5 min

What Is Amazon Private Label? The 2020 Guide

AMZ Advisers, September 29, 2020

Amazon is one of the most successful companies on the planet. A very large factor explaining this success are the Amazon marketplace and the 3P sellers on it. According to Statista, about 50% of all the sales that happen on the platform come from third-party sellers. To achieve this, Amazon sellers have resorted to different selling tactics, and one of them is Amazon Private Label.

If you’re planning to sell on Amazon, you’ve probably already heard about Amazon Private Label and how it has helped millions of sellers increase their sales.

For some years now, this selling tactic has been put into practice. However, it is important to mention that old-school private labeling isn’t as successful as it used to be, due to a simple reason: the more crowded Amazon gets, the fiercer the competition becomes.

Therefore, in this article, we’re going to walk you through some of the main takeaways of this selling practice and how you can make it work to your advantage in 2020.

What is Amazon Private Label and How Does It Work?

Before we get down to the nitty-gritty, you should know that there are four main ways to sell on Amazon FBA: Amazon Private Label, retail arbitrage, wholesale, and creating your own product.

Amazon Private Label is about finding a product on Amazon that has high sales, but maybe a low number of reviews; getting that product, and labeling it as if it were yours. Basically, what you will try to do is to upgrade the presentation of that original existing product by creating your own brand. (We will outline the benefits of this strategy below.)

With retail arbitrage, you go to retail stores to find products on a deep discount; you buy that product; look for its original price, and sell it on Amazon to make a profit. In the long run, this practice can turn into a real hassle since you have to be constantly going out to hunt those bargains.

Wholesale has to do with going to different manufacturers; buy their product at wholesale price, and flip it on Amazon for the regular retail price. The only downside is that it is getting extremely saturated. There are so many manufacturers out there producing very similar products that, in some cases, they’d rather sell them on Amazon their own. Also, you’ll find many established sellers with a solid reputation that won’t be easy to outrank.

Creating your own product requires a bit more effort from your part. But, by doing it so, you will definitely have bigger chances of standing out from the competition, thus of getting higher sales.

How to Sell Private Label on Amazon?

Although there is controversy regarding this old-school practice; in 2020, Amazon Private Label can still be profitable. You just have to step up your game to find the product that will resonate with your audience.

As mentioned before, this strategy allows you to get your products from a supplier and labeling them with your own brand. All you need to start is a good product.

Before you make the decision of trying out Amazon Private Label, there are a couple of things to consider. Remember, you’re not selling a brand, you’re creating one for a product that already exists.

Which means that the dividends are going to take a bit of time to come. Think of it more like buying stocks and bonds versus opening a lemonade stand. Stocks are more profitable in the long run.

Also, consider the following:

  • This selling strategy does require an upfront cash investment. You’ll need to buy products and adapt them to your brand.

  • Running a test drive to make sure that the product will sell well is paramount. This includes analyzing the keywords that are already being used by the competition so you can rise above them. (Experts agree that this is one of the most important parts of the process.)

  • Steady revenue is the secret to make your brand grow. Selling through Amazon Private Label is not only a short-term goal.

Best Practices to Sell Private Label on Amazon

If we look at the numbers, in 2018, private label businesses reached a profit of $5.5 billion by growing 4.4% (Source – plma.com). Just in the US, in 4 products sold, nearly one product is a private label or store brand product. This shows us that this is a market on the rise.

Once you’ve done your research, you might want to follow these important steps to ensure a smooth sailing:

1. Picking a profitable product

The best way to start is by checking Amazon’s list of best-selling products. You can get an idea of what customers are buying or looking for. That is priceless information. Avoid saturated categories, and look at your competition and what they’re doing.

A great tip is to focus on newer stuff.

The kind of products that are not yet stocked by other big retailers or marketplaces. Deep dive into departments and subcategories to find new products. Pay attention to the “Hot New Releases” columns.

2. Choosing the right manufacturer

Avoid the mistake of choosing the cheapest manufacturer, even if you have a great communication with them. The cheapest product is not the best in all cases. A better way to go is using the lower price quotes to help negotiate prices down with the manufacturers.

Usually, manufacturers willing to negotiate have better communication and fulfillment skills. It is better to choose a supplier with excellent services in all areas. Remember any time you’re negotiating you are free to walk away from a deal.

Once you’re set on a supplier, arrange payment via your preferred method. Most suppliers will accept PayPal or Alibaba’s Trade Assurance for safe and secure payment processing.

At this point you should mention to your supplier about working with private label products. It could be as simple as having labels produced for you by a print shop and them add them to your product packaging and continue to be a private label. Talk to your manufacturer to figure out the best options.

3. Investing in quality design and branding

As the adage goes, “A picture is worth a thousand words.” Investing in quality design and branding will not only allow you to have a seamless online presence in the marketplace, but it will also enhance your customers’ experience. Amazon A+ Content can help you achieve these goals.

4. Creating killer listings

When creating your listings, make sure you cover these aspects:

Include all the details you can in your description. Make it as informative as you can. Most customers reading the product description are about to make a decision to purchase something. Take advantage of that opportunity! Use bullet points to make information easy to read. Don’t forget to add keywords in the product description as well.

Keep it simple. Add key details about your product in the title. Make sure to mention your brand name. Your title should have 100 to 150 characters. Be clear and use your keywords wisely!

Make it appealing. It is your responsibility to make sure your customers understand your product and how it works in the best way possible. Use high-quality photos and videos from every angle. At least 6 photos will usually give buyers a good idea of how it looks in real life. Amazon recommends at least 1280 pixels on the longer side.

5. Testing the market

If a product has caught your eye, you can test the waters by creating an Instagram account, showcasing your product. This way, you’ll get to engage people quicker and this can work as a strategy to driving outside traffic.

You can also use it as an opportunity to promote customer feedback through surveys or direct messages, which will eventually help you to improve your marketing strategy.

6. Setting a competitive price

The ideal range of prices for a private label product is a range between $15 to $50. A product that sells at less than $15 will leave you with a very small margin. Customers looking for products that go over $50 prefer established brands, so anything over $50 will move slowly for private labels.

7. Using Fulfillment by Amazon (FBA)

Using FBA is definitely a safe bet. This fulfilling program, supported by Amazon, not only gives you the peace of mind you need when fulfilling your customers’ orders, but it also increases the customers’ trust in your brand.

Additional recommendations on how to sell Private Label on Amazon

Besides choosing a product likely to succeed, make sure it complies with the features below to make sure it is as easy to sell and ship as possible:

  1. Your product’s features should be easy to explain. Electronics can be fun to sell, but they often come with a lot of headaches and customer service issues. The same is true for fashion and clothing products, which may require you to have multiple colors and sizes for a single SKU. So, you may want to think twice before choosing any products related to these categories.

  2. Steer away from seasonal products. You want to have year-round sales, so seasonal products are not the best decision for Amazon Private Label. Some examples are: Christmas products, or basically any holiday products, winter clothing, etc.

  3. Your product should be easy to transport: Make sure your product fits into a small, flat-rate box, and that is no heavier than one or two pounds. This will help you save on shipping from the manufacturer and during the fulfillment process.

  4. Avoid paperwork. Some items like food, toys, and batteries can be difficult to sell if they have any sort of “red tape”. Choose products that are easy to manufacture and that don’t need legal paperwork and/or certifications.

What are the advantages of selling on Amazon Private Label?

Private Label products can significantly increase exposure of your products. Especially if your packaging and Amazon Product Detail Page are consistent with your name, logo and color scheme. Customers won’t have trouble remembering you and will be likely to come back for more.

Branded products tend to have a higher price than those unbranded. Your own private label product can give you the flexibility to position yourself in the market successfully. You’ll have access to an exclusive audience that is willing to spend more money in their purchases.

It’s no secret that if customers trust your brand, they’ll purchase more from you. Being consistent with your private label, branding and marketing as much as possible will increase credibility for customers.

What are the disadvantages of selling on Amazon Private Label?

As we mentioned before, Private label products can mean a steady revenue and ongoing profit, it does take work and it is not a guaranteed success.

Manufacturers usually work with bulk orders. Also, to be competitive you’ll have to set an affordable cost for your product. We’re talking about thousands of dollars. Remember it’s more like an investment.

While you won’t have to worry about marketing costs, branding your product and standing out from the competition is easier said than done. You will have to invest time in doing your research and having a solid presence.

Since you’re relabeling an already high-selling product, there’s always a risk of failing against a different seller with a bigger investment than yours. If that does happen, it’s likely you’ll lose more money than a regular seller.

Closing Thoughts

Now that you have a better idea of what is Amazon Private Label, you can understand that your success will mostly depend on your ability to carry out the right market research to make the best decision on the product you want to sell and the way to manufacture and brand it.

To sell through Amazon Private Label in 2020, there’s no special training required other than being extremely persistent, patient, and determined.

You can build your Amazon private label business in such a way that customers will remain loyal to your brand. Good luck!

To get started or learn more about how Perpetua can help you scale your Amazon Advertising business