Private labeling has been a grand opportunity for sellers on the Amazon marketplace. This business model allows sellers to develop their own brands and protected listings within the vast Amazon jungle. And with the same simple marketing methods available to all sellers, to push products and the brand itself to success. This opportunity is closing in on private labelers, however. The advantages enjoyed by private label sellers are no longer so succulent.
On top of increasing competition from other sellers, some of whom play dirty, Amazon itself has joined the Private Label game. Amazon ranks second globally in terms of market value. This top ranking reflects how good they are at selling. Having them to compete with on their own marketplace is intimidating to say the least.
This does not mean death to all third-party sellers and private labelers, however. You can remain viable on the marketplace by employing the following strategies to stay in the race. Even though Amazon claims 50% of online sales overall, brands still have a chance to keep a reasonable slice of the pie. Even if Amazon is selling the same product as you are, you can make your brand your strength if you stay focused on the prize.
The challenge that Amazon’s size presents is nothing new, and smaller businesses have thrived despite the existence of giants like this retailer.
What is Private Labeling?
A private label product is simply an item – and it doesn’t have to be a unique one – that a seller brands; i.e. puts their logo on. Many private labelers on Amazon source cheap, common items from manufacturers and other marketplaces, label them and pack them with their logo and sell them as their own products.
Some private label sellers do, of course, actually come up with their own products that are unique, but most stick with the above method. Not much time, effort or money needs to go into it because there’s no development – just adding a logo that can be as simple as a sticker and a printed plastic wrapper or bag.
With drop shipping being so popular recently because of more developed shipping networks and Amazon’s own FBA, private labeling has been a breeze. That is, until now. Many private label sellers are panicking because of Amazon’s private label brands.
Amazon’s Private Label Brands
Amazon has had its own brands on the marketplace for at least ten years. What’s making sellers shake in their boots is the expansion that has happened since then. In 2017, Amazon had about 40 private label. In just the next year, that number doubled. And to give you an idea of how large these brands are, AmazonBasics alone, which launched in 2009, sells more than 1500 products.
Currently, with more than 150 private labels, Amazon’s private label brands are a force to be reckoned with – particularly for sellers within the jewelry, clothing and shoes categories. Amazon’s private label brands are selling almost 7,000 products on the marketplace.
Amazon’s private label expansion was quiet for the most part. Then, in September of 2018, Amazon’s private label products began surfacing on organic search results with the daunting heading, “top rated from our brands”. With an endorsement like that from Amazon, it’s tough for any other brand to win the purchase. Amazon’s private label products have also been shoeing up recently under listings for competing brands.
Of course, there’s no way that anyone can complain about how Amazon markets its own products on its own marketplace. Sellers can only accept the increased level of competition with brands that are slated to bring in 25 billion more to the retail giant within the next two years.
They can market however they want, are able to give crazy discounts, and can afford to create flashy new banners for each offering.
Image Source: https://www.amazon.com/stores/AmazonBasics/AmazonBasics/page/947C6949-CF8E-4BD3-914A-B411DD3E4433
Data Fueling Amazon’s Private Label Brands
Many sellers worry that they won’t be able to, especially after factoring in the scores of data that Amazon collects on marketplace customers – and hides away from everyone else.
Only Amazon knows exactly what shoppers on the marketplace want in terms of products and how much they are willing to pay. Sellers are continually contributing to this data goldmine, but aren’t able to take full advantage of it.
You sell, they analyze and improve their own brands – some of which go virtually unnoticed because they aren’t publicly advertised as Amazon’s private labels.
So how does a home-run private label operation compete?
First off, sellers don’t need to worry that Amazon will push them out. They are still a very important part of Amazon’s business. Obviously, Amazon needs other sellers to gather the data that they use to experiment with their private labels. And they also still bring in a huge chunk of money – billion every year in selling and fulfillment fees.
The danger lies in keeping to a smaller niche and too few products. As Amazon diversifies, so must third-party sellers and private labelers.
And there are several other tactics that can be used to stay profitable despite Amazon’s private label expansion:
1. Build Your Brand
There’s almost nothing stopping Amazon from selling what you sell and selling it cheaper. You may still of course make some sales at a higher price because shoppers know that cheap isn’t always good. But the point is that you simply can’t compete with them on the price point.
Instead, build your brand into an experience.
Hundreds and thousands of brands sell more than virtually the exact same products sold for much less because they’ve built a lifestyle around their wares. If you can sell a dream to customers, you can keep them loyal to your brand.
And build customer loyalty.
Develop your brand by developing a unique value proposition for each of your products. From the standpoint of your brand, build trust in you and it will translate into trust for your products. Once you have that, customers will not easily be lured by cheaper products.
Alongside this, develop your brand story. Amazon can rank their own products higher than yours. Amazon has all the data and you get only a trickle. Amazon can sell anything that they see is doing well on the marketplace (and cheaper). But they don’t have your story.
Compelling Value Proposition + Unique Brand Story = Strong Business Success
2. Use Amazon
Use the Available Tools
Although Amazon has the clear advantage on their platform, they still have to follow the same rules to a point. The algorithm applies to them the same as you. You can use this to your advantage.
Use what’s available on the platform to boost your rankings. Sell in the right categories. Be the most compliant seller and nurse your scores to get top search results. Leverage Amazon data through their Advertising platform.
Maintain a Presence
Don’t give up on Amazon. You may be disappointed and feel tempted to abandon the marketplace. But remember that somehow, if you don’t maintain a presence there, chances are, someone else will soon take your place.
Shoppers love Amazon and there’s always a seller that wants to fill the void left by another seller who quits the scene. When that happens, you will lose control over your brand reputation. Keep your store open so that you can control how your products are sold and maintain your image.
3. Up Your Game
When stronger competition comes, more effort should follow. It’s not impossible to compete with Amazon if you’re ready to put your back into it.
Secure your Supply
Don’t leave supply to chance. If you currently have loose agreements with manufacturers, work on firming them up. If your agreements are thin, plan on making them more robust. Open negotiations to secure more competitive pricing and prepare to scale your business to meet demands from their side.
And don’t forget to diversify. You can’t compete with Amazon for manufacturers on the financial side, but you can ensure stability by securing the flow of inventory.
Understand the Competition
If Amazon is selling your product, buy it and do an honest, in-depth comparison against yours. Then highlight the advantages of what you’re selling and work to improve in the areas where Amazon shines brighter.
Then go a step further and look at what’s around the product and improve that. If Amazon doesn’t offer guarantees, you do it. Offer customers a special feature that Amazon doesn’t. Give them something that makes your offering stand out because it’s more appealing. You can even be better at customer support than Amazon by focusing on the personal touch and being more lenient with return and refund policies.
Sell to Your Customers
One of the biggest disadvantages of selling on Amazon is that you can’t retarget because everyone who shops there is Amazon’s customer and not yours. What you need to do is capture them before they get to Amazon. Use other channels to engage shoppers. This way, even if you direct them to your Amazon store in the end, they are your customers. You can get their emails and market to them without violating Amazon guidelines.
Generate Your Own Traffic
Don’t be content with riding the Amazon wave. As you build your own email list, build also your own traffic streams – again, outside of Amazon. Take advantage of the numerous channels that have high traffic to reach out to potential customers and introduce them to your brand before they get to Amazon.
Think about what Amazon has done to get where it is today. Think about the observation and innovation that has been the backbone of their success through the past decades. Then do the same.
You have to be flexible and ready to make changes if you are to remain competitive on the marketplace. Take a cue from Jeff Bezos and your Amazon business will weather the Amazon’s Private Label storm just fine.