Planning to start an ecommerce business on Amazon in the USA? An important thing to keep in mind is that your selected method of selling will be a crucial factor in your performance. This comprehensive guide looks at Amazon Private Label, an effective selling strategy for everyone who wants to build a solid business on Amazon. Learn how to choose the right products, set a competitive price, and promote your Amazon listings.
Explained in simple terms, Private Label is a business model where you take products manufactured by someone else and then label and sell them under your own brand. The most obvious example of Private Label that each of us has probably come across is when a successful supermarket chain buys items (potato chips, toilet paper, etc.) from no-name manufacturers and sells them with its logo on it.
Amazon, one of the world’s leading online marketplaces, has been tapping into the numerous benefits of the Private Label model for years now. Amazon sellers identify products with high sales and order them from third-party manufacturers (mainly in China). As the next step, they label the goods with their own logo and sell them to Amazon shoppers. The Private Label business model is used by Amazon itself, as well as thousands of its sellers.
Amazon has been using the Private Label model for over a decade. As of today, the e-commerce giant owns more than 400 private label brands, such as Kindle, Echo, Amazon Basics, etc., and lists around 243,000 private label items across a variety of categories, from food to electronics. And the sales are soaring!.
For example, in 2017-2018, Amazon’s private label brands selling consumer goods (groceries, household items, beauty products, children’s products, etc.) grew by a whopping 81%. As of 2020, Amazon Basics had been growing by 47% a year.
Backed up by such impressive statistics, it’s no surprising that the Private Label model became wildly popular among Amazon sellers. Used by a staggering 59% of Amazon sellers, Private Label is one step ahead of other selling methods, such as wholesale and retail arbitrage (26%), online arbitrage (23%), dropshipping (10%), and handmade items (8%).
There’s quite a few things that make Amazon Private Label an attractive option for businessmen.
Like any business model, Private Label is not without shortcomings and risks.
Choosing the right product to sell is the alpha and omega of a successful Amazon Private Label business. Start with researching the market, looking for reliable suppliers, and calculating some financial metrics. Once you’re done with this part, you can proceed to marketing your items.
When selecting your product range, be sure to rely exclusively on market data. Don’t let your personal tastes and preferences veer you off the right path. Otherwise, you risk ending up with a large inventory that doesn’t sell because your customers simply don’t need it.
Step 1. Identify popular categories of products. You might want to fish fresh ideas from the following sources:
Step 2. Choose the best products.
Step 3. Once you have your eyes set on the right goods, you need to do market research to estimate the demand. Luckily for sellers, there are Amazon-specific tools that can do that for you:
These and similar online services offer detailed statistics on each Amazon product, including the average monthly sales, number of customer reviews, popular search requests, competitive analysis, and more.
Choosing a good supplier is a vital step that will have a big impact on your sales.
One of the best places to look for suppliers is Alibaba, a major Chinese marketplace that works with bulk orders. Sign up with the e-commerce platform, search for items that interest you, and pick several suppliers. Contact each candidate and ask them the following:
Order a product sample from the manufacturers that have passed the initial selection. When deciding which supplier to choose, consider the following criteria:
A low price is not always the best solution, especially if the product is of poor quality and the manufacturer is not good at smooth and transparent communication. Finding the best price-quality ratio may take long but it’ll pay off eventually.
After receiving a test batch of products from China, list it on Amazon and see how well it will sell. Before putting your merchandise out there, however, you need to choose one of the two methods of selling offered by Amazon:
For a quick test of a sample batch, opt the easier FBA model. All you need is to ship your items to an Amazon warehouse. The rest is not your concern: Amazon will pack and ship your orders and process customer reviews on the site.
Speaking of customer testimonials, they are of paramount importance at the stage of product testing. Scrutinize each review and make improvements to your business based on your customer feedback.
Now the time is right for putting a price tag on your items. To do this, you need to research your competitor’s pricing policies and make some basic calculations.
Study your competitors’ prices
Experts say that your ideal price should hover around 20% of the average market price. If, say, your competitors are selling mugs at $15, your recommended price range should be between $12 and $18. Don’t succumb to the idea of selling at the lowest price out there. However attractive at first sight, dumping leads to losses in the long run.
Estimate your profits
To calculate your potential profits, you need to know three parameters:
There’s no lack of online tools that can help you with your calculations:
Do you have to register a brand under which you’re going to sell your Private Label items? The answer is a definite “yes.” It’s a surefire way to protect your business from the so-called “hijackers.” These are people who sell counterfeits or resell your items using your product cards.
Protecting your Amazon business is done in two steps. First, you need to register a trademark. Then, you need to get it enrolled on the Amazon Brand Registry.
How to register a trademark
You have two options:
How to join Amazon Brand Registry
Brand Registry is Amazon’s program designed to protect registered brands from violation of their intellectual property. Amazon goes to great lengths to punish rogue sellers that parasitize off hard-working brands. The Amazon data say that since its launch, Brand Registry has helped reduce violations by 99%.
To bring your inventory in front of the eyes of your target audience, you need a mix of strong branding, SEO, and advertising. Let’s focus on each of these ingredients one by one.
Create a brand identity
One of the best things about the Private Label model is that it enables you to label your items with your own brand. A compelling visual branding is a powerful tool that comes with a myriad of benefits for your ecommerce business. It’s a great way to showcase your products’ value to your audience and elevate your business above competitors.
Start with creating a logo that will become a founding pillar of your brand identity. If you’re a rookie in graphic design, you’re welcome to use online logo makers, such as ZenBusiness. Type in your business name and get a custom logo for your Amazon business!
Your next step is to optimize your product listings. Along with high-quality photos of your products, SEO is a crucial factor that can help you step up your game and rise above your opponents. Here are some tips you might want to follow to pave your way to the top of Amazon rankings!
Launch PPC ads
Another effective way to make your inventory visible to your target audience is to launch an ad campaign. While requiring cash investments, this strategy can save you lots of time testing your first batch of items.
Amazon has its own ad system in place, Amazon PPC. With it, your product will display at the top of search results, across remarketing ads, and even on product pages of your competitors.
A/B testing is also a viable way to improve your marketing efforts. Launch two versions of ads with different keywords, prices, photos, and other parameters and see which one delivers better results.
Amazon Private Label is an easy and time-tested way to succeed as an Amazon seller. When preparing your business for launch, research your niche, find a high-selling product, and come up with an attractive USP. Apart from that, you also need to build a strong brand and market your inventory to signal your presence to your audience and increase exposure of your products.