A 3P sales model on marketplaces describes a retailer selling products on a marketplace as their own brand/store. The customer knows they are purchasing a brand directly, and the sales contract is between the retailer and the customer. The sellers then handle their own customer service issues, including reviews and shipping – unless they use an Amazon fulfillment service or Amazon Prime. Items sold by 3p merchants are marked as “Sold by merchant and Fulfilled by Amazon / Fulfilled by merchant”.
In-depth definition of 3p marketplace
In a 3P marketplace, sellers have the advantage of being able to control their pricing, which means they have the flexibility to change prices according to their competitors, market fluctuation or to create sales events in real-time. The brand also maintains control over its pricing across a whole range of products rather than just several items.
These sellers can also ensure that their products are displayed correctly with the correct product descriptions.
For all the benefits of 3P selling, there are some disadvantages. Particularly when selling on Amazon, 3P sellers who don’t use a product-to-consumer (P2C) platform with a marketplace solution have to manually create and optimize their listings and manage all their promotions. Amazon does offer several shipping or fulfillment options, Fulfillment by Merchant (FBM), Fulfillment by Amazon (FBA), or Seller Fulfilled Prime (SFP). But the seller is obliged to ensure that stock is available. This requires regular updates to your listings which may be difficult in the case the Amazon API won’t let you refresh your data at a given time.
Companies with large volumes of SKUs, even large marketing departments, struggle to maintain accurate product and order data. This is why a smart marketplace solution is essential for managing product and order data before a single file with scheduled exports is sent to Amazon.
What is the difference between a 1p and a 3p marketplace?
If 3P is a preferred option for ecommerce brands and organizations, many manufacturers and producers executing D2C or product content syndication sales models use a 1P option. 1P is where a wholesale supplier delivers products in bulk to a marketplace – Amazon, Walmart – and the marketplace itself becomes the seller to the end customer.
1P vendors get to leverage Amazon’s branding to gain market credibility and your business saves time and resources because the marketplace – Amazon merchandising – optimizes your listings for you. You generally only pay a flat fee rather than having to pay several charges for fulfillment and referrals.
On the downside, you lose control over your product marketing, which will create dissonance between your general branding and how your products are displayed and described on a marketplace. You also lose control over pricing, which could damage your brand inf, for example, the marketplace decides to sell your items at a cut-price, thereby placing your products in a price category you may not want.