Deciding how to sell on Walmart Marketplace is much more than just a financial decision. It’s a strategic one that can have a major impact on how your business will operate and expand its brand in both the short term and long term.
With that in mind, you’ll want to carefully consider the different ways that you can get started on Walmart:
- First Party (1P)
- Third Party (3P)
- Dropship Vendor (DSV)
In this blog, we’ll cover what each arrangement entails and the pros and cons of each for you to consider.
Walmart 1P (First-Party Seller)
Under this arrangement, you sell products in bulk to Walmart at wholesale prices. Products are listed as “sold & shipped by Walmart” instead of your brand, and Walmart assumes all responsibility for listing, marketing and delivering your product.
As a 1P seller, you are solely responsible for sending your inventory to Walmart’s fulfillment center, where your product will be stored and distributed like any other product in its care (though your products are only available for sale on Walmart.com, not in Walmart stores). You do not ship to Walmart stores or customers.
1P works like a traditional wholesale relationship. Your inventory becomes Walmart's. You sign a contract and deliver your product. That's it. Once you pass over your inventory, you do not have to worry about shipping costs, meeting performance standards or lower margin if, say, Walmart chooses to discount your products or run promotions on your item.
The main con is the lack of control, especially over price. Walmart is a low-cost retailer and may cut your prices as a way to offer the most competitive price online. Beyond affecting your brand’s reputation, you may face price-parity issues across other marketplaces you sell on. Amazon, for example, will flag your product if it can be purchased at a significantly lower price on another platform. If you don't adhere to such price-matching requirements, you could wind up getting delisted (or worse, suspended) or having to lower your prices. In addition to this, Walmart assumes control over the messaging around your product, which could lead to inconsistent branding between the sites you sell on.
Another note of warning: Thousands of Amazon 1P sellers learned the hard way that relying too heavily on their wholesale relationships can be risky. On several occasions, Amazon has pulled the plug on their weekly purchase orders, literally overnight. No matter which platform you sell 1P, remember to avoid concentration risk—that is, letting any single channel have this much control over the success of your business.
Walmart DSV (Drop Ship Vendor)
When you apply (and are accepted) as a Drop Ship Vendor (DSV), you essentially become part of Walmart's supply chain. As a DSV, you sell your products to Walmart at wholesale (not bulk) prices and your products are sold under Walmart’s name. You, however, are responsible for storing, managing and shipping products as orders come in. Walmart will cover all costs of shipping, but you will be held accountable for getting products from your warehouse to the customer or Walmart store whenever a customer opts for “pick up in store.”
Like with 1P, DSV doesn’t require much setup, assuming you’ve got the storage and fulfillment capabilities to begin with. You work with a buyer to negotiate pricing, promotions and other details—afterwards, Walmart assumes control over pricing and the marketing of your product.
If there is a problem with delivery, the customer contacts Walmart, then Walmart contacts you. If there are too many problems with deliveries (either in terms of on-time deliveries or item condition), you could be removed from the program.
DSV lets you leverage the Walmart brand without the burden of managing your own listings, shipping costs, customer service and other parts of marketplace selling. You do not incur additional costs for any promotions that Walmart runs on your items, and your margins are protected. DSV products also get priority in the buy box, potentially leading to more sales.
Like a 1P seller, you cannot control the price or representation of your products. You are responsible for inventory, which remains on your balance sheet, and are paid on a per-item basis rather than by bulk sales. Walmart also maintains high standards for remaining in its program, so you’ll have to be able to keep up.
Walmart 3P (Third-Party Marketplace Seller)
To become a 3P seller, you must meet certain business qualifications and apply for approval. Once approved, you will retain maximum control of your inventory, pricing and listing. You will be expected to list your own products to the marketplace via Seller Center or a third-party management software, like Zentail. You create your listings, optimize them, price, promote, ship—the whole shebang—on your own, unless you tap a service like Deliverr or WFS to assist with certain operations.
Walmart benefits by gaining a larger assortment of products to offer on its site while assuming less inventory risks and charging a commission fee. To protect the buying experience, Walmart enforces strict performance, content and ethical standards (none that would come as a surprise) that you must meet.
If you’re looking for the option that grants you this most control, this is it. You set your prices. You control your own inventory. You control details like your return policies and shipping templates. Most importantly, if you’re a brand owner, you manage your brand and how it’s represented across your listings.
Managing the entire process, from listing to post-purchase, can be a lot of work. You start from the same level as every other 3P seller, meaning, you have to find a way to organize yourself, marketing your product (including earning positive reviews) and get your Walmart listings ranking higher than your competitors.’ There are multiple things you need to track aside from this, like product performance (i.e., reordering the right amount of inventory) and meeting shipping standards. If you’re not well-equipped to handle the unpredictability and the cost of a new sales channel, then this could be a lot to take in.
Which Option Should You Choose?
There are multiple factors you’ll want to consider in order to make your decision. First and foremost, are you eligible to sell in these programs? Application to become a third-party seller is, for example, notoriously difficult. You must be a U.S.-based seller with an existing reputation elsewhere online. Some sellers even resort to 1P or DSV until they’re able to qualify for 3P.
Beyond this, ask yourself:
- Which option fits with your overall ecommerce strategy?
- Can you find cost-effective shipping methods?
- Can you meet Walmart's low-price standards?
- Can your business scale to meet the added requirements of 3P?
Let’s dive a bit deeper into each.
Consideration #1: Your Overall Ecommerce Strategy
What type of control do you ultimately want over your product or brand? Are there any operational gaps that will impact your decision either now or in the future?
For example, say your business model is volume-based. You aren't interested in becoming a household name. You just want to move as much of your inventory as quickly as possible. It would make sense for you to apply for the 1P program.
On the other hand, if you want to establish your brand and build it into something that can stand on its own legs, then 3P is likely your best option because it provides the most control over the marketing, pricing and branding of your products. This not only lets you set the tone for your brand on Walmart, but on any other channel you sell on.
That being said, as you consider becoming a 3P seller on Walmart, do not assume that you can simply move your listings from one marketplace to another. Walmart's Marketplace has its own ranking algorithm and additionally maintains that your listings are worded uniquely for Walmart.
If you’re looking for something in between, then you can consider DSV for some (if not all) of your items. Walmart allows you to participate in both 3P and DSV, though a single SKU cannot be sold through both. DSV doesn’t provide as much control over your brand as 3P, but enables you to expand your reach via Walmart’s help and offload certain tasks that can be tedious to manage.
Consideration #2: Shipping Capabilities
For some, the difficulty of managing and scaling a fulfillment network that can keep up with the pace of ecommerce is enough to keep them from entertaining in anything other than 1P.
But many remain open to exploring 3PLs or services like WFS if it’s not currently possible to scale their own system. Worth noting: WFS is only open to existing third-party sellers at the moment, so it’s not guaranteed that you can rely on it when you first join the marketplace.
Also, Walmart Marketplace tends to place a lot of emphasis on its fast shipping programs, especially TwoDay. So, you’ll want to be selective in your search and choose 3PLs like Deliver (Walmart’s official fulfillment partner). Furthermore, Walmart bans the use of Amazon MCF for fulfillment for any Walmart Marketplace orders.
Ultimately, you’ll want to know if your shipping system can live up to the standards that Walmart requires and is cost-efficient. To compete as a 3P seller, you need to be able to offer fast shipping at low costs to your buyer. DSV sellers share similar challenges, while 1P sellers are only concerned with wholesale shipment.
Consideration #3: Pricing
Walmart has a reputation to uphold rooted in its everyday low price strategy. As such, every marketplace seller must likewise offer competitive, if not the lowest, price for his/her products. In general, it’s wise to check how your competitors on Walmart are already pricing their products before involving yourself with Walmart at all.
The company will take quick action if they discover that your product can be purchased at a lower price on Walmart.com or anywhere else on the web. This includes your total landed price—the sum of your item price, plus shipping and handling costs.
If you choose to sell 3P, can you still undercut your competitors’ pricing as you invest in tools or services that keep you competitive? If you’re leaning towards DSV or 1P, are you willing to let Walmart lower your pricing as the company sees fit? How will this impact your compliance and pricing on other sites, like Amazon?
Consideration #4: Scalability and Time Investment
As you evaluate your business today, is it in a position to scale up? Across all programs—1P, 3P and DSV—you must be able to adapt your operations as demand and sales grow. But 3P selling on Walmart can be especially demanding if you’re not prepared to saddle up from the get-go.
In an article published on WebRetailer, Zentail CEO Daniel Sugarman, explains a common misconception held by new Walmart Marketplace sellers: that what worked for them on Amazon will work on Walmart.
The reality is, Walmart Marketplace is relatively new, untrodden territory. It’s still evolving, and those who take the time to study it as its own channel and ‘prime the pump’ are in the best position to yield positive results, whereas those who passively invest in Walmart or simply copy-and-paste their Amazon approach are likely to be disappointed.
The vast majority of new sellers will have to work for their keep on Walmart and anticipate ups and downs in sales until they’ve really gotten the channel figured out.
For the above reason, an ecommerce operations system like Zentail comes highly recommended to reduce the costs and risks inherent in joining a new channel. By providing a central database for all your product data and AI-powered automation, Zentail can minimize the level of effort needed to get started on Walmart and help you avoid costly listing errors, inventory flukes (like overselling) and missed opportunities. You can regain time to spend on marketing your products or testing new strategies, rather than making sure everything is working as it should.
Know what you’re capable or willing to commit to before going ‘all-in’ with a 3P strategy. If you don’t foresee yourself wanting to commit seriously into Walmart, you may either want to hit ‘pause’ on it or consider the other two selling options. Needless to say that 1P and DSV can be much easier to sustain if you’re already in the business of wholesaling.
What We Personally Recommend
First and foremost, we urge you not to bite off more than you can chew. Once that’s established, 3P is our top recommendation because it keeps the control in your hands. You have full autonomy over how your products are priced and represented on Walmart (with the exception of resold products, in which case you have less control over the master listing).
You can better protect your margins and the long-term reputation of your brand. The best way to take advantage of 3P is by finding the right logistics and software partners to support your expanded operations. Once the right building blocks are in place, operating as a third-party Walmart Marketplace seller can be very rewarding, with new sales and audiences to offer.
Schedule time with a Zentail expert to see how we can transform your Ecommerce business.