News & Insights
Profit from Private Label Products on Amazon
The Amazon marketplace didn’t become one of the world’s most dominant ecommerce websites because of a lack of ways to leverage the platform for success. Direct-to-consumer sales, dropshipping and authorized reselling, are just a few of the paths that an Amazon business can choose in the search for a profitable model that they can grow on the platform.
Private label selling is one strategy that gets less attention but is growing in popularity among Amazon sellers looking to establish their own unique brand on the platform. By joining the other private label brands on the site, sellers can offer a branded product without taking on product development and manufacturing costs.
However, this approach still offers an opportunity to stand out from the competition, potentially earn higher profit margins, and establish a loyal customer base. Keep reading to learn more about how to private label on Amazon and the details that can help you decide if it can play a role in the future of your business.
What are private label listings on Amazon?
Private label listings on Amazon refer to products sold under a brand name owned by the seller rather than under the name of an established brand. In other words, private-label products are manufactured by a third-party manufacturer but marketed and sold under the seller’s brand. One of the most familiar examples of private labeling on Amazon is the Amazon Basics line, which is owned by the ecommerce behemoth itself. While Amazon has shifted its focus to other priorities more recently, countless other retailers also use a private label model to succeed on the platform.
On Amazon, private label listings are identical to any other brand name listed on the product detail page. So, for example, if a seller creates a brand name called “Best Company” and sells a private label product under that name, the product listing will show “Sold by Best Company and Fulfilled by Amazon,” and the brand name “Best Company” will be displayed on the product detail page.
It’s virtually impossible to know whether a seller is marketing a private-label product from a third-party manufacturer or an item unique to only their company. However, for many private-label products, you will find nearly identical listings from multiple brands you are unlikely to recognize. This is in contrast to listings of popular brand-name products where the resellers typically compete for the Amazon Buy Box on a single listing.
Private label products can be a path to success on Amazon
Business owners looking to expand their product offerings often consider selling private-label products on Amazon since they can offer several advantages over selling established brands, including greater control, higher profit margins and increased customer loyalty.
When you sell private label products on Amazon, you have complete control over the product’s branding. This includes the name, logo, packaging, and marketing, allowing you to create a unique and differentiated product that stands out from competitors. In addition, you can choose the listing content, the design of the packaging, and the messaging you want to convey to your customers.
With private-label products, you have an opportunity to create a brand that resonates with your target audience. By focusing on your customer’s needs and preferences, you can tailor your products to meet their demands. This helps to establish trust and loyalty and can lead to repeat business.
When you sell private label products, you have more flexibility to experiment with different product offerings, pricing strategies, and marketing tactics. You can avoid the manufacturer’s MSRP and MAP policies that can come with being an authorized retailer. Less oversight can help you adapt to changing market conditions and customer preferences more easily. You can test different product variations, target new customer segments, and optimize your pricing to maximize your sales and profitability. An Amazon private label brand may also have higher profit margins compared to reselling products from other brands. Since you control the pricing and production costs, you can optimize your margins to make more money per sale.
Additionally, since private label products are sold exclusively by the seller, there is less competition on Amazon, making it easier for a private label seller to rank higher in search results and potentially increase sales. Since you aren’t competing against other sellers of the same product for the featured offer, you can focus on optimizing your listings for search keywords and target specific customer demographics to maximize your visibility and reach.
Creating a private label brand that is well-received by customers can encourage a sense of loyalty and repeat business. Customers may be more likely to purchase products from the same brand in the future, which can lead to increased sales and revenue. You build long-term relationships with your customers by establishing your brand as a trusted and reliable source of quality products.
Create and register your private label brand on Amazon
Companies looking to sell private label products on Amazon must first source a product from a supplier. One of the first steps that most Amazon sellers undertake is to try and identify a profitable niche. Sometimes, Amazon sellers already sell another product on the site and want to add a complementary item to their lineup. In other cases, companies are looking to launch a new product idea or break into a new category that they haven’t sold in previously.
Regardless, it’s helpful to consider factors like market demand, competition and profitability.
Companies should conduct product research to determine items already selling in any prospective niche and identify ways to offer something unique or different. The company must also source the product at a competitive price. After this extensive research and analysis, companies can narrow down the options and choose a product that fits the targeted niche and be sold profitably.
New sellers must also select a brand name to use on Amazon. It should accurately reflect your products and resonates with your target audience. The best brand names are easy to remember, unique, and trademarkable. You don’t want to settle on a brand name already used by another company, especially not one selling on Amazon or elsewhere online.
First-time sellers will also need a seller account to access the platform’s selling portal, Amazon Seller Central. Similar to the registration processes for other online accounts that have become ubiquitous, registering for an Amazon seller account is relatively simple. It requires only the most basic information about you and your business.
While Amazon does offer an individual seller account, it only provides limited access to the full suite of Amazon advertising and reporting tools. In addition, the per-item commission of $0.99 means the cost savings of the individual plan end when sales exceed 40 items per month. Therefore, the company’s Professional Selling Plan for $39.99 a month will better serve most businesses pursuing substantial Amazon sales.
It’s also important for Amazon sellers to complete Amazon’s Brand Registry. The program is open to companies with an active trademark from the United States or one of 18 other countries, the United Kingdom, the European Union, or the United Arab Emirates. A pending trademark may also be accepted for registration.
Unlike creating a seller account, the good news is that there is no fee associated with the Amazon Brand Registry program. Any company that meets the eligibility criteria can join at no cost.
The primary purpose of the Amazon Brand Registry is to keep brands secure and create a more attractive platform for legitimate sellers. Participating brands have access to powerful tools to detect and report suspected intellectual property infringement. Amazon also utilizes the information sellers provide through the program to improve their ability to block violations before they have an impact. Enhanced marketing and advertising options, as well as expanded monitoring capabilities, also add to the value.
Add and Optimize your Product Listings
As an Amazon seller, it’s hard to overstate the importance of your products since they will likely be the ultimate driver of your success or failure. But, before you can sell them on Amazon or protect them via the Brand Registry, they will need to be added to the platform as a product listing.
Your vehicle for this part of the process is Seller Central. Products can be added one at a time by inputting the required information for each product or in bulk by uploading a correctly-formatted inventory spreadsheet. The latter can be much more efficient but requires some familiarity with spreadsheets and the ability to adhere to Amazon’s required template. An employee or partner experienced with this option can significantly reduce novice sellers’ frustration when trying to add new products in bulk.
While adding products requires minimal information about each item, optimizing an Amazon listing takes much more knowledge and effort. Of course, producing exceptional Amazon product listings should be a priority for any brand owner pursuing growth and long-term success on Amazon. Effective product listings are built accurately and organized with your customers in mind. They feature detailed information, high-quality images and, in many cases, helpful videos. Check out our blog on listing optimization for a detailed guide on creating listings that exceed expectations and convert shoppers.
Once your current inventory is added to Amazon and the listings are optimized for Amazon’s algorithm and shoppers’ needs, you’re ready to start marketing your products to prospective buyers.
Private label price matters a lot on Amazon
One of the most important decisions you’ll make when selling private label products on Amazon is how to price your products. Price your products too high, and you risk turning away potential customers. Price them too low, and you may not profit enough to sustain your business.
Start by scoping out the competition. While your initial research likely covered this, it’s essential that you continuously monitor pricing on Amazon. Check out their prices and product listings to see how they compare to yours. Take a close look at product features, packaging, and reviews to understand how they position themselves in the market. And remember, the site’s automated pricing tools can sometimes lead to unintentional price wars among inexperienced sellers who lose money on sales.
Obviously, your costs will play a huge role in determining the price you can sell a product for. The price of goods, packaging, shipping, and Amazon fees must all be considered. You’ll need to price your products high enough to cover these costs and maintain a margin that allows your business to profit. Also, don’t forget to factor in marketing and advertising costs when setting your prices.
Amazon FBA simplifies a private label sales model
One of the most costly expenses for Amazon sellers of any kind will be the price of fulfillment. For most companies, utilizing Fulfillment by Amazon (FBA) is the preferred way to manage the process of reliably getting orders to customers.
FBA levels the playing field against a brand’s biggest competitors and often improves customer service and minimizes costs. In addition, shifting fulfillment responsibilities to Amazon allows sellers to focus on other priorities.
The FBA model also helps a company meet the expectation of most customers that their orders will arrive promptly. More than 100 million American households are Amazon prime members, and FBA makes products eligible for prime shipping. Prime shipping gives these members two-day shipping across the United States. At Amify, we often see a 50-100 percent increase in sales when a brand moves to Prime eligibility.
Also, since Amazon is the largest shipper in the U.S., they enjoy some of the lowest shipping rates in the country, and luckily they pass these savings along to FBA customers. For most products, we find the FBA shipping costs are 30-50 percent cheaper than a brand shipping products themselves (even when comparing two-day shipping on Amazon to five-day for other carriers.
When using FBA, sellers have the additional advantage of Amazon answering most customer service questions and taking responsibility for any late-arriving shipments. Delegating this responsibility allows businesses to focus on sourcing great products and marketing them to the right users rather than responding to “where is my item?” questions all day.
The challenges of selling private-label products on Amazon
Starting a private label business on Amazon can be a lucrative business opportunity, but it also comes with unique challenges. Researching and purchasing inventory can be expensive, as can marketing your Amazon listings. Creating product listings, running Sponsored Ads, and building your brand through social media or influencer marketing can quickly add up. And if not done strategically, these efforts can have a limited return.
Companies also need to find reliable manufacturers or suppliers for their private-label products. However, when dealing with any manufacturer, quality control is often a concern and especially difficult to manage at overseas manufacturers.
And whether from Amazon or elsewhere, one of the advantages of ecommerce is the incredible amount of data sellers can access. There’s often an overwhelming number of reports available regarding inventory, shoppers, advertising, buyers and more. All of it must also be appropriately analyzed to reveal actionable insights that optimize for Amazon SEO and grow sales. Private label sellers need to know which tools to turn to first and how to stack efforts effectively to create sales momentum for their products. This strategic planning is something that even long-time business owners can struggle with due to the intricacies of selling on Amazon.
Give your bottom line a boost with Amify
Regardless of your Amazon business model, you can trust your brand to the experts at Amify. We can help you navigate the challenges of getting your Amazon private label products to the top of the rankings or streamline your FBA warehousing needs.
But the first step to making sure your company is in the best position to win on Amazon is to Schedule a free Amazon Account Consultation. Contact us today to learn how our team can help you reach more shoppers and accelerate conversions.