There are Many Ways to Sell Products to Make Money Online...Starting a Private Label Business with Amazon FBA is a Winning Strategy for Massive Profits and Payouts.
First...What is Amazon Private Label?
Let's quickly define Private Label Products and the concepts of Private Labelling before we jump into the specifics of private labeling products for Amazon and FBA Private Label.
Then we’ll get into the basics you need to know for selling private label on Amazon.
Retail businesses and private brands of all shapes and sizes have been able to private label products from larger manufacturers for over 100 years. The concept predates online business and Amazon FBA, but the overall concept is the same.
Private Label Products are also called "White Label Products" or sometimes "Private Brand Products"
To keep things simple we will refer to the more generic term, “private label” for this article.
If you are unsure of terms used in this article, including Amazon FBA (Fulfillment by Amazon) then you may want to check out our Amazon Glossary of Terms.
In a private label arrangement, a third party manufacturer is hired by an independent seller or brand (you) to manufacturer a product using their own internal machinery, facilities and workers.
However, the product is sold under the independent seller’s brand name. That independent seller is now called a “private label seller”.
Usually, but not always, the manufacturing company will also provide private label packaging services using the private label seller’s branding.
Decades ago, the generic private labels were white with a generic product term on them. That’s where the term “white label” originated from.
Retail and Amazon white label products no longer (at least most don’t) use the generic basic white labels, but the term has stuck around.
This has been a popular way to start selling products online or in stores for so long because it requires lower start up capital to begin the process.
You, as a private label seller, can come up with a product idea but pay someone else to make and manufacturer the product using their equipment they already own and operate.
The manufacturers will typically only make a private label product with a minimum order quantity of at least hundreds of units. For cheaper products, they will typically have a minimum order quantity of over 1000 units.
The largest manufacturers may require very large minimum order quantities regardless of the total order size.
The private label manufacturers like this setup because they get a bulk order of products that they sell directly to the private label seller and don't have to worry about retail sales, marketing or servicing multiple suppliers.
They know a successful private label seller will be back again and again to order more and more units from them for the foreseeable future.
If you're looking to sell private label products on Amazon there are typically 3 main types of private label goods for new sellers to launch.
1) When you private label an existing product and make no significant changes aside from adding your private label brand name to the product and/or its packaging.
When you hear Amazon gurus and marketers talk about “me too” products, this is what they’re referring to. A non significant change would be something like the color of the product, or a slight texture change with no real purpose outside of aesthetics and branding.
However, that also means the barrier to entry is low which typically means high competition.
You can absolutely find success this way but you need to dial in your Amazon private label brand assets to standout from the competition.
Perhaps more important is the fact that your Amazon product listing optimization, marketing, Amazon copywriting and Amazon keyword research have to be top notch.
The majority of Amazon private label products for new sellers on Amazon FBA fall into this first tier.
2) When you want to sell an existing product but identify some unique ways to improve the product by adding additional functionality, add-on pieces, or streamlining the product to make it easier to use.
Selling on Amazon this way can be extremely lucrative for people who are able to identify ways to improve products. It involves more market research, product research and creative thinking, so the barrier to entry is not as low as the first example of private label products.
Private label brands that follow this formula to create new products can make massive sales and experience high profit margins selling on Amazon, but they need to stay on their toes and make sure they maintain their position as a top Amazon brand in their category.
Other Amazon FBA private label products and brand competitors will pop up following the first formula.
3) When you invent a new product or turn a novel idea into a new product to sell on Amazon, but you use a third party manufacturer for their private labeling capabilities.
Selling branded products this way has the highest ceiling for overall success and sales. But you need to have the creativity and research skill set to invent a new product or products.
The risk is inventing a product that customers don’t want or need. You may think something is an amazing idea but the market doesn’t respond and sales are low or non existent.
But when it works...you can disrupt an entire market and literally create a 9 figure or even billion dollar brand that transcends Amazon FBA and dominates the greater retail market.
This type of private label business is the least common of the three, but there are still many highly successful private label products and brands that use this formula to sell their product on Amazon.
If your product gets to that point you can move production in house and you would no longer be considered a private label brand.
Contrast the 3 Types of Private Label Categories Above with the Retail Arbitrage (RA) or Wholesale Supplier Model.
As a smaller Amazon FBA seller who exclusively sells wholesale from suppliers or follows the retail arbitrage process of personally searching for inventory in local consumer stores and buying at a discount to resell, your profit margins won’t be as high as if you were selling a private label product.
Your start up costs will probably be lower and the research is easier because if a product is selling a certain amount per month in retail stores, then customers will likely turn to sites like Amazon to find the product cheaper.
Be aware that wholesale suppliers or major brands may monitor Amazon for the price of their products on Amazon and report sellers who go under the Minimum Advertised Price (MAP).
Amazon Private label sellers generally don't have to to worry about MAP, legal takedowns or copyright violations on your product listing.
That’s why the Amazon Copywriting Brothers recommend small businesses and entrepreneurs should think about selling white label products and creating an Amazon private label business.
Private Labels and Where to Begin?
Selling private label products starts with in depth market and product research.
You need to have a system to identify potential winning products that you can add to your Amazon FBA catalog or Amazon store brand.
A great starting point is to brainstorm and think about product niches that you are personally interested in for work or as a hobby or activity.
That isn’t the only way to start, and many people have started wildly successful private label businesses for products they didn’t know anything about prior to launching…but if you regularly use and enjoy the products in your niche then you may be able to think of improvements or ways to set your private label product apart from the competition on Amazon.
If you’re starting budget is limited then take that constraint into account for your first product launch. Find a lower cost product with healthy margins.
Of course, if you’ve identified a private label product that you think will do well on your Amazon FBA store, then don’t let a lower margin or retail price stop you from selling on Amazon FBA.
That said, it is our personal recommendation for people brand new to selling private label products on Amazon to make sure your the product you want to sell has an Amazon retail price point over $10.00.
As you grow your brand and sales, you can create new private label products on Amazon with lower prices.
A new brand with no customer base will struggle to compete on cheap products while still creating a profit margin. So it’s best to save those products until you have more experience selling product on Amazon FBA and have a better grasp of fulfillment costs, your marketing cost and how the competition reacts in your amazon category.
You want to avoid sitting on inventory that doesn’t sell. Amazon’s fulfillment fees increase if you have a product on amazon sitting in the warehouse taking up space and not selling.
It’s also important for people looking to sell private label products on Amazon to not make their only distinguishing marketing feature all about low price.
This can create a race to the bottom with the competition, who are probably more established and can out last you by lowering their prices to eat into or even eliminate your profit margin.
Creating a marketing plan purely around a low price also means you’ll be sacrificing quality to maintain your margins.
The average customer on Amazon takes Amazon reviews and ratings into account before buying a product. If you have a low quality product you will quickly earn some bad reviews that will tank your new listing and can destroy a young unestablished brand.
A final word of advice when creating your first product. Avoid selling products that are highly seasonal and avoid product categories that require lots of additional paperwork to get approved.
Working with Private Label Suppliers and Manufacturers
Once you’ve found a product you think will sell on Amazon, you’ll need to find a manufacturer who can create the product.
Many companies are very familiar with creating private label products and you should work with a company who knows the process and has experience working with Amazon sellers.
Keep in mind, if you are sourcing from Alibaba, that many companies on there pretend they are the manufacturer. In reality they are a broker or a supplier who acts as a middleman with the true manufacturers.
That isn’t inherently a problem, because the true manufacturing company may not have an English speaking salesperson who can communicate directly with you.
You could engage the services of a sourcing agent to act on your behalf, but that adds additional expenses to your start up costs. If you’re budget is tight then you may not be able to afford those services.
If using a site like Alibaba or Aliexpress, make sure you work with a supplier who can provide samples, offer trade assurances and ideally a supplier who has in house private labeling capacity for your product packaging.
Not every company offers private label packaging, which is important if you’re trying to establish a long term brand on Amazon.
You can work with a supplier or manufacturer in the United States (or Europe if you’re in Europe) as well.
China isn’t the only place to source your inventory or create relationships with good manufacturers.
Companies in the USA and Europe, in general, can provide higher quality products but the cost of labor is higher too.
The higher cost of labor will likely mean you pay more upfront when ordering your private label products.
However, a higher quality product can sell better than cheaper alternatives and customers will notice the difference in quality.
That’s good news for your brand and your product reviews.
If you’re located in the same country, and ideally region, as your manufacturer, then you can schedule inspections and trips much easier. Forming a good relationship with the makers of your product will help the whole process work better.
If the supplier you use doesn’t offer their own private label packaging, then you can also source your packaging from a third party printer and send it directly to the manufacturer without having to worry about international shipping prices or lead times.
In general, shipping your finished product to Amazon fulfillment centers or your own warehouse will be cheaper and faster as well.
If you do end up sourcing from the USA, you can incorporate that into your marketing efforts. Customers all over the world like to see “Made in the USA”. It may even be the deciding factor to get a prospect to convert into a paying customer.
Establishing Your Private Label Brand Assets
We haven’t touched on it too much, but a major benefit when following the private label business model, is the fact that you have ultimate control over your brand.
Having a well defined brand can help you tell a branded story about your products and connect with your customers emotionally.
It's been proven time and again that emotional connections and benefit driven selling points are the true keys to securing customer loyalty and high conversion rates.
Creating a valuable brand and branded assets will help propel you to medium and long term growth on and off of the Amazon platform.
Many of our own clients here at the Amazon Copywriting Brothers have secured massive multimillion dollar exits when they sell their retail brand after using our Amazon Copywriting Services in their business.
They couldn’t do that if they had a random assortment of products without any brand identity or cohesion.
Customers absolutely prefer to purchase from companies and brands who tell a story they can identify with and believe in.
You’re also very limited in your ability to control the listings of the products you sell when you’re not the brand owner.
We’ve helped make our clients over $250,000,000 on Amazon because we can directly edit their product listings to add high converting customer centric copywriting that beats the competitions copywriting for Amazon listings.
Our professional Amazon listing service lets us get extremely granular with our keyword research and Amazon SEO optimization to help our client’s products rank for lots of high value keywords.
If you’re a wholesale seller or relying exclusively on retail arbitrage then Amazon is unlikely to accept your backend changes to a product listing. That means you can’t carve out more keywords just for your listing.
Your additional keyword changes likely won't be accepted by seller central.
And even if they are, then every third party seller will benefit.
Once you outgrow your suppliers you can begin manufacturing your products in house to create even great profit margins. You can even use your own facilities to do fulfillment outside of Amazon.
At that point you can even supplement your businesses income by becoming a private label manufacturer for other businesses and brands.