Amazon’s taking over the world. Need proof? This internet giant pulled in over $320 billion of revenue in the 12 months prior to July 2020!
Its astronomical success isn’t hard to understand either. Amazon offers a seamless user experience and a means of purchasing everything from groceries and apparel to homeware and tech. Yet this is no ordinary online store…
It’s also a marketplace for 3rd-party vendors. Anybody with something to sell can now set up a proverbial stall on Amazon and leverage its user-base to generate revenue. Are you thinking of doing exactly that?
Well, private label products are one of the best ways to do it. Done right, this modern business model can drive huge sums of income with minimal effort, competition, or customer interaction. You don’t even have to handle the products you’re selling!
Want to learn more about what’s involved? Check out our beginner’s guide to getting started with private labeling.
What Is Private Label?
Private labeling’s the process of sourcing unbranded, generic products and then selling them on Amazon under your own brand name. And no, this definitely isn’t illegal! Because everything’s unbranded from the outset, you’re not infringing on trademarks or patents.
You might wonder why anybody would purchase something from an unknown brand instead of the bigger retailers. However, private label products are commonplace nowadays and are often far more popular on Amazon than items from established brands. Of course, a high-quality, sought-after product is the foundation of success.
From there, though, you also:
- Find under-served niches where there’s lots of demand for a product but minimal supply,
- Create an attractive, detailed listing with compelling images and sales copy to attract buyers,
- Accrue lots of positive reviews that build your credibility on the platform, and
- Leverage the endless supply of users on Amazon to forge market share in your niche.
Do all that and you can (and will) sell your own unique product on this platform! Assuming there’s enough margin in whatever you buy from the supplier (which are usually based overseas in places like China), you can drive a healthy profit in the process.
The Pros and Cons of Private Label
Selling private label products on Amazon offers a plethora of advantages to aspiring entrepreneurs. Yet no business model’s perfect! There are both pros and cons to private label to know about before you dive headlong into the endeavor:
Pro: Leverage Amazon FBA Service
The first thing to note is that you don’t have to sell your private label products on Amazon. You could flog them on EBay, Etsy (depending on the product), your own website, or a Shopify store instead. Take any of these other approaches, though, and you’d lose out on the incredible power of Amazon FBA.
An acronym for ‘fulfilled by amazon’, this service enables you to store your inventory in Amazon’s giant warehouses. Better still, Amazon’s employees will then handle your orders, pack them up, ship them onto the customer, and deal with customer service! All you have to do is ship your products to Amazon and they’ll sort out the rest.
Now, Amazon takes a reasonable chunk of each sale in return for their input. But as long as you have enough margin in your product, few business models offer such a convenient, hands-off experience.
Pro: No Competition
You could choose to sell other brands’ products instead of your own. Known as retail arbitrage (buying discounted products in stores and flipping them online for a profit) and online arbitrage (like retail arbitrage, except you source discounted products online instead), it’s another viable way to make money online and on Amazon. The trouble with these models is that you compete with other sellers for the coveted ‘buy button’ on each listing.
By comparison, private label products give you full control of the listing. After all, put your logo on the item and it’s officially yours. No other sellers have it, which means they can’t piggyback on your listing; you take home every sale as a result.
Con: Finding the Perfect Product Is Tricky
One problem with the private label model is sourcing the perfect product. Amazon’s jam-packed with every imaginable item and, somehow, you need to find a niche that’s underserved or a product that’s better than what’s already available. Whether you buy personal care products from www.bpilabs.com/ or jewelry from a Sri Lankan factory, making a miscalculation can lead you to buy large shipments that never sell.
Likewise, if you’re utilizing Amazon FBA, you have to choose an item that isn’t too big or heavy. Why? Because large, heavy items cost more to ship, which eats into your profits.
Con: Minimum Order Quantities
Another obstacle to confront is the number of products your supplier will ask you to pay for upfront. Unlike online and retail arbitrage (where you can run tests and buy a few products at a time to see if they’ll sell), you’re forced to buy hundreds of items at once! In other words, there’s more risk involved.
And don’t forget that the first time you see your product is when the manufacturer ships them to you. In a worst-case scenario, you could spend thousands of dollars on a shipment that’s a) full of faulty items or b) doesn’t sell fast enough (or at all) on Amazon.
Don’t Forget this Entrepreneur’s Guide to Private Label
Amazon is a dream come true for consumers and entrepreneurs alike. With an enormous marketplace of vendors and customers, you can leverage its popularity to create a thriving private label business.
As always, though, it’s important to know exactly what you’re getting into beforehand. That’s why we put this post together! We hope this guide will provide the building blocks to begin your foray into the wonderful world of private label products.
To carry on your education on all things Amazon, search ‘Amazon’ on our website now.
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