Amazon 1P vs 3P: building the real marketplace P&L
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For many brands, Amazon is their largest single channel and their least understood. The question of whether to sell first-party (1P, through Vendor Central, where Amazon buys your goods) or third-party (3P, through Seller Central, where you sell directly) is often answered by habit rather than math.
Why the headline numbers mislead
Under 1P, revenue arrives as wholesale purchase orders, which feels simple. But the real cost includes items that rarely sit in one report: co-op and marketing allowances, damage and freight allowances, chargebacks for compliance errors, shortage claims, return allowances, and advertising. Under 3P you keep retail pricing but pay referral fees, fulfillment and storage fees, advertising, and carry the operational work yourself.
Build the P&L line by line
- Net revenue after returns and allowances
- Cost of goods sold
- Referral, fulfillment and storage fees (3P)
- Co-op, allowances, chargebacks and shortages (1P)
- Advertising: Sponsored Products, Brands, Display and DSP
- Promotions, coupons and deal fees
- Team and agency cost to run the channel
Compare contribution margin per unit and in total for each model, using at least twelve months of data so seasonality and annual negotiations are captured.
Consider pricing control and brand impact
Under 1P, Amazon controls retail price. If it discounts, other retailers and your own site may feel pressure. Under 3P, you control price, which matters for MAP and wholesale relationships. Also measure cannibalization: how much Amazon revenue would have come through your own store anyway.
Three outcomes
- Grow: the channel earns a healthy margin and has room to scale.
- Fix: the channel can be profitable with changes, such as moving to 3P or hybrid, cutting unprofitable SKUs, or renegotiating terms.
- Exit or shrink: the channel loses money after all costs and harms pricing elsewhere.
Our Marketplaces team builds this P&L in every diagnostic and gives a clear recommendation.