Are you considering starting an Amazon FBA private label business? Do your research first! These are our pros and cons to private label selling on Amazon.
January 20, 2023
If you want to start an e-commerce business in 2023, Amazon is the best platform to work with. Amazon's thriving marketplace is perfect for entrepreneurs ready to work hard. There are several models you can choose from to start your FBA store - including private label selling on Amazon. Is this the right choice for you? Let's find out. 👇
All You Need To Know Before Becoming An Amazon FBA Private Label Seller
Before selling on Amazon, you must decide which model suits you. There are many ways you can create a profitable Amazon store.
Some of the most popular business models on Amazon include
- Amazon FBA Private Label
- Retail Arbitrage
- Amazon Wholesale Business
- Handmade Goods
- Merch On Demand
These models can be used effectively to create a highly successful Amazon business. However, they all come with pros and cons that must be considered before you jump into business.
What Is An Amazon FBA Private Label Business?
An Amazon FBA private label business allows you to build your own private label brand by creating your own version of an existing product.
Private-label (or white-label) Amazon businesses are incredibly popular in today's marketplace.
How does this model work?
You find an existing product that is already performing well on Amazon, think of a way to improve and customize this product, build a brand, source your product affordably, and sell it on Amazon.
With an Amazon private label business, you don't have to handle your product physically - Amazon does this for you.
Here at EcomHub, we specialize in private-label selling on Amazon. We landed on this as the most effective way to build a profitable business on Amazon after carefully considering the pros and cons - but everyone's situation is different, and Amazon FBA private label isn't for everyone.
Check out the pros and cons to decide whether an Amazon FBA private label business is for you!
Pros Of Amazon FBA Private Label
There are many pros to selling private label on Amazon! Our team has relied on this model for years to generate 6- to 7-figure Amazon stores (over and over!).
Here are 6 of the most critical advantages of Amazon FBA private label.
- You own the brand. When you own a private label store on Amazon, you have your own brand. Every sale you make is directly benefiting you and helping to get your logo in front of more customers. You aren't building someone else's business for them.
- More freedom on Amazon. As a private-labeling FBA seller, you can (and should) get your own trademark and enroll in Amazon's Brand Registry. This gives you more freedom to use exclusive marketing tactics like Amazon A+ content, video ads, sponsored brand content, a custom Amazon storefront, and more. You don't have this freedom when wholesaling on Amazon.
- Higher profit margins. You don't have to split profits with a parent company - so you determine your profit margin. If you can source a cheap product and keep business costs low, you can easily enjoy profit margins of 30-40% (compared to around 10% for wholesale or retail arbitrage).
- You own the listing. No competing for the Buy Box. As long as you've trademarked your product and enrolled in Brand Registry, you can be sure you're the only one of your product out there. That means you get to own the Buy Box all day, every day.
- Greater protection against copy-cats. Amazon's Brand Registry program protects you against copy-cats seeking to piggyback off your success or duplicate your brand.
- Scalability. You don't have to touch your own private label products. Once you've approved the final design and taken care of your marketing assets, all you have to do is send your shipment to an FBA warehouse and manage your Seller Central account. That makes scaling your business a breeze because the workload is the same whether you're dealing with 100 products monthly or 100,000 products monthly.
Cons Of Amazon FBA Private Label
Nothing worth anything comes easy. This is true of an Amazon FBA private label business.
There are many pros to this model - but there are cons to consider as well.
Here are four cons to private label selling on Amazon.
- Competition demands creativity. Amazon FBA is a competitive marketplace. You have to spend a lot of mental and creative energy on the front end to develop a product that will perform well. Wholesale and retail arbitrage are both less mentally taxing at the beginning in this regard.
- Brand and business setup takes time. Since you have to get your trademark and register your brand, there is work to do at the beginning. This includes full-on brand development, the creation of digital assets, and marketing initiatives. You also have to register your business as an LLC or deal with selling as a sole proprietorship. These processes also cost money, which requires additional startup funds.
- Sourcing products is complicated. At least at the beginning, it can be difficult to find overseas suppliers you can trust to deliver a quality product at an affordable price. Luckily, our team has recently acquired our own sourcing office in China to make this process easier for our team and clients!
- Information overload. It can get overwhelming if you don't have someone to help you! There are many to choose from when you want to sell private label products on Amazon - and a vast pool of resources online to pull from with different advice on how to succeed.
How Private Label Has Changed
Selling Amazon private-label products is a different game today than it was a decade ago.
In the beginning, the process was as simple as copy and pasting. New sellers would find high-performing products online, source an almost exact replica, slap their label on it, and start selling.
Sounds spammy, right? But it worked. Now, in 2023, this model has changed. The marketplace has become more saturated. Back in 2007, only around 25% of sales on Amazon were made by third-party sellers1. Now? That number is closer to 60%1.
More competition requires more creativity. Selling private label products on Amazon is no longer "copy and paste." You must find a way to put your unique spin on a popular product so you can stand out from your competition - not just offer a slightly lower-priced version of their product.
This is one reason so many new sellers lose money when they start on Amazon. They listen to old advice, try the copy-and-paste method, and can't get their store off the ground.
Amazon FBA Private Label For Beginners
While there are challenges associated with Amazon private label, many of these can be overcome with the right tools. We have custom-made our training material to help you tackle the four cons we addressed in this article - without the headache.
If you want to start an Amazon FBA store, your best bet is to work with professionals who can guide you through the ever-evolving world of Amazon and help you find an Amazon private label product that will win big.
Our Amazon FBA Academy is the perfect training program for any prospective seller. Our newest launch includes freshly updated course content, one-on-one mentorship, and hands-on guidance. Don’t trust our word, though - check out what our clients are saying!
If you're interested in starting your private label business on Amazon, our team of experts would love to help you take the first step.
Starting an Amazon FBA private label business can be a great way to make money online. But it's not without its challenges. You must be creative and have the right resources to succeed - that's where our team comes in! Schedule a call with our Amazon experts to start building your Amazon FBA private label business today!
Julia Grant is a copywriter specializing in e-commerce and small business, helping businesses expand their reach with copy that clearly communicates their message and converts. She is a certified translator and interpreter and prides herself on providing culturally relevant content in both English and Spanish.See more posts from this author