Is Amazon Private Label a Convenient Business Model?

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Private Label

Amazon features different business model options for sellers to choose from. One of the most popular is Private Label. The concept is quite simple – take an existing product, revamp it with your own brand, and start selling it. Think of Walmart’s Great Value and Costco’s Kirkland Signature. These are private label brands. Another great example is AmazonBasics.

The retail giant sources items from third-party manufacturers. Amazon then sells the rebranded products for low value and high profits.

Therefore, we believe that Private Label is a great model to boost profit. But it’s also time-consuming, and it’s not without risks.

In this post, we’ll break down the pros and cons of Amazon Private Label to make it work in your favor.

Why Choose Private Label?

Private Label allows you to build a brand, launch many product lines, and take control of your prices.

But there are some flipsides to this business model, especially the starting costs. For example, you must buy stock in bulk orders from manufacturers.

You’ll also have to start selling at low prices. This is crucial to set a solid food in Amazon, until you build your customer base.

Plus, branding is no easy task. You must be willing to invest in research and marketing campaigns to carve a place amongst Amazon shoppers.

It takes a lot of hard work to build a successful private label store. But if done right, the benefits outweigh the setbacks:

  • Lesser Brand Restrictions. Private label requires you to enroll in Amazon Brand Registry.  The program gives sellers the right to oversee their stock. But they can also control their brand. So, you won’t deal with the usual Amazon restrictions to sell in the marketplace.
  • Visibility. You’ll have the chance to create a unique image and rep, which customers will remember. Tie it up with great products, and users will come back for more.
  • Reduced Competition. Your brand will be unique. So, no other seller can compete against your products. Customers will recognize you, and sellers won’t undercut your listings.
  • Enhanced Content. Private Label stores can feature A+ Content on their Amazon listings. This means you can customize your listings with multimedia content. Thus A+ Content is an opportunity to boost search ranks, and increase customer experience.

How to Set Up Private Label

Private Label is not an easy or fast way to make a profit. But if you want to set up a long-term Amazon store, then Private Label is the model to build upon.

Now, let’s go through the requisites you need to start a Private Label store on Amazon.

Create an Amazon Seller Account

There are two options: Individual and Professional accounts. The first option is free, but sellers are restricted to selling 40 products. They must pay Amazon a $0.99 fee per item sold.

Professional accounts are the second choice. There’s a $39.99 monthly fee. You’ll also pay some referral fees, but there’s no limit to your sellable products.  you can sell.

A good strategy is to start as an individual seller. Once you build up your private label store, upgrade to a professional account.

Product Selection

Go for products with high demand but low competition. And for great results, zero in the most profitable niche markets.

Niche products may have less visibility than well-known items. But they make up for it with a targeted customer base and fewer competition.

When you’ve settled on a niche, it’s time to find the best items to sell. Here are some guidelines to help you out:

  1. Study your choices. Track your preferred items for a few weeks. Check for seasonal spikes, or inflated prices. You want to go for products that sell throughout the year.
  1. Go Simple and Light. It’s best to start up with small items at first, especially for individual seller accounts. This will reduce shipping times and boost manufacturing.
  1. Check for IP concerns. Trademark infringement claims could get your Amazon account suspended. So, make sure you acquire the rights to produce and sell. You don’t want to
  1. Set the right value. Price your items between $15-50 for a healthy revenue. Lower prices will eat your revenue, but going high may scare customers away.

Partner Up with a Supplier

Finding the products is just the first half of the process. Sellers also need to find a supplier.

You can start your quest on sites like Alibaba. As the largest B2B platform, Alibaba features many products sold below retail value by the manufactures.

Narrow your options to suppliers that meet the following checkmarks:

  • High-quality Items. Request some samples beforehand to review the specs and quality of the products.
  • Experience. Go for a supplier that permits private labeling. Also, check that it has manufactured and imported your specific products for at least 3 years.
  • Rapport. Evaluate response times and feedback quality. A great seller-supplier communication will be crucial to your Amazon success.
  • Capabilities. Make sure the supplier can produce items in bulks, and ship to your preferred location.
  • Fair price. Your final choices should share similar price ranges. Much higher or lower prices could be a red flag.

Work Out Your Private Label Brand

The way you introduce your brand to the world is everything. Take the time to work on your brand’s details. Write and publish a compelling value proposition, and tell customers about your story.

Create a unique logo and image. This entails choosing the colors and font that best define who you are, and what you can offer.

To take things further, consider creating an Amazon Store. This is a customized landing page to showcase your brand to consumers.

Stores let you set up a unique Amazon URL. You can also share your story and value proposition through personalized content.

The goal is to engage emotionally with customers and to remain consistent. Ensure your brand is easily recognized in the packaging and on each Amazon listing.

Make sure customers remember who you are.

Select Your Fulfillment Strategy

As with your Amazon account, there are two options for Amazon Shipping. The first is Fulfillment by Amazon, or FBA. 

FBA allows brands to delegate logistics. You just pack and deliver inventory to the warehouse.

From then on, Amazon handles stock management, shipping and deliveries.

This is quite an opportunity for private label brands. FBA lets sellers focus on selling and generating revenue. Plus, FBA items are eligible for Prime delivery.

The drawback to FBA may be the storage and fulfillment fees.

Storage and Fulfillment Fees

Here’s a quick rundown for you:

ServiceFee
Professional seller rate$39.99 per month
Individual seller rate$0.99 per item sold
Individual selling rates$0.45 to $1.35 per unit
Stock removal$0.50 to $0.60 per unit
Labelling$0.20 per unit
Product prep$1.00 to $2.20 per unit
Standard Storage$0.69 to $2.69 per cubic foot
Long-Term Storage$6.90 per cubic foot or $.015 per unit
Oversize Storage$0.48 to $1.20 per cubic foot
Amazon Standard Seller15-18% of an item’s price (after sale)

But there is a second option. Fulfillment By Merchant (FBM) allows brands to control all logistics. The plus side is they don’t have to deal with FBA fees.

FBM sellers manage customer orders, packing, shipping, and delivery. But how can it be a better choice to some sellers? Let’s see:

  • FBM is especially good when dealing with heavy and bulky items. You won’t have to deal with FBA oversize fees, which would save some profit.
  • SFP sellers also enjoy direct brand and stock protection. No more risks of shipping the wrong items, or even dealing with FBA fees.
  • Besides, you can add a personal touch to customer service. As the direct supplier, you’ll be able to deliver unique shopping experiences.
  • FBM sellers may enroll in Seller-Fulfilled Prime (SFP). This means you can access Prime deliveries, and still control the fulfillment process.

However, FBM means a lot more work. For example, SFP eligibility requires a 99% distribution track record. Plus, your cancellation rate must fall below 1%.

Create Your Product Listings

It’s time to upload your products to the marketplace. Make sure you cover these components:

  • Title. Go for simplicity and detail. First off, always mention your brand name. Then, add 100-150 characters, pointing out the item’s key features.
  • Bullets and description. This is your chance to turn traffic into sales. Be as informative as you can. Make sure you fully explain why and how the product will benefit customers.
  • High-quality visuals. Upload at least 1280 pixel-images with concise copy. Let users see what the product does in full. Take advantage of A+ story to create a visual story for each item.
  • SEO Optimization. Find the most relevanthead phrases and long-tail keywords. Place these in the title, bullets and description. This is crucial to boost your search ranks.

Take Off

That’s it, you’re set up! But it’s always good to give your private label a boost when starting out. That’s what Amazon Sponsored Campaigns are for.

  • Sponsored Products highlight individual listings.
  • Sponsored Displays advertise your catalog on many channels.
  • Sponsored Brand promotes your brand and your best three items.

Once you start making sales, reach out for customer ratings and reviews. After all, positive feedback is what will establish your private label store as a trustworthy business. 

Final Thoughts

Private Label is a solid model to build a solid eCommerce store. To recap, here’s how the business model works in a nutshell:

  1. Select high-demand/low-competition items.
  2. Buy from a product manufacturer.
  3. Revamp the item with your own design.
  4. Ship the rebranded products to Amazon.
  5. Upload and optimize your listings.
  6. Set up a marketing campaign.
  7. Start selling.

It’s not easy to build a private label store, especially at the start. It takes time, effort and attention.

Go for niche products you can refurbish at low cost per unit. Also, establish a trustful relationship with your chosen manufacturer from the start. And work out a solid marketing plan to draw organic traffic and customers.

If you do it right, you’ll have the potential to attract a loyal customer base. Not only that, but you’ll generate long-term profits.

Author

Esteban Muñoz is an SEO copywriter at AMZ Advisers, with several years’ experience in digital marketing and e-commerce. Esteban and the AMZ Advisers team have been able to achieve incredible growth on the Amazon platform for their clients by optimizing and managing their accounts and creating in-depth content marketing strategies.

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