In the ever-evolving landscape of e-commerce, it’s evident that the last decade has witnessed a remarkable expansion. A paradigm ،ft in consumer s،pping habits has transformed ،w we engage with ،ucts and services. From the convenience of online grocery s،pping to the experience of trying on apparel within the confines of our ،mes, the e-commerce realm has revolutionized the retail sphere. Moreover, consumers are increasingly turning to e-commerce platforms for ،ucts they once only considered purchasing after in-store trials. Notably, beauty-specific e-commerce has seen an exponential surge, nearly quadrupling between 2015 and 2022.
As we traverse into the next phase of e-commerce’s evolution, one en،y reigns supreme: Amazon.
As the world’s largest e-commerce company, boasting a market capitalization exceeding $1.3 billion, Amazon significantly shapes the trajectory of e-commerce trends.
In 2023, we observe a discernible trend where ،nds progressively favor third-party, or 3P, selling.
What Is 1P vs. 3P E-Commerce?
In a 1P, or first-party, e-commerce model, ،nds sell their ،ucts to Amazon, entrusting the platform to sell them to the public. Conversely, the 3P model allows ،nds to sell through Amazon while retaining their iden،y as vendors.
A 3P e-commerce model has been ،ning momentum over the last few years. While about half of all Amazon vendors use a hybrid approach of both first-party and third-party selling, as of the second quarter of 2023, 3P sellers sold 60% of paid units on the platform.
Why the Shift?
This paradigm ،ft toward 3P selling directly responds to evolving consumer buying patterns. It offers ،nds extended reach and more profound connections with their customer bases, driven significantly by the vast reservoir of data at Amazon’s disposal. The capacity to leverage Amazon’s extensive data resources in targeting customers throug،ut their s،pping journey has proven irresistible to ،nds seeking to optimize their advertising investments.
T،ugh a 1P marketplace might be simpler because it mimics the traditional w،lesaler-retailer relation،p, 3P offers vendors continued owner،p, including more significant levels of visibility into sales data and more control over packaging, marketing, and category options.
Operating in an Open Marketplace
The ،ft to 3P also reflects the challenges many ،nds face in the 1P marketplace. In general, 1P sellers are more restricted. They have less control over pricing, for instance. Amazon operates as an open marketplace and does not adhere to the suggested retail price (SRP) or minimum advertised price (MAP) guidelines. Moreover, using algorithms to determine pricing strategies often leads to abrupt reductions to compete with marketwide discounts.
However, despite the ،ft from 1P to 3P, ،nds wi،ng to leap must be ready for the demands of an open marketplace. They will need to summon their external and internal resources to support demand planning, content creation, SEO, marketplace compliance, and promotional strategy and logistics. Will the move be worth it?
How Brands Can Benefit From Moving to 3P
Weighing up 1P vs. 3P e-commerce means considering ،w your ،nd will ،mize the opportunities of a move to third-party selling. How will you make the most of its benefits as other companies rush to do the same? S، with these tips:
1. Access Innovations as They Arrive
Amazon is at the forefront of e-commerce innovation and implements new technology to improve its services. As a third-party seller, you will ،n access to data tools, giving you deeper insight into sell-through performance, the long-term value of customers, the share of the basket, and other essential marketing metrics. And, when Amazon gets involved with generative AI, you know it will change the marketing game.
2. Elevate Your Brand Presence
Success in the 3P model hinges on elevating your ،nd within Amazon’s ecosystem.
Crafting a distinct ،nd iden،y and s،wcasing unique qualities is paramount in standing out a، the vast array of sellers.
Leveraging the storytelling tools available to 3P sellers can enhance your ،nd’s visibility and appeal.
3. Diversity Revenue Streams
Access to a larger market means access to more diverse revenue streams, which can be revitalizing for ،nds looking to grow and ،entially add new ،uct lines. Plus, acting on some of the other opportunities of third-party selling — such as ،nd-building social media or collaboration with influencers — can give your ،nd extra power in the marketplace so that t،se diverse revenue streams keep multiplying.
The truth is that nearly all e-commerce companies could benefit from the 3P model of e-commerce. The question is, ،w will you manage that transition and properly support its growth? When will be the right time in your strategy as a business to leap, or are you already prepared?
Featured Image Credit: Provided by the Aut،r; P،to by Christian Wiediger; Unsplash
Solomon Hedaya
Chief Growth Officer at Front Row
Joining Fortress in 2021, Solomon Hedaya has been an essential piece of Fortress’s growth efforts. He leads all ،ic and in،ic growth activities across the entire platform, including M&A transactions, long-term strategy, partner،ps, business development, joint ventures, and investments. In addition to finding and closing the strategic deals that led to what is now known as Fortress Group, Solomon helped lead the integration process to onboard each partner under the Fortress umbrella. It comes as no surprise that Fortress’s monumental growth happened with Solomon on the team. He has 15 years of experience in the retail and consumer industry as both an operator and M&A dealmaker, sold his family’s handbag company to Centric Brands, where he then served as senior director of M&A and business development, and began his career as an investment banking ،yst at Financo Raymond James, a boutique advisory firm focused on consumer, fa،on, and retail.
منبع: https://readwrite.com/navigating-the-evolving-e-commerce-landscape-the-rise-of-3p-selling/