There are broadly two types of sellers on Amazon distinguished by the delivery models.
One set of sellers stock their inventory in Amazon warehouse and list the product on the website and, as and when there is a customer order, Amazon will directly ship that product to the customer from Amazon’s warehouse. This model is called as Fulfilled by Amazon (FBA) and Amazon charges the seller for some FBA services such as customer delivery, warehouse charges, website listing services, etc.
The other set of sellers use something called as the Merchant Fulfilled Network (MFN). In this case, the seller will not stock the inventory with Amazon and, instead, the seller stores the stock in their premises of business itself. The seller orders packaging material from a vendor and, as and when there is a customer order, the seller packages the product on Amazon packaging material and ships directly to the customer using some delivery services. In this case, the seller is only taking the website listing service and only pays to Amazon the commission for the listing service.
On the outset, it may seem that sellers should choose to be an MFN seller to get more margin out of the sale. However, Amazon has multiple programs for FBA sellers and the standards of service for FBA is extremely high such as 24 hours delivery or same day delivery, cash on delivery option, buy box winner, etc. These options make FBA an extremely attractive option for a seller; there is a significant increase in sales for an FBA seller of the same product as compared to selling on MFN. This is because of the customer trust in the brand name Amazon and the trust in the delivery that Amazon has verified this and is assuring the quality of the product as compared to it being delivered directly from the seller.
One of the most popular sellers on FBA is Amazon itself selling and taking the services of FBA. So this seller is usually called as the Retail seller and all the other sellers are called as 3P sellers (including both FBA and MFN – non-Amazon but other outside sellers). Hence, we arrive at three different types of sellers while referring to Amazon sellers.