Walmart is a leading e-commerce giant globally which has come to the forefront as one of the biggest online retail platforms. According to NRF, Walmart is the largest retailer in the US, based on the sales with more than 4,700 stores across the country. Walmart Marketplace is now comprised of thousands of sellers and it is still growing. Walmart’s online sales grew 79% for its fiscal year 2021 and the shoppers are not just browsing or comparison shopping, they are adding products to their virtual cart.
Walmart flaunts an extraordinary network of stores, distribution centers, and buyers as the largest retailer in the world. It is a strategic decision for sellers to sell on the Walmart marketplace. Selling on the Walmart Marketplace can have a major impact on a brand’s business and growth in the short term and long term.
There are two different ways that Walmart sellers can start on the platform: 1P (first-party) and 3P (third-party) sellers. To get started on the Walmart platform as a seller you need to know what 1P and 3P sellers are and understand the pros and cons of each seller type.
In this article, we will dive into detail on the different types of Walmart sellers with each of their advantages and disadvantages that can potentially help you make a well-informed decision.
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Walmart 1P Sellers (First-Party Sellers)
As a 1P seller, you are responsible for sending your products to the fulfillment center of Walmart where your product will be stored and distributed. You will be supplying the products in bulk to Walmart at wholesale prices. Walmart is listed as the seller instead of your brand. Products are listed as “sold and shipped by Walmart” as shown on the image above. You do not ship to Walmart stores or customers instead Walmart assumes all ownership and responsibility for selling the products which includes pricing the products, optimization of the Walmart listings, advertising, marketing, and delivering of your products.
Walmart 3P Sellers (Third-Party Sellers)
You must apply for approval and meet certain business qualifications to become a Walmart Third Party seller. As a Walmart 3P seller, you will have maximum control over your Walmart product listings and inventory. You own the product, listing, and brand. Walmart Marketplace is only used as your channel/medium. You can list your products to the marketplace through Seller Center or third-party management software and optimize your Walmart listings, set your price, promote, manage the shipping, and fulfill orders. 3P offers you the most control over your business.
1P vs 3P: Which Model is right for you?
Deciding whether to sell as a Walmart 1P vs 3P seller is crucial for e-commerce success. Sellers can make decisions based on their business structures and objectives considering the pros and cons of both business models ( Walmart 1P vs 3P marketplace sellers). Sellers can gain maximum advantages from both options by having good marketing strategies that allow them to compete for the Buy Box.
Since winning the buy box is the ultimate goal for every seller, it is significant to learn about the advantages and disadvantages of these two types of business models (Walmart 1P vs 3P sellers). In-depth knowledge and understanding of the pros and cons of each seller type allow you to make the right decisions to make effective business plans and strategies so you can maximize your brand visibility, sales, and business growth.
Listed below are the pros and cons of both Walmart 1P vs 3P business models.
Advantages for 1P Sellers in Walmart:
- As a supplier, once you deliver the inventory to Walmart, you do not have to worry about setting shipping rates, meeting performance standards, or worry about your margins. The marketplace will handle all the customer-facing aspects.
- Your items get the benefit of being listed as a Walmart product i.e., your product becomes Walmart’s products which can increase credibility & trust and potentially increase purchases.
One of the ways credibility and trust are measured is by the reviews and ratings on the products. Using our Ad Intelligence solution, we analyzed thousands of shoe products on Walmart.com which showed that 1P sellers had much more products rated above 4 and they had more products with 50+ reviews as shown on the graph below.
- You make sales in bulk and your inventories are sold under the recognizable Walmart name, so you remove all inventory risk from your business.
- 1P sellers get access to more marketing tools and advertising options that can organically boost conversion.
- Walmart takes full responsibility to discount your products, run promotions on your item, and market the products via sponsored ads.
Disadvantages for 1P Sellers in Walmart:
- There is a lack of control especially over price and you must offer wholesale pricing which hurts your margins.
- You may face price-parity issues across other marketplaces you sell on which can affect your brand reputation.
- Walmart assumes control over the messaging around your product which could lead to inconsistent branding between the sites you sell on.
- You could get suspended or may have to lower your prices if you do not stick to Walmart’s price matching requirements.
- To offer the most competitive price Walmart may cut your prices even beyond your recommended sales price as it is a low-cost retailer.
Using our Product Intelligence tool, we analyzed shoe products on Walmart Marketplace which showed that 1P sellers almost exclusively provided shoes priced under $50 whereas 3P sellers provided shoes in a variety of price ranges. This gives the impression that to be a 1P seller on Walmart Marketplace, you need to only provide low-cost products.
Advantages for 3P (Third Party) Sellers in Walmart:
- 3P sellers have more flexibility and can control their entire sales including product pricing, return policies, fulfillment process, and customer service.
- You get the benefit of setting your own prices so you can protect your margins or get higher margins, have better payment terms, and match your pricing on other marketplaces.
- You have full control over your Walmart product listings, marketing strategies, and inventory so you can fulfill orders on various marketplaces from your stock.
- Brand owners get to manage their own brand and how it is represented across their listings.
- You have complete ownership and control of your products and brands and can get additional brand exposure for your seller account.
- You can activate Walmart Free 2-day shipping nationwide through your own fulfillment processes to guarantee shoppers fast shipping.
Disadvantages for 3P (Third Party) Sellers in Walmart:
- 3P Sellers have to organize and handle the marketing of their products themselves including earning positive reviews and getting their listings ranked higher than the competitors.
- You are responsible to manage the entire process from listing to post-purchase. You oversee generating optimized products, running special offers and discounts, and establishing ad campaigns.
Providing sales and promotions is one of the best ways to get customers as everyone loves sales. Analyzing the data on shoe products on Walmart Marketplace, we found that 1P sellers provide more special promotions on their products versus 3P sellers. Walmart extensively uses its ‘Rollback’ feature to reduce the price of the products to entice customers as shown on the graph below.
- You will have to set up and optimize your own listings, product performance, reordering the right amount of inventory, and meeting shipping standards which can be a lot of work.
- Walmart does not provide fulfillment for 3P sellers. If you decide to go 3P, you need to handle your own storage, shipping, exchanges, and returns.
- As a 3P seller, you have more responsibility to fulfill which can be difficult for you to handle to get more product visibility and maintain better sales volume.
Walmart Marketplace is an effective sales channel for sellers with both big and small businesses. With its worldwide recognition, Walmart has been the go-to shopping destination for many.
With the right marketing strategies, your product line can get great exposure on Walmart as it offers a tremendous opportunity for your business. It is a great platform for anyone looking to expand their e-commerce business. By selling on Walmart’s rapidly expanding marketplace many sellers and brands can seek greater visibility and sales volume.
If you are a new seller or an existing seller on the Walmart Marketplace and you want to expedite your success on the platform, using an external tool such as Marketplace Intelligence from GrowByData can be extremely supportive in helping you enrich your Walmart product listings, optimize your product detail pages, and give you a holistic view of your performance across channels in real-time.