Every comparison article you've read about Vendor Central vs. Seller Central is built on a false binary. It assumes there are two options. In 2026, there are three — and the third one is the option reshaping CPG economics on Amazon. The original two haven't stood still either. Amazon has been actively terminating Vendor Central accounts since Project Wildfire began in 2019. Seller Central fees have compounded roughly 15% cumulatively from 2022 to 2026. The landscape a brand evaluated two years ago no longer exists.
Vendor Central (1P) makes the brand a wholesale supplier to Amazon. Seller Central (3P) makes the brand its own retailer on Amazon's marketplace. A 2P partner buys the brand's inventory at wholesale and becomes the seller of record — capturing the retail P&L that 1P historically handed to Amazon and absorbing the operational complexity that 3P pushes back onto the brand. That third model is the structural option most CPG incumbents never evaluate, because most of the content about Amazon selling models was written before it existed at scale.
This piece is for the CPG brand operator — COOs, VPs of eCommerce, heads of commercial strategy — who needs to make or revisit the Amazon channel decision in 2026. We'll break down what each model does to your P&L, where each one fractures, and how to use a structured decision matrix to find the right fit for your brand's specific stage, category, and operational capacity.
What's the real difference between 1P, 3P, and 2P?
The labels get used loosely. Here's what each one actually means from an operational and financial standpoint.
1P (Vendor Central): Amazon is your customer. You ship inventory to Amazon's warehouses at wholesale. Amazon sets the retail price, manages the buy box, handles returns, and runs customer service. You're a supplier. You submit promotional proposals and hope they get accepted. You see limited data. You fight chargebacks on Amazon's terms, and Amazon issues those chargebacks — for everything from labeling infractions to carton dimensions.
3P (Seller Central): You are the retailer. You list products, set prices, run advertising, manage inventory via FBA or FBM, handle returns, and own the customer relationship within Amazon's platform. You keep the retail margin — but you also keep every operational headache that comes with it. For a CPG brand doing $20M+, that means hiring a team or an agency to manage a platform that changes its fee structure and policies on a quarterly basis.
2P (Partner-operated): A 2P partner buys your inventory at wholesale — just like Amazon does in the 1P model — but the partner, not Amazon, is the seller of record. The partner controls pricing, advertising, content, and channel P&L. The brand retains brand registry ownership and strategic approval authority. The partner earns money on retail margin, not management fees.
The mechanical difference is who signs the purchase orders and who appears in the "Sold by" field. The strategic difference is where the P&L risk lands and who controls the operational levers.
How do the economics actually compare?
Economics are where the three models diverge most sharply — and where most brands make their decision for the wrong reasons.
Dimension | 1P (Vendor Central) | 3P (Seller Central) | 2P (Partner) |
|---|---|---|---|
Seller of record | Amazon | The brand | The 2P partner |
Inventory ownership | Amazon (after PO) | The brand | The 2P partner (after PO) |
Pricing control | Amazon sets retail price | Brand sets retail price | Partner sets retail price (brand-aligned) |
Advertising control | Limited (AMG/DSP via invite) | Full (Sponsored, DSP) | Full (partner-operated) |
Fee structure | Wholesale margin to Amazon + co-op + chargebacks | Referral (8–15%) + FBA + storage + placement | Wholesale margin to partner (no fees to brand) |
Chargeback exposure | High (Amazon-issued, often opaque) | Low (brand controls inbound) | Partner absorbs and recovers |
Best-fit brand size | $100M+ (invite-only, shrinking pool) | $1M–$50M (manageable ops) | $5M–$500M (operational scale + partner ROI) |
The column most brands skip is total cost of ownership. A 3P brand doing $30M on Amazon is spending $4.5M–$6M annually on referral fees, FBA fees, storage, inbound placement, and advertising management — before the cost of the team or agency running it. A 1P brand is giving Amazon a wholesale margin of 40–60% and losing pricing control entirely. A 2P brand gives the partner a wholesale margin of 40–55% — comparable to 1P — but retains strategic control and gains an operator whose revenue depends on sell-through, not supplier compliance.
When does each model break down?
Every model has a failure mode. Knowing where each one fractures is how you avoid choosing the wrong one for your stage and category.
1P breaks when Amazon decides you're not worth the shelf space. Project Wildfire proved this. Amazon has been terminating mid-tier vendors since 2019, and the criteria are opaque. If your average selling price is under $15, your category is low-margin, or your brand isn't driving enough search demand, you're a termination candidate. The notice period is typically 60–90 days. Brands that built their entire Amazon presence on Vendor Central and suddenly lost it have faced 30–40% revenue drops in the first quarter post-termination.
3P breaks at scale. A $5M brand can run Seller Central with a small team or a competent agency. A $50M brand on Seller Central is running a mid-size eCommerce operation: catalog management, ad optimization across thousands of keywords, FBA inventory planning at 200+ SKU depth, chargeback disputes, listing suppression recovery, and Brand Registry enforcement — on a platform that changes its fee structure and policies quarterly. The operational complexity compounds faster than the revenue.
2P breaks when the partner can't operate. The 2P model is only as good as the operator behind it. A partner without category expertise, proprietary technology, or senior operators on your account is just an agency that accepted inventory risk it can't manage. The failure mode isn't structural — it's operational. That's why selecting the right 2P partner matters as much as selecting the right model.
How should a CPG brand decide? The Three-Model Decision Matrix
There's no universal answer. But there is a decision framework — what we call The Three-Model Decision Matrix — that maps a brand's specific attributes to the model most likely to work.
Factor 1: Revenue scale. Below $5M trailing-12-month Amazon revenue, 3P with a competent agency or in-house team is usually the right call. The operational overhead of a 2P relationship doesn't pencil at that scale for either side. Between $5M and $500M is the operating range where 2P delivers the strongest ROI. Above $500M, some brands have the internal capability to run their own 3P operation at scale — though many still choose 2P for the operational efficiency.
Factor 2: Operational capability. How many people does your brand have dedicated to Amazon? If the answer is zero to two, you're either handing everything to Amazon (1P) or to a partner (2P). If you have an eight-person team running your Amazon business, 3P may be the right model — but audit what that team is actually costing you versus what a 2P partner would deliver at the same scale.
Factor 3: Pricing sensitivity. If MAP enforcement and pricing control matter — and for most CPG brands selling through multiple channels, they do — 1P is structurally hostile. Amazon sets the retail price, often below MAP, and there's no recourse. 3P gives you pricing control but exposes you to unauthorized sellers undercutting your listings. 2P gives you a single authorized seller who aligns retail pricing with brand strategy.
Factor 4: Channel ambition. If your 2026 roadmap includes TikTok Shop, Walmart Marketplace, Shopify DTC, and Amazon, the question is whether you want to manage four channel operations or one partner that runs all four off a single inventory pool. 2P partners operating omnichannel via MCF can launch a new channel in weeks, not quarters. 3P requires separate fulfillment and operations per channel. 1P is Amazon-only by definition.
Factor 5: Category dynamics. High-velocity CPG categories — pet, health/wellness, beauty, grocery — with frequent replenishment patterns and 200+ active SKUs favor models with sophisticated demand forecasting. If your partner or team can't forecast at the SKU level, inventory is either overstocked (killing margin) or understocked (killing rank). That forecasting capability is what separates real 2P operators from agencies holding inventory.
What does the hybrid model look like — and does it work?
Some brands run a hybrid: 1P for core ASINs where Amazon is willing to carry inventory, 3P for tail ASINs or new launches. On paper, this captures the best of both. In practice, it creates two operational surfaces, two fee structures, two sets of chargebacks, and doubled management overhead.
The hybrid model can work for brands above $100M with dedicated internal teams managing the complexity. For most CPG brands in the $5M–$100M range, hybrid is a complexity tax that exceeds the marginal benefit. Every hour spent reconciling two Amazon channel models is an hour not spent on TikTok Shop, Walmart, or DTC expansion.
The structurally cleaner alternative is a single-model approach. In 2026, for brands in the $5M–$500M range, the 2P model offers the economics of 1P with the control of 3P — operated by a team whose margin depends on your product selling.
What's the Neato point of view on the three-model landscape?
We operate as a 2P eCommerce accelerator because the structure aligns the operator's economics with the brand's outcomes in a way neither 1P nor 3P can. That's not a claim that the other models are broken — they served their era. But the era has shifted. Amazon is shrinking its 1P vendor base. 3P fee compounding is eating brand margins year over year. And the market is moving omnichannel, which means the operational bar keeps rising.
Neato buys inventory from brands at wholesale, operates as the exclusive seller of record on Amazon, and extends that model to TikTok Shop, Walmart, and Shopify DTC — all from a single MCF-fulfilled inventory pool. We earn margin when the product sells. We absorb the loss when it doesn't. That alignment is structural, not aspirational.
The Three-Model Decision Matrix isn't a tool we built to push brands toward 2P. It's the framework we use internally when a brand asks us whether we're the right fit. Sometimes the answer is: not yet. We'd rather say that in the first conversation than discover it in the third quarterly review.
