The growth of e-commerce giants like Amazon has opened up a new avenue of entrepreneurs to make money – through private labels. For individual sellers, private labeling provides them with an opportunity to create a unique and trusted brand. All it takes are generic products. If your brand manages to make a name for itself, then it is also incredibly profitable.
All of this sounds easy and alluring, but it takes a lot more effort than it sounds to create a successful Amazon private label.
Let’s look at how you can create a successful private label on Amazon!
- What is an Amazon private label?
- Why create a private label on Amazon?
- Creating a private label on Amazon
- Research your product
- Analyze The Competition
- Identify your supplier
- Decide your fulfilment strategy
- Create your private label brand
- List your new private label product
- Launch your product
What is an Amazon Private Label?
Private labeling is a very simple concept. You buy your products from a manufacturer, but label and market them using your own brand. The best example of a successful private label is AmazonBasics. Amazon does not manufacture the products, but merely sources it from other manufacturers. The e-commerce giant then sells them under the AmazonBasics brand.
In 2018, private label business grew by 4.4% reaching a profit of $5.5 billion (Source – plma.com). In the US, out of every 4 products sold, nearly one product is a private label or store brand product, according to the Private Label Manufacturers Association.
With such startling growth, private labels give Fulfilled by Amazon (FBA) sellers an incredible opportunity to create a trusted brand. You won’t have to worry about manufacturing and Amazon will take care of most of the logistics and customer service. What you have to do is find a great generic product and a reliable supplier!
Why create a private label on Amazon?
A private label on Amazon is not an easy or quick way to make money. Why should a seller go through the trouble then?
1. No Brand Restrictions
There are certain restrictions on selling products from other brands on Amazon. When you’re creating your own brand, that’s not something you need to worry about.
2. Less Competition
You’re not competing with products of the same brand when you’re a private label seller. This means you don’t have to worry too much about other sellers undercutting your listing and stealing customers.
3. A+ Content
Amazon A+ Content, also known as Enhanced Brand Content, is only available for brands registered on Amazon. With Amazon EBC, you can customize your listings with multimedia content. The premium content feature enhances the user experience which leads to more traffic and conversions!
Not everything is great about being a private label seller on Amazon. There are a few hurdles you have to overcome to set up your own brand.
4. High Starting Cost
Creating a private label requires a lot of upfront capital. Manufacturers demand bulk orders and in order to be competitive, you need to make sure the cost per product is low. A private label will usually set you back a few thousand dollars early on. A private label is a long-term investment.
A private label is great if you can pull it off, but branding your product and standing out from the competition is easier said than done.
6. Higher Risk
Spending a significant amount on product purchases and branding comes with its own risk. You’re not picking up an established brand and there is always the risk that your private label fails to make a mark. In these cases, you’re likely to lose more money than if you were a regular seller.
Creating a private label on Amazon
A private label is not a way to make quick cash. It takes time to establish a brand and even longer to start seeing substantial results. A private label is a long term investment and if you haven’t done your research, it might just be money down the drain. Whether you’re starting to sell on Amazon or trying to establish a private label, the first thing you need to do is create an Amazon seller account. You’ll have two options when creating an account, so let’s look at how they are different, and how you can leverage each option to your advantage.
1. Individual Seller Account
An individual account is free to create, but you need to pay a commission of $0.99 for every sale that you make on Amazon. This is in addition to a 15% consolidated fee on those sales. If you’re an individual seller, you can only sell 40 products.
Creating an individual account is great when you’re not going to sell more than 40 products, and if you’re not interested in selling products from restricted categories.
2. Professional Account
A professional account will set you back $39.99 every month along with some additional referral fees and variable closing fees. You will not have to pay Amazon a fixed amount for each item you sell, and you can also list more than 40 products on the platform.
We recommend you start with an Individual Account before you actively start selling. Once your products are listed and ready to ship, you can upgrade to Professional Account to save on costs. Don’t forget, you need a professional account before you can even request approval to sell restricted products!
Research Your Product
You’ve probably heard this a million times, but success on Amazon hinges on your ability to identify niche markets and zero in on a great product. Research takes time, but it is the foundation of your business. Figure out what customers are looking for and check whether the market for your product is saturated.
Amazon’s list of best selling products is a great place to start your research. It will give a glimpse of what customers are looking for on the platform. That is invaluable information. Keep the competition in mind when picking a product. You’re unlikely to succeed in a saturated category. The key is to find a niche product that is in high demand. You can use SellerApp’s product ideas feature to see what ‘s hot on the market in real-time.
Don’t forget, some products are also seasonal so keep that in mind when looking for your breakthrough product. You don’t want to be stuck selling Halloween costumes in January! You need to target products that have consistent sales throughout the year.
Wondering what products are selling like hotcakes? Check out our detailed guide on private label products.
When it comes to a private label, there are a few things you need to keep in mind when picking a product:
Size & Weight
Your products should ideally be small and lightweight. This will help you save costs on shipping — from your supplier and to Amazon FBA warehouses. Ideally, you want to sell a product that weighs less than 3 pounds.
Generic and Unregulated
You don’t have the option of selling every product on Amazon. Some categories and products require permission from Amazon before you can list them. Make sure your private label product is unrestricted and generic to avoid issues.
You ideally want to sell products that are priced between $15 to $50. If you’re selling a product worth less than $15, your profit margins will be slim after Amazon’s cut. When it comes to expensive products, customers are more likely to trust an established brand. So anything over $50 doesn’t work out well for private labels.
Analyze The Competition
Once you narrow down your product idea, it is time to check out the competition. Keep track of how they are performing and how many sales they generate. Just open up Amazon and look for the product you want to sell. Open the top five products and review each listing in detail.
- Look for keywords that explain the product and check how your competitors use them.
- Review customer feedback and keep an eye on product ratings. Negative reviews will help you identify gaps in your competitors’ products. You can bridge those gaps with your new private label!
Once you’ve scoured Amazon to study your competitors, compile your findings. It’s never a bad idea to create a pros and cons list for each product in consideration before taking a final call.
Identify Your Supplier
Finding the perfect supplier is easier than many people think. Platforms like Alibaba have made it much easier to source products directly from the manufacturer. So the first thing you need to do is log in to one of these international B2B platforms, and get in touch with your potential suppliers. If you’re having trouble identifying suppliers, you can read this detailed guide.
Make sure you contact different manufacturers so you can find the best prices. Also, make sure that your suppliers permit private labeling. There are a lot of fake manufacturers online, so make sure you’re sourcing from a reputed manufacturer with at least two years of experience and trade insurance. Only use a trusted payment method.
While contacting the supplier, mention these details:
- The product you wish to purchase
- The quantity required
- The location you want them to be shipped to
- How you want your products to be shipped
Once you’ve zeroed in on a product and a supplier, you are free to negotiate. Most manufacturers only accept bulk orders of 500-1000 products. It is up to you to negotiate the terms of the contract. One handy tip – act like you belong so that manufacturers think you’ve done this before. Make sure no details are lost in translation by keeping communication simple.
Decide Your Fulfilment Strategy
With Amazon, you can choose to ship packages yourself or delegate the logistics to Amazon (for a price). We recommend signing up for the FBA program if you’re creating your private label.
If you’re an FBA seller all you need to do is make sure your products reach Amazon’s warehouse. Amazon takes care of storage, packaging, shipping, and customer support. This doesn’t come free, but it is definitely worth the money. Moreover, FBA sellers are eligible for Prime delivery and stand a greater chance of winning the Buy Box.
Create Your Private Label Brand
When you think about most brands, the first thing that pops into your head is their logo. There are also colors that people associate with brands. They play a major role in influencing customer buying decisions. These visual elements make a lasting impression that words never can. Keep that in mind when starting your brand. Your logo and brand colors speak for your company!
Keep these things in mind when choosing a logo or brand colors:
- Don’t blindly follow trends. It’s always better to come up with a unique logo design.
- Identify your brand colors and stick to two or three main ones.
- Even something as simple as a font is important. Stick to one or two.
- Keep your logo simple and minimalistic
- Do not use vector graphics, raster images, or stock art.
Once you’ve created your logo and settled on your brand colors, you need to start thinking about packaging. You may need to outsource it, but we recommend customizing your packaging. This will help you stand out from the rest of the competition and include branding elements. Make sure you include these details in your packaging:
- Brand name
- Product name
- Product photograph
- Manufacturing details (where it was made)
- Legal information
Make sure you give yourself enough time to create your brand elements and packaging before listing your product on Amazon.
List Your New Private Label Product
Your account is set up, your products are labeled, and you’re ready to ship. Now you need to list your product on Amazon. A good product listing is necessary for driving traffic and generating sales. Visibility on Amazon hinges on your ability to leverage keywords and media to create a rich and descriptive product listing. What makes a good product listing? If you need a more detailed explanation on how to optimize your listing, take a look at this guide.
Your product listing consists of 4 main components:
Keep your product title simple and add key details about your product in the title. When you’re selling a private label, make sure you mention your brand name. You have 200 characters to work with, and a descriptive title of 100 to 150 characters is a good start.
Customers on Amazon cannot visually verify a product before they buy it. Your job as a seller is to help the customer know exactly what the product is. High-quality photos and videos give customers a visual understanding of your product. We recommend at least 6 photos which cover every angle of your product. Amazon recommends at least 1280 pixels on the longer side. You can also add a product video to talk about its features!
You won’t be the only one selling a generic product on Amazon. If you need to stand out, your price needs to be competitive. You need to make sure that you’ll make a profit as well. You can start with a low margin early on and gradually increase prices once your brand kicks off. You can use SellerApp’s FBA fees calculator to check your profit margin for each product.
A customer has a right to know every detail about your product. Your product description needs to cover these details. Most customers reading the product description are considering making a purchase, so this is your chance to convert traffic into sales. We suggest using bullet points to make information concise and easy to read. Don’t forget to add your keywords in the product description
Launch Your Product
The most important thing to consider after the product launch is reviews. The best way to get reviews is to ask for them. Amazon has policies against incentivizing customers to give reviews, so be careful about how you contact your customers. Ask for honest feedback once the product is purchased but never offer discounts or goodies in return.