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 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 you sell 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.
Disadvantages 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.
- Many customers think of these generic items as being of lower quality simply due to the fact that the marketing budget that name brands have isn’t being applied to your products.
- You are depending on the supplier to make a good product. Any defects or poorly-made products will reflect badly on you, even though you had no control at all over the products.
- 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. Your options for purchasing from these suppliers will be limited to what trends they are following.
- Developing your own branded packaging does cost money, although it is still nowhere near the cost that you would incur if you produced your own inventory.
- It takes a lot of time to see private label selling result in large amounts of success. When your brand is interchangeable with many others selling the same generic product in different packaging, it is hard to gain the brand awareness that you need to become successful. 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.
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 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.