What is Private Label on Amazon? Top Strategies for Sellers
Last updated June 2, 2022
Over the years, Amazon Private Label has established itself as a very successful business model for E-commerce entrepreneurs around the globe. Especially on Amazon, it’s not an uncommon decision for merchants to sell Wholesale and Private Label products simultaneously.
If you are thinking about starting your own online business with a focus on selling over Private Label on Amazon, this article was written for you. With a few tricks, the right niche, a suitable target group, the right calculations and a little bit of luck, your tidy profit is only a few mouse clicks away. But what exactly is Private Label on Amazon nowadays? Let’s take a closer look.
What is Private Label on Amazon ?
Private Label brands are products that are manufactured for specific sellers so that they can then sell them under their own brand name. Sellers can modify or make improvements that the manufacturer directly implements. Some manufacturers even provide personalized packaging at your request or print your logo on the product.
How to Sell Over Private Label on Amazon – Benefits and Drawbacks
Selling over Private Label is a very popular business model, especially for creative sellers that are always working on “the next big thing”. Needless to say, it’s not all rainbows and butterflies, especially once you find out that selling over Amazon Private Label does not necessarily guarantee you the Buy Box. Or that your competitors are not only Private Label sellers. Or that you can’t “just simply order from China, sell in the UK, and get filthy rich.” You get the point. There are several drawbacks you have to keep in mind. However, the benefits are very convincing. Let’s take a look at them.
The Benefits of Selling Over Private Label on Amazon
When it comes to online shopping, Amazon is the go-to search engine – a study by Jungle Scout from 2022 showed that 63% of US consumers see the marketplace as their first port of call when looking for products. Not only that, but you can also find unique product niches on Amazon. All in all, Amazon is the perfect platform for Private Label products – you can reach a clearly defined target group with niche products but also use Amazon’s reach to convince as many consumers with purchasing power as you can.
Full Creative Freedom
When selling on Amazon, your own Private Label business can thrive not only through the quality and ingenuity of your products, but also through your eye for branding. As we just mentioned, manufacturers often give you the possibility to create your own packaging and logos. You can also customize your Amazon Brandstore by creating elements such as headers, tiles as well as product categories. This gives your online business the necessary recognition value, while also giving potential buyers browsing your store a good overview of your products. When it comes to customization, the possibilities in the Amazon Brandstore are similar to those of an own online shop, with the big difference that you can benefit from the online giant’s massive reach when it comes to potential customers.
USP Communication Through Amazon Private Label
Selling over Amazon Private Label is the best opportunity to target customers that would profit most from your custom-tailored or maybe even unique product. Amazon Brandstore customization, which we mentioned above, is only one of the means at your disposal. A+ content or an extensive Amazon PPC campaign are other methods that you can use to motivate customers to make a purchase.
No Buy Box Competition
With Amazon being the most popular E-commerce platform in the world, sellers have to live with the fact that they will be facing a lot of competition. But how do you cope with this? Competitive pricing is one of the most important factors here, so is winning the Buy Box. Private Label sellers have a particular benefit when it comes to the latter. Amazon Private Label is a business model that enables you to sell your own product, meaning that you get your own listing, with your own Buy Box.
Access to Product Listing, Keywords and Text Design
A successful Private Label strategy on Amazon requires that you put a lot of effort into the design of your product detail pages. This includes text, images, keywords, and descriptions. The more effort you put into these elements, the higher your chances of communicating the quality your product and landing a sale.
Be as descriptive as possible, tell the story of your product on your listing. Why did you make it? For whom? What inspired you to start selling this product? Pictures also tell a great story. Be sure to take high quality pictures of your products so that customers can zoom in on your product detail page, when they check out one of your items.
Higher Margins
Since day one, Amazon has put customer friendliness and convenience at the very top of their agenda. And this has paid off enormously. Not only in terms of revenue but also in terms of customer loyalty. Even though Amazon may be more pricey than other alternatives, many customers still shop on the E-commerce giant’s platform because of the included amenities.
You as a seller and your Amazon Private Label brands will profit from this. Even if you set your margins higher than your competitors on other platforms, there is still a very good chance that you will sell as much as they do, if not even more. To ensure that it stays like this, you have to ensure that you as a seller do everything you can to uphold what Amazon stands for in regard to customer centricity. This means hard work on your metrics, especially customer support and delivery time.
Security Through Amazon Brand Registry
If you visit an Amazon seller forum and stay there for longer than 20 seconds, chances are you will find a post where someone describes how his/her product listing was hijacked. The best way to prevent this is with Amazon Brand Registry
The protection of your own brand and intellectual property is covered by the Amazon Brand Registry Services. When creating new Private Label products, an individual alphanumeric code can be stored with the help of the Transparency tool. If another seller now wants to sell your product or even a counterfeit, he/she must enter this code. This way, Amazon Private Label products are protected at all times from misuse – which is not only in the interest of the brand owners but also of the customers.
Here you can read more about this topic: How does Amazon Brand Registry work?
Drawbacks of Private Label on Amazon
Are you dreaming of selling your merchandise from the comfort of your home, maybe even from a beach on a tropical island? Ordering your items from China at a ridiculously low price and re-selling them in Europe for a 400% markup and repeating this process until you can afford that yacht that all the Amazon sellers on Youtube are filming themselves on? Cool. Sounds good. Here’s a few reasons why it doesn’t always work that way.
The Risks of Importing From China
Extremely low net unit prices, a huge selection of manufacturers, products and flexibility when it comes to individual product manufacturing – these are the main arguments for importing from China. At the same time, these factors only apply in certain cases, such as high order volumes, small freight sizes and certain product segments. It is also not uncommon for sellers to work with import agencies, which subsequently take care of the product’s quality, communications with the manufacturer, licenses, certificates, delivery problems, etc.
Long Delivery Times and Immense Planning Effort for Repeat Orders
Selling over Amazon Private Label has requirements that sellers need to fulfill. As an example, the items must be produced according to the sellers specific instructions and therefore cannot be reordered or delivered directly. Naturally, European sellers ordering from China will need to wait longer for their deliveries than the EU sellers shopping in Europe (because of the distance). Regardless of whether you work with Chinese or European manufacturers, you will have to expect longer delivery times when selling over Amazon Private Label. This, in turn, increases the planning effort for repeat orders.
Full Product Liability and Declaration of Conformity
If you choose to sell over Private Label, you will have to take on more responsibility for your products. As an example, in order to protect European consumers, legal regulations and ordinances are in place that products imported into the EU must fulfill. This is the case for electrical appliances, toys, products that come into direct contact with food or the human body and many more. As an importer, you need to find out in advance which certificates and markings the products require for import. If you want to work with manufacturers from Asia, it might be easier to hire an import agency to take care of steps like manufacturing, licensing, certification, customs.
Testing Your Products Is Expensive
Once you’ve done your research and chosen which product you want to import, you will want to do a test run before you buy in bulk. This will of course cost you. And in the case of Amazon Private Label products, this will cost you more than usual, due to the higher detail of production (customization, labeling, fitting to size).
Time Consuming Marketing Efforts
What we described as a benefit earlier is also a drawback when you take into account how many hours you have to invest. Creating an effective marketing strategy around your product is a surefire way to increase sales but also a huge time consumer.
High Investment Amounts
As you’ve already gathered from the previous points, running a Private Label Amazon business requires quite a bit of investment money. To be competitive, you need to make sure that product costs stay low, meaning that you need to order in large quantities. After all, every Amazon Private Label seller is engaging in a long-term investment.
5 Essentials for Your Private Label Seller Strategy on Amazon in 2021/2022
When thinking of how to create and manage a Private Label on Amazon, sellers should keep the most important aspects in mind, one of which is that Amazon is constantly changing. One phenomenon that has been very apparent lately is that Chinese manufacturers are not only producing and selling their products to European sellers, they are now selling their products on the platform itself, thereby cutting out the middlemen and driving other sellers away. There are two things you can do in such a scenario. Complain about it on every forum you come across, or look for other ways to remain competitive. Doing both at the same time is also a possibility.
1. Product Research and Market Analysis
Before you go spending money on an Amazon Private Label online course, be sure to test the waters yourself. The good news is you don’t have to be a creative genius to sell successfully on Amazon. Gathering data on industries, customers, competitors and other market parameters are often enough to give you a good overview of what’s going on in the market and what products could become the next big thing.
Product Research
If you are starting from scratch on Amazon and your Private Label needs product ideas, it is worth taking a look at the bestseller lists. Here you will find products that are in high demand and are usually always being sold to someone. The process on Amazon regarding Private Label product research can become repetitive after a while. Thankfully, there are tools that can simplify this otherwise very tedious research process for you.
Target Group Definition
When researching products, don’t lose sight of your potential customers. When creating your Private Label strategy on Amazon, defining your target audience goes hand-in-hand with your product research. If you can create an emotional connection between your target group and your product, even better. Once you know your target group well, you can put together attractive offers and bundles during product research which will result in even more sales.
Competitor Analysis
Observing the competition has never been a bad thing. There is nothing on Amazon that does not already exist. So assume that your customers will look for alternatives very quickly. Before you start selling Private Label on Amazon, take a close look at what the competition is doing.
What expertise can you offer your customers to leave the competition behind?
Chart the pros and cons of your competition. Observe how items are marketed and do it better or differently than them when your product is launched. If the quality of your products, customer service, shipping speed, or product info is more elaborate, you’re already winning at this point and building unique selling points for your presence.
EU or China?
When searching for the right supplier, it is not uncommon to look to China. As we have already mentioned, working with Chinese manufacturers can mean a lot of effort and very often you have to expect longer delivery times. This increases the planning effort and can possibly cause you to go out-of-stock during a rising demand for your products and not only miss out on a trend but also lose the Buy Box.
Sourcing in the Far East has its drawbacks, which in turn sets the stage for the benefits of EU sourcing. A supplier from Europe is more expensive, but gives sellers more guarantees. You can buy already produced items here in small quantities, and if needed, you can buy more quickly and flexibly. At the end of the day it makes sense to have more flexibility with a product that lives through customization. Also take notice that the importer is responsible for compliance with all regulations as well as for any damages.
2. Registration of Your Seller-Account on Amazon
After you have successfully completed your market research, nothing stands in the way of your registration.
Individual tariff
The creation of the individual account is free of charge. However, you will have to pay a commission of €0.99 per item for each sale you make on Amazon + percentage sales fees, which are around 7-15% depending on the product line. This fee model is designed for sellers who plan to sell less than 40 items per month.
Professional tariff
In the Professional tariff, you have many more design and usage options at your disposal, such as a better overview of sales figures, customization of shipping costs, list uploads, detailed sales statistics and much more. The tariff is already worthwhile if you sell more than 40 products per month.
We recommend starting with an individual account before you start actively selling and going independent with it. Once your products are listed and ready to ship, you can upgrade to the professional rate.
3. Registration of Your Private Label on Amazon
Trademark registration – for example at EUIPO – protects your trademark rights and is essential if you want to run a business with Amazon Private Label. Don’t forget that trademark protection is always territorial. If you registered your trademark in the U.S. for example, you will not be able to take action against unauthorized use in China.
Additionally, you know that you have the possibility to protect your brand directly on Amazon. This is a major benefit, because it can happen that third-party sellers use an already existing ASIN to sell counterfeit products cheaper or to change the product description. This does happen quite often unfortunately. Trademark registration on Amazon eliminates this problem as it gives the brand owner access to Amazon tools that make it easy to monitor and report trademark violations to Amazon.
4. Your Fulfillment Strategy
As an Amazon seller, you can choose to prepare and send your Private Label products yourself or to use the Fulfillment by Amazon (FBA) service. You may also consider going for another fulfillment option – via Dropshipping, which is widely gaining in popularity nowadays.
Selling Over Amazon Private Label With FBA
Let’s start this off with the fundamentals: What is Amazon FBA? If you’re selling over Private Label, or planning to do so at least, you need to know this. FBA stands for “Fulfillment by Amazon” and means that you can employ Amazon to take care of your delivery and your customer support. This is a very general description of a service which actually offers much more, click here to read more about it.
But how does FBA benefit Amazon sellers with Private Label products?
FBA is perfect for sellers that want to focus more on their product marketing and listing, since they don’t have to spend energy and time looking to improve their customer support and delivery experience.
Selling With Private Label via Dropshipping
Amazon is known for its ingenuity regarding customer satisfaction. However, the sellers on the E-commerce platform have also found ways to make their life easier. Dropshipping is a business model that allows sellers to conduct their business without any physical contact to their product. The product is listed in the sellers’ online shop, but is delivered to the customer directly through the manufacturer.
Private Label sellers on Amazon often use this method of shipping because it is practical and does not require storage fees. There are also many suppliers that have specialized on this model and include the price of personal branding in their offer.
The drawbacks are that you can’t control the quality of the goods that you sell. You don’t own the items, so you won’t know about any product errors and are fully reliant on the word of your manufacturer.
5. Selling Over Amazon Private Label With a Repricer
There are many forms of repricing and most of them are known for their strategy to win the Buy Box. This makes a lot of sense for Wholesalers who have to win this golden “Add-to-Cart” field on a regular basis. Most Private Label sellers on Amazon don’t have to do this, since they are the owner of the product and therefore do not have to share their listing.
Is a repricer still worth it in this case? Absolutely. The thing is, every repricer worth its salt will have multiple strategies that can be custom-tailored to your company. For Private Label, this means that you will be able to automate your pricing strategy according to how many products you sell, at what time they sell best, and also in regard to the prices at which your competition is selling.
Here you can find more information on how Private Label sellers can make use of a Repricer: The Private Label Repricer: What It Is and Why You Need It.
Final Thoughts
Amazon Private Label is a very popular way to sell products if you have a knack for identifying trends and a good eye for marketing and storytelling. The high level of customization makes it easier for you to form a connection with the buyer which – in turn – improves customer loyalty. At the end of the day, selling Private Label is also not rocket science, which means you won’t be needing the “Private Label Amazon Course” at some dodgy online academy anytime soon.
On the other hand, Private Label is also very time-consuming and will require quite a bit of investment. To ensure that the costs stay low, you will have to buy in large quantities. And even with the best marketing efforts, not every product you sell will fly off the shelves. This is an investment you must be willing to make.
Image credits in order of appearance: © fotomowo – adobe.stock.com / © SELLERLOGIC / © tawatchai1990 – adobe.stock.com / © Feng Yu – adobe.stock.com / © symkin – adobe.stock.com
