1P vs. 3P on Amazon: Which Model Maximizes Your Profits?

The Current State of E-Commerce and Amazon’s Dominance

E-commerce continues to surge, with global online sales expected to reach $6.3 trillion in 2024 (Statista). Amazon dominates the market, accounting for 37.6% of all U.S. e-commerce sales (Insider Intelligence). In 2023, Amazon’s third-party sellers generated $400 billion in gross merchandise value (GMV), making it a crucial platform for brands and businesses of all sizes.

With increasing competition and evolving consumer behavior, choosing the right selling model—1P (First-Party) or 3P (Third-Party)—is critical for maximizing revenue and controlling your brand presence on Amazon.

Seller Central vs. Vendor Central: How They Work

Amazon offers two main platforms for businesses:

Seller Central (For 3P Sellers)

• Used by third-party sellers who sell directly to consumers.
• You set your own pricing, inventory, and marketing strategy.
• Choose between FBA (Fulfilled by Amazon) or FBM (Fulfilled by Merchant) for fulfillment.
• Fees include referral fees (typically 8-15% per sale) and FBA fees (if using Amazon’s fulfillment service).
• Suitable for businesses that want more control over branding and pricing.

Vendor Central (For 1P Sellers)

• Used by manufacturers and wholesalers who sell directly to Amazon in bulk.
• Amazon acts as the retailer, controlling pricing, branding, and fulfillment.
• You receive purchase orders (POs) from Amazon and ship inventory to their warehouses.
• Fees are not directly charged, but Amazon negotiates wholesale pricing, typically resulting in lower margins.
• Suitable for established brands that prioritize bulk sales over control.

Understanding 1P vs. 3P Selling

1P (First-Party Seller) – Vendor Central

• You sell wholesale to Amazon, and they act as the retailer.
• Amazon controls pricing, branding, and fulfillment.
• You receive bulk purchase orders (POs) from Amazon.
• Amazon handles returns and customer service.
• Typically used by established brands with high sales volume.

Pros:

• Guaranteed bulk purchases from Amazon.
• Trusted “Ships from and Sold by Amazon” label increases conversions.
• Amazon manages pricing and logistics.

Cons:

• Lower profit margins due to wholesale pricing.
• Less control over branding, pricing, and inventory.
• Amazon may suddenly reduce or stop ordering your products.

3P (Third-Party Seller) – Seller Central

• You sell directly to consumers via Amazon’s marketplace.
• You control pricing, inventory, and fulfillment strategy.
• Choose between FBA (Fulfilled by Amazon) or FBM (Fulfilled by Merchant).
• Full access to branding and marketing tools.

Pros:

• Higher profit margins (you set your own prices).
• Full control over branding, marketing, and customer experience.
• No dependence on Amazon’s unpredictable POs.

Cons:

• More responsibility for customer service and fulfillment (if FBM).
• Must actively manage pricing, ads, and inventory.
• Competing with Amazon and other 3P sellers.

Q&A: Choosing the Best Model for Your Business

Q: Which model gives me more control?

A: 3P (Seller Central) offers full control over pricing, branding, and inventory, while 1P (Vendor Central) hands most of that power to Amazon.

Q: Which model is more profitable?

A: 3P is generally more profitable because you set your own prices and avoid Amazon’s wholesale discounts. However, 1P can bring in steady bulk orders without the need for active sales management.

Q: Can I use both models at the same time?

A: Yes! Many brands adopt a hybrid approach, selling some products via 1P for bulk orders and others via 3P for better control and pricing.

Q: Is 1P better for well-known brands?

A: Yes, large brands with established demand benefit from 1P because Amazon purchases in bulk and handles logistics. However, if brand control is important, 3P is the way to go.

Q: Is 3P harder to manage?

A: 3P requires active management of inventory, pricing, and advertising, but it also allows for better margins and brand control.

Final Verdict: Which Should You Choose?

• Choose 1P if you want bulk orders, hands-off fulfillment, and don’t mind Amazon setting the prices.
• Choose 3P if you want higher profits, branding control, and more flexibility.
• Use both if you want the best of both worlds—wholesale stability with 1P and direct consumer engagement with 3P.

The Amazon marketplace is evolving, and many brands are shifting towards 3P due to its higher profit potential and control. Which model fits your business best?