong brand presence on Amazon: By managing your own listings and branding, you can build a distinct identity that resonates with customers and sets you apart from competitors.
• Flexibility in managing inventory and shipping: You can choose how to handle inventory and shipping, whether through your own logistics or by using Amazon’s Fulfillment by Amazon (FBA) service.
• Opportunity to reach a vast customer base on Amazon’s marketplace: With millions of active users, Amazon provides an unparalleled platform for reaching a wide audience and driving sales.

How 3P ecommerce works

As a 3P seller, you are responsible for managing your own inventory, pricing, and customer service. This involves using Amazon’s Seller Central platform to list and manage your products, fulfill orders, and handle customer service issues. Seller Central provides a comprehensive suite of tools to help you optimize your listings, track sales, and manage your business efficiently. Additionally, you can opt for Amazon’s Fulfillment by Amazon (FBA) service, which takes care of storage, packaging, and shipping, allowing you to focus on other aspects of your business. This flexibility and control make the 3P model an attractive option for many businesses looking to thrive on Amazon’s marketplace.

~30% of all our customers have >20 unauthorized sellers attacking their PDPs monthly on Amazon’s marketplace. In categories like office products, candy and pet supplies (some of the top categories on Amazon as per Jungle Scout), brands have anywhere from 50 to 200 unauthorized sellers attacking PDPs of their top items. This problem also exacerbates during the holiday season, driving the brand’s time and attention away from focusing on sales.

Identifying and extinguishing these rogue 3P sellers and variants is a full-time job that requires daily monitoring to ensure that no other ASIN variants appear and taking immediate action to remove them. Third-party sellers play a significant role in this context, as they often introduce unauthorized listings. And, even when Amazon blocks an offending seller from re-linking unauthorized ASINs to a brand’s PDP, the seller often registers new storefronts to bypass this. It’s like playing a game of whack-a-mole—eliminate one, and three others pop up. This is a recurring problem as the sellers can be relentless. This is a classic case for automation, where brands are best served by a machine-based approach like CommerceIQ.

Now let me share some examples of how automations can help in maintaining digital shelf sanctity. Take this “hair dye” listing for example. All of the hard work this brand did to gain the high organic search listing + sponsoring the listing goes by the wayside and instead benefits this rogue 3P variant that has positioned itself within the listing. These listings are very hard to find manually. CommerceIQ does deep crawling of product categories and applies machine learning to find these listings and match them with a brand’s 1P catalog. The most common action through the automation route is to submit merge requests so that these listings cease to exist. Some of our customers also take action against these sellers, as this violates Amazon policies.

Similarly, variations are a huge part of the Amazon shopping experience, providing shoppers with visibility and buying options. When certain variants break away, it can have a huge impact on sales. CommerceIQ audits each variant group on Amazon every single day and detects any changes. If the changes are not in line with what was set up, a ticket can be automatically submitted to get that rectified and prevent revenue leakage. Effective inventory management is crucial here to maintain control over listings and ensure accurate product availability.

How Bad are 3P Variants?

Unauthorized 3P sellers of products are a key source of revenue leakage that reduces the conversion of your product offers. Based on data we’ve collected, more than 2% of revenue is lost due to this phenomenon as it leaks glance views and conversion to sellers.

Our internal analysis of top customer ASINs has highlighted that conversion rates drop on days when unauthorized 3P variants are attached to the PDP, likely impacting revenues at Amazon as well. These sellers usually have poor content, inconsistent pricing, and shipping which negatively affects not just the equity of the brand, but also shopper experience, conversion and more importantly “Customer Trust” in the products sold on Amazon’s platform.

Below is a graph view of a known brand from CIQ’s SKU Insights dashboard that highlights how conversion rates improve significantly when a PDP is clear of unauthorized 3P Variants.

3P variants also introduce branding problems that come with them, as we saw during Covid with price gouging issues and unfulfilled product complaints. While this would never happen on the physical shelf because retailers themselves would intervene, the digital shelf is an entirely different animal. By virtue of being an open platform, Amazon doesn’t have a very clear policy towards them nor do most ecommerce marketplaces, despite the negative impact on shoppers. Instead, the onus is on brands to manage them. ecommerce teams must proactively report and merge the appropriate ASINs and remove duplicates. CIQ automatically detects all such cases on a daily basis, creates tickets, and gets them removed from the page. We see a success rate of 90% through automation.

The ROI of Automation

With 3P variants, there’s never been a more compelling case to make for automation.

By automating the process of stopping them in their tracks, the ROI is easy to prove. The time savings alone justify the investment by freeing up team members who would otherwise be spending all of their time manually managing variants.

We solve many of these problems through large-scale automation, including the following:

• Always-on monitoring finds ASINs where 3P sellers are adding variants to PDPs.
• Prevents revenue loss by merging 3P duplicates into existing PDPs where rogue listings rarely win the Buybox.
• Stops 3P listings from lowering overall click-through rates (CTRs) to your PDPs
• Protects brand equity from inaccurate or poor content on 3P duplicates

 

Request a demo today or read how our ecommerce sales management platform can reduce unauthorized 3P activity for your brand.