Selling Private Label on Amazon -Pros and Cons
Entrepreneurs that sell products on Amazon have many options when it comes to sourcing their products and selling them to customers.
One of the many ways to make money on Amazon.com is to sell private label products, which are generic products that you can sell under your own brand name after purchasing them in bulk from a bigger supplier. This process helps you save on production costs and fills up your inventory faster so that you can serve more customers.
But is it really the best way to sell products on Amazon? Here are some pros and cons to help you determine if private label products are right for your brand.
Pros of Selling Private Label Products on Amazon:
There are many great reasons to try this selling method on Amazon.
- You can afford to keep your prices lower, which attracts more buyers. Because you are able to save money by avoiding the cost of products that have branding, you can keep your prices lower.
- You can provide your customers with a big mix of products to suit multiple needs. One great thing about selling private label items is that you can not only provide a mix of item types, but also a mix of item quality. You can offer affordable items and higher-quality items that meet different needs.
- You have more options for suppliers now than ever before. Production companies that create these generic products are seeing big success by selling to entrepreneurs, so they have begun to offer far more options that you can take advantage of today.
- You have far more control over your profit margin than if you produced your own products. When selling a private label items, you are negotiating the price from your supplier, and can list the price to your buyer at whatever you like. Because you have so many options for suppliers, you could easily turn to a more affordable supplier if your profit margin starts to shrink. You don’t have to worry about rising production costs that you’d have to cover if you produced your own products.
- You can adapt to trends faster and easier. If a specific product or category starts to gain popularity among your target audience, it is very easy to get a new product listed quickly so that you can take advantage of the need.
- You can control the branding of the products that you sell. You may prefer to have multiple different brands under one umbrella company that you use to cater to different target audiences. With private label items, you can do this without needing to produce multiple lines of products.
- You don’t have to compete with name brands because your items are being sold through Amazon. Instead of trying to make your own website or online store gain attention, you can simply allow Amazon to direct customers to your items by ensuring that your listings are using good SEO practices.
- You could modify the products once you get them to better suit your customers and make your brand stand out more. Private label items aren’t protected by any sort of legal rights that make it impossible for you to change them in order to sell them.
- Selling on Amazon have created a great opportunities for startup companies. Some of them have created a stable income to leave their jobs and just focus on growing their own business.
- The cost of running a business through selling on Amazon is lower compared to other channels.
- FBA is fulfillment by Amazon. It is a great way to buy the products from your suppliers, and ship to Amazon to store and fulfill orders.
- Amazon sells products in the USA, Europe, Asia, and the Middle East. This is great as it will help you expand your business worldwide.
- You can pick a unique niche for your brand, and expand your ideas without much cost.
- Amazon offers a great way of advertising at a low cost.
- Amazon customers are more brand loyal, they love to test new products from the same seller.
- Reviews and videos can easily help your brand marketing.
- You don't have to have millions of dollars to start selling on Amazon. Many sellers started at $1,000 only.
- You don't have to buy large inventory, you can start small and expand your product collection from there.
- You can also allow other sellers to sell and distribute your products on Amazon. This is a great way to find more customers and build your brand.
Cons of Selling Private Label Products on Amazon:
Now let’s talk about some of the reasons why you may not want to sell private label items on Amazon.
- You may have a harder time building customer loyalty because you don’t have a central hub for your products. By using Amazon as your storefront, it can give the impression that Amazon is the company that the customer is buying from, rather than you.
- Customers often perceive generic items as lower quality because they lack the marketing budget of name brands.
- You are depending on the supplier to make a good product. If there are problems with products, it will make you look bad, even if you had no control over them.
- You likely won’t have the opportunity to sell anything that is unique to your market. Private label suppliers produce things that are already selling well, following trends for high-demand products. These suppliers will limit your options for purchasing to the trends they are following.
- Creating your own packaging costs money, but it's much cheaper than making your own inventory.
- It takes a lot of time to see private label selling result in large amounts of success. It is challenging to gain brand awareness when your brand is similar to others selling the same product in different packaging. This brand awareness is crucial for achieving success. The only way that you have to build success is to continue selling for a long time.
- You do need experience in online sales to be successful with this type of selling. You’ll need a budget to purchase a stock of inventory before you get started, to design and produce branded packaging, and to invest in quality product listings to attract searches. Patience and some investment will be required.
- If you don't pick the right supplier, you may have to deal with shipping delays and bad products quality.
The Bottom Line
The bottom line for private label selling is that it can be a very affordable way to operate a business on Amazon. However, it is not a get rich quick scheme that will work for you overnight.
You do have to do some research to ensure that you are ordering from a supplier known for consistent quality, and you also have to spend a lot of time working to make your products stand out from competitor private label sellers, and find top Amazon Sellers to compete.
And while you give up some of the autonomy to truly choose what you are selling, following the trends with your inventory isn’t necessarily a bad thing.
If what you want is to meet a need and turn a profit, and to skip the huge amounts of work that come with producing inventory, then this is a great way to get started as an entrepreneur on Amazon.