The economics that used to work, broke

The Vendor Central pitch was simple. Amazon buys your inventory at wholesale. They handle pricing, fulfillment, returns, advertising sometimes, the whole retail surface. You get a clean wholesale margin and a check. Operationally, the lightest model in the marketplace. Strategically, you trade some control for predictability.

That trade made sense when the margin gap between 1P and 3P wasn't large, when chargebacks were occasional, when Amazon's ad ecosystem was less central, when AVS fees and co-op were still meaningful but bounded.

None of that is true anymore.

The brands I see right now are getting hit on multiple lines simultaneously. Chargebacks have multiplied — some accounts I've reviewed are eating 5-8% of net revenue in dispute-difficult deductions that take dedicated headcount just to claw back. Co-op rates have climbed. AVS has become non-optional in practice. Promotional asks have intensified. Pricing flexibility has narrowed. And the ad spend Amazon expects you to put into your own listings — for the privilege of being sold by Amazon — has become a structural part of the P&L, not a marketing line item.

Add it up and you have brands whose 1P contribution margin has compressed by 30-50% over the last three years while their stated revenue line has held flat or grown slightly. The chart looks fine. The bank account is screaming.

The "we can't afford to leave" trap

The reason most brands haven't already left is a specific argument you hear in every leadership meeting where this comes up: we can't afford to walk away from the volume.

It is a real concern. 1P revenue is often 30-60% of a CPG brand's Amazon business and a meaningful share of total revenue. Disrupting it sounds catastrophic. The CFO points at the chart. The board points at the chart. Everyone agrees the volume is too important to risk.

What nobody runs is the second number: what is that volume actually worth? Strip out chargebacks. Strip out co-op. Strip out the ad spend you're paying to support Amazon's resale of your own product. Strip out the headcount you're spending on disputes and reconciliation. Strip out the pricing flexibility you've lost. The volume that looked too important to disrupt frequently turns out to be break-even or worse.

Brands aren't trapped by their 1P revenue. They're trapped by a number that no longer reflects the economics underneath it.

What "quietly leaving" actually looks like

Here's what I see brands doing, in roughly the order they do it:

Phase 1: Audit, not exit. Smart leadership teams aren't picking up the phone and telling their Vendor Manager they're leaving. They're rebuilding their internal P&L view of 1P contribution profit, post-everything. Most brands have never done this. The number that comes back almost always changes the conversation.

Phase 2: Run a parallel 3P or 2P operation. Before disrupting the 1P relationship, the brands that succeed get the alternative running. They build the Seller Central account, develop the FBA forecasting muscle, partner with a 2P operator, get the operational engine warm. This typically takes 6-12 months done right. Brands that try to do it in 60 days while terminating 1P simultaneously usually break themselves.

Phase 3: Stop accepting POs strategically. Not all at once. Hero SKUs first, supported by the parallel operation. Or low-margin SKUs first, to bleed the unprofitable ones out of the relationship before the high-velocity ones. The sequencing matters. The strategic mistake is treating the exit as binary when it should be surgical.

Phase 4: Manage the Amazon relationship through the transition. Amazon does not love losing 1P relationships. Brands that handle this well communicate openly, manage the relationship through the transition, and emerge with stronger positioning on the marketplace. Brands that handle it badly find themselves dealing with retaliatory pricing actions, suppressed listings, and a buy box environment that suddenly got hostile.

This entire sequence is now standard playbook for the brands that have run it. It used to be experimental. It isn't anymore.

What replaces 1P matters more than the exit

The mistake some brands make is treating "leaving 1P" as the strategic decision. It isn't. The strategic decision is what replaces it.

Three real options:

Pure 3P / Seller Central run in-house. Highest control, highest operational burden. Works if you have the depth — the team, the systems, the discipline — to run a marketplace operation at scale. Most brands underestimate what this actually requires.

A 2P partner. A retail operator that buys your inventory like a wholesale customer but operates the marketplace with you, not at you. Different incentives than 1P. Different control dynamics than pure 3P. The version that wins is structured around the brand's success on the channel, not around extracting fees from the brand.

Hybrid models. Some SKUs 1P, some 3P, some 2P. Can work. Usually doesn't, because most hybrids inherit the weaknesses of all three without the operational discipline to compound the strengths.

There is no universally right answer. There is a right answer for your brand based on the size of the operation, the strategic priorities, the operational depth available, and how much control you actually want.

What there isn't, anymore, is a defensible reason to keep the 1P relationship on autopilot just because changing it feels hard.

The takeaway

Vendor Central worked in a different version of Amazon. The economics that made it the path of least resistance for CPG brands have shifted enough that "least resistance" now means "highest hidden tax."

The brands quietly leaving 1P aren't doing it because they're chasing a trend. They're doing it because they ran the math and the math now says something different than it used to.

If you haven't run that math on your own business in the last twelve months, that's the first move. Everything else — partner selection, transition planning, Amazon relationship management — comes after the number.

The number is probably uglier than you think.