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TLDR;
1P is rigid. 3P is chaotic. 2P is the strategic middle path. This blog breaks down how second-party partnerships let brands scale on Amazon without losing control over pricing, content, or brand identity. If Amazon feels like a drain, 2P might be the model your team’s been missing.
8 Minute Read
For many successful CPG brands, Amazon represents a frustrating paradox. Your products are thriving in retail stores. Your direct-to-consumer channel shows impressive growth. Customers consistently rave about your offerings, and perhaps you've even attracted investor interest.
But when it comes to Amazon... that's where things get complicated.
If this sounds familiar, you're not alone. Many brands describe their Amazon experience as hitting a wall. Despite success across other channels, they find themselves trapped between imperfect options that force uncomfortable compromises.
It's like running 90% of a marathon only to face an unexpected obstacle before the finish line.
The Numbers Tell a Sobering Story:
Amazon seller fees have skyrocketed from 19% in 2014 to over 50% today. Add the required 7-9% advertising spend just to maintain visibility, and suddenly that massive marketplace doesn't look so profitable.
Meanwhile, 80% of online sellers unauthorized, committing MAP violations 50% of the time—costing the industry $2.6 billion annually in lost revenue.
Here's the Solution:
Break free from Amazon's restrictive 1P First-Party and 3P Third-Party models and embrace 2P (Second-Party)—a strategic partnership approach that gives you both operational support and brand control.
The 2P model eliminates the compromises that have been holding your growth back on Amazon. Let's dive into how it works, why leading brands are making the switch, and how to determine if this innovative approach could be the missing piece in your ecommerce strategy.
The Amazon Landscape: Understanding Your Options
Before exploring the 2P opportunity, it's crucial to understand why traditional models create such challenges for CPG brands.
1P: Streamlined Operations, Sacrificed Control
The 1P model works well for brands seeking operational simplicity and broad distribution. Amazon handles the selling process while you focus on manufacturing and brand development. This model particularly benefits:
Brands with established wholesale operations
Companies with high-volume, lower-complexity products
Teams prioritizing wide distribution over direct marketplace management
But here's the catch: 1P vendors sacrifice 40-60% margins through wholesale pricing, plus additional co-op fees reaching 15-25% of revenue. Worse, Amazon's algorithmic pricing can drop your products below MAP within days, creating channel conflict that damages retailer relationships and erodes brand value.
3P: Maximum Control, Maximum Complexity
The 3P model gives brands direct access to Amazon's 300+ million customers while maintaining control over pricing, content, and customer experience. This approach works best for:
Digitally-native brands with in-house ecommerce expertise
Companies with robust operational infrastructure
Teams that prioritize data ownership and direct customer relationships
The challenge? Managing 3P operations requires dedicated cross-functional teams, with 71% of consumer goods companies reporting difficulty filling these specialized roles. Ecommerce professionals report working 14-16 hour days during peak periods, managing everything from inventory forecasting to complex international tax compliance.
The 2P Opportunity: Bridging the Gap
The 2P model offers a strategic alternative that combines key advantages from both traditional approaches. Rather than choosing between operational simplicity or marketplace control, 2P creates a partnership with specialized Amazon accelerators who purchase your inventory and manage the entire marketplace ecosystem.
Think of it as having an Amazon co-pilot: a specialist who navigates marketplace complexities while you maintain strategic oversight and focus on what you do best—building your brand and creating innovative products. Unlike traditional outsourcing or agency relationships, 2P partnerships align incentives. Your partner only succeeds when your brand thrives.
This innovative approach delivers unique benefits that are difficult to achieve with traditional models:
Operational excellence without internal complexity - Your 2P partner brings specialized Amazon expertise without requiring you to build and maintain that capability in-house. With sophisticated data analytics and marketplace optimization strategies, professional 2P management delivers results across complex marketplace ecosystems.
Strategic control without day-to-day management - You maintain approval authority over brand presentation and pricing while your partner handles execution. This preserves your brand equity while eliminating the operational burden.
Channel alignment without constant vigilance - Your 2P partner enforces your pricing and positioning across the marketplace, preventing the MAP violations that plague 80% of brands on Amazon.
Marketplace growth without resource diversion - Your team stays focused on product innovation and broader strategy while still capturing Amazon's growth potential. Success metrics show brands achieving 2-3x higher profit margins compared to traditional 1P arrangements.
Why Leading Brands Are Embracing 2P
The shift toward 2P partnerships isn't just theoretical—it's driven by measurable results and compelling economics. Research reveals that brands using 2P partnerships consistently experience transformative outcomes:
Protected Margins and Price Stability
Under 2P, you eliminate the hidden, unpredictable costs associated with Vendor Central. New fees introduced in 2024, including Low-Inventory-Level charges and Inbound Placement Service fees averaging $0.27 per standard unit, no longer erode your margins. Your 2P partner absorbs these operational costs while you maintain predictable wholesale margins.
More importantly, professional brand protection shields your products from the unauthorized resellers that commit MAP violations 50% of the time. Major CPG companies report spending hundreds of thousands annually on enforcement efforts that achieve only 80-90% removal rates—a "never-ending game of whack-a-mole" that 2P partners handle comprehensively.
Operational Freedom
All marketplace operations—from inventory forecasting and listing optimization to advertising campaigns, customer service, and compliance management—are seamlessly handled by your 2P partner. This is particularly valuable as 30,000 new CPG products launch annually, with only 30% of digital shelf space occupied by traditional brands in competitive categories.
Neato's "2P+" model exemplifies this comprehensive approach, managing everything from creative development to customer service under a "one partner one P&L, zero retainers" philosophy. This infrastructure enables brands to compete effectively without building expensive internal capabilities.
Brand Integrity Preservation
Your brand story, positioning, and premium identity remain consistently communicated across all Amazon listings. This matters more than ever, with 74% of Gen Z consumers considering brand values important in purchase decisions. Professional partners ensure customers experience your brand exactly as intended, not as Amazon's algorithm decides.
Predictable Revenue Streams
Wholesale purchasing arrangements with your 2P partner deliver financial stability and predictable revenue flows. Partners typically provide upfront payment for inventory versus Amazon's net 90 terms, significantly improving cash flow. Some 2P providers document 10% average bulk purchase discounts that further improve unit economics.
Real Results from Real Brands
The proof is in the performance. Industry data shows brands using professional 2P management achieve remarkable transformations: moving from category rank #19 to #1 positions, doubling sales during peak seasons despite supply chain challenges, and achieving 234% average ROI improvements. These aren't outliers—they represent the consistent pattern of success when brands partner with experienced 2P providers who understand both marketplace dynamics and brand building.
For a deeper dive into these results, see the case studies inside our 2P guide.
Is 2P Right for Your Brand?
Evaluating whether 2P aligns with your strategic objectives involves honestly assessing your current Amazon challenges:
☐ Managing Amazon is spreading our team too thin - If your team works 14-16 hour days during peak periods just to keep up with marketplace demands, it's time for a change.
☐ We've plateaued on Amazon while retail/DTC thrive - When 70% of consumers never navigate past the first page of search results, professional optimization becomes essential.
☐ Price erosion and unauthorized resellers are common issues - With $2.6 billion lost annually to MAP violations, can you afford not to have professional brand protection?
☐ Our brand presence on Amazon doesn't reflect who we are - If Amazon's algorithmic decisions are commoditizing your carefully crafted brand story, 2P offers a solution.
☐ We'd rather focus on innovation than Amazon ops - Your expertise is in creating great products, not navigating Amazon's 2,000+ page terms of service.
If you answered "yes" to any of these questions, check out our 2P guide! It includes a self-assessment to help you map exactly where your Amazon strategy needs support.
How to Get Started with 2P
Transitioning to a 2P model is more straightforward than building internal capabilities:
Step 1: Audit your current Amazon challenges
Take an honest look at your Amazon profitability—not just revenue. Factor in all the hidden costs: platform fees, advertising spend, chargebacks, and compliance penalties. Then add the real killer: resource allocation. How many hours does your team spend on Amazon issues versus other channels?
If you're dedicating 40% of your ecommerce team's time to a channel delivering 20% of your revenue, that's a red flag. Many brands discover they're spending disproportionate internal and external resources managing Amazon complexity relative to the actual profit contribution.
Step 2: Define your strategic goals
Be specific about desired outcomes: margin improvement, brand control, operational efficiency, or sustainable growth. Clear goals help identify the right partner.
Step 3: Vet potential 2P partners
Look for proven success with brands like yours. Neato has driven $500 million in Amazon wins across our brand portfolio, with a track record of transforming struggling Amazon channels into profitable growth engines. Our high client retention rates reflect our commitment to long-term partnership success.
Step 4: Transition inventory and align execution
Professional partners handle the complexity of transitioning models, ensuring continuity while implementing improvements.
Step 5: Scale sustainably with ongoing strategic check-ins
Regular reviews ensure alignment between your brand vision and marketplace execution, adapting strategies as Amazon evolves.
Want a deeper breakdown of these steps? Our in-depth 2P guide walks through each one in detail, with benchmarks and examples from real brands.
The Strategic Advantage of 2P
Selecting the right Amazon partnership model isn't merely an operational decision—it's a fundamental strategic choice that can reshape your brand's future. The data is clear: third-party seller services grew 13% year-over-year to $36.2 billion in Q2 2024, now representing 61% of all Amazon units sold. The marketplace is shifting toward models that balance control with professional management.
With a 2P partnership, your brand can reclaim its vision, reallocate internal resources to high-impact initiatives, and achieve sustainable, scalable growth across all channels, including Amazon. Industry executives report that 70% find their jobs more stressful than ever—partnering with 2P specialists alleviates this burden while delivering superior results.
If your Amazon experience feels like an endless cycle of compromise and frustration, it's time to explore the 2P model—the strategic partnership truly aligned with your brand's long-term success.
