Is Amazon’s Private Label a Suitable Business Model?
Amazon presents different business model options for sellers to choose from. One of the most popular is Amazon private label. The concept is simple: take an existing product, revamp it with your branding, and start selling it. Think Walmart’s Great Value and Costco’s Kirkland Signature. These are private-label brands. Another great example is Amazon Basics.
The giant retail chain sources items from third-party manufacturers. Amazon then sells renowned products for low value and high profits. So, the private label is a great model for driving profits. But it is also time-consuming and has risks.
In this post, we’ll look at the pros and cons of Amazon’s private label to make it work in your favor.
Why choose a private label?
Private labeling allows you to create a brand, launch many product lines, and control pricing.
But some things could be improved in this business model, especially the upfront costs. For example, you must buy stock in bulk from the manufacturers.
You will also need to start selling at discounted prices. Establishing a solid feed on Amazon is crucial until you build your customer base.
In addition, branding is a challenging task. You must be willing to invest in research and marketing campaigns to carve a niche for yourself among Amazon shoppers.
It takes a lot of work to build a successful private-label store. But if done right, the benefits outweigh the setbacks:
Minor trademark restrictions
Private labeling requires registration with the Amazon Brand Registry. The program gives sellers the right to monitor your stock. But they can also control your brand. So you won’t have to deal with Amazon’s usual restrictions on selling on the marketplace.
Visibility
You will have the opportunity to create a unique image and representative that customers will remember. Tie it together with excellent products, and users will come back for more.
Reduced competition
Your brand will be unique. Therefore, no other seller can compete with your products. Customers will recognize you, and sellers will not undermine your listings.
Enhanced Content
Private label stores can feature A+ content in their Amazon listings. This means you can customize your listings with multimedia content. Therefore, A+ content is an opportunity to boost search rankings and increase customer experience.
How do I set up a private label?
Private Label is not an easy or quick way to make a profit. But if you want to set up an Amazon store for the long term, Private Label is the model to follow. Now, let’s go over the requirements 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 fee of $0.99 per item sold.
Professional accounts are the second option. There is a monthly fee of $39.99. You will also pay some referral fees, but there is no limit to your sellable products. You can sell.
A good strategy is to start as an individual seller. Once you create your private label store, upgrade to a professional account.
Product selection
Choose products with high demand but little competition. And for excellent results, zero in on 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 less competition.
When you’ve decided on a niche, it’s time to find the best items to sell. Here are some guidelines to help you:
Study your options
Track your favorite items for a few weeks. Check for seasonal spikes or inflated prices. You want to opt for products that sell year-round.
Go simple and light
It’s best to start with small items at first, especially for individual seller accounts. This will reduce shipping times and boost manufacturing.
Check for intellectual property concerns
Trademark infringement claims could get your Amazon account suspended. Therefore, make sure you acquire the rights to produce and sell. You don’t want to.
Set the right value
Price your items between $15 and $50 for a healthy income. Lower prices will eat into your revenue, but raising them can scare customers away.
Partner with a supplier
Finding products is only the first half of the process. Sellers also need to find a supplier.
You can start your search on sites like Alibaba. As the largest B2B platform, Alibaba features many products sold by manufacturers below retail value.
Limit your choices to suppliers that meet the following criteria:
High-quality items
Ask for some samples in advance to check the specifications and quality of the products.
Expertise
Choose a supplier that allows private labeling. Also, check that it has been manufacturing and importing your specific products for at least 3 years.
Report
Evaluate response times and the quality of feedback. Good communication between sellers and suppliers will be crucial to Amazon’s success.
Capabilities
Make sure the supplier can produce items in bulk and ship them to your preferred location.
Fair pricing
Your final choices should share similar price ranges. Much higher or lower prices could be a red flag.
Create your private-label brand
How you present your brand to the world is everything. Take the time to work out the details of your brand. Write and publish a compelling value proposition and tell customers your story.
Create a unique logo and image. This involves choosing the colors and fonts 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 allow you to set up a unique Amazon URL. You can also share your story and value proposition through personalized content.
The goal is to interact emotionally with customers and maintain consistency. Ensure your brand is easily recognizable on the packaging and in every 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 Amazon Logistics.
Amazon Logistics allows brands to delegate logistics. It simply packages and delivers inventory to the warehouse.
From then on, Amazon takes care of stock management, shipping, and deliveries.
This is a great opportunity for private-label brands. Amazon Logistics allows sellers to focus on selling and generating revenue. In addition, Amazon Logistics items are eligible for Prime delivery.
But there is a second option. Fulfillment By Merchant (FBM) allows brands to control all logistics. On the plus side, they don’t have to deal with Amazon Logistics fees.
FBM sellers manage orders, packaging, shipping, and delivery for customers. But how can this be a better option for some sellers?
Let’s see:
FBM is especially good when it comes to heavy and bulky items. You won’t have to deal with Amazon Logistics’ oversize fees, which would save you some profit.
SFP sellers also enjoy brand and stock protection. No more risk of shipping the wrong items or even dealing with Amazon Logistics fees.
Plus, you can add a personal touch to customer service. As a direct supplier, you can offer unique shopping experiences.
FBM vendors can enroll in vendor-managed Prime (SFP). This means you can access Prime deliveries and still control the fulfillment process.
However, FBM means a lot more work. For example, PFS eligibility requires a 99% distribution history. In addition, 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
Opt for simplicity and detail. First, always mention your brand name. Then, add 100–150 characters, pointing out the key features of the item.
Bullets and description
This is your chance to convert traffic into sales. Be as informative as you can. Be sure to explain why and how the product will fully benefit customers.
High-quality images
Upload at least 1280-pixel images with a concise description. Allow users to see what the product does in its entirety. Leverage the A+ story to create a visual story for each item.
SEO optimization
Find the most relevant main phrases and long-tail keywords. Place them in the title, bullets, and description. This is crucial to improve your search rankings.
Takeoff
That’s it, and you’re all set! But it’s always good to give your private Label a boost when getting started. That’s what Amazon-sponsored campaigns are for.
Sponsored products highlight individual listings.
Sponsored displays advertise your catalog on many channels.
Sponsored branding promotes your brand and your top three items.
Once you start making sales, look for customer ratings and reviews. After all, positive feedback is what will establish your private label store as a reliable business.
Final Considerations:
A private label is a solid model for building a solid e-commerce store. In a nutshell, here’s how the business model works:
1: Select high-demand / low-competition items.
2: Buy from a product manufacturer.
3: Rebrand the item with your own design.
4: Submit the rebranded products to Amazon.
5: Upload and optimize your listings.
6: Set up a marketing campaign.
Start selling
It is not easy to build a private label store, especially in the beginning. It requires time, effort, and attention.
Choose niche products that you can refurbish at a low per-unit cost. Also, establish a trusting relationship with your chosen manufacturer early on. and develop a solid marketing plan to attract traffic and organic customers.
If you do it right, you have the potential to attract a loyal customer base. Not only that, but you’ll generate long-term profits.
