Choosing the right business model is important before selling on Amazon.
Learn why you should choose Amazon FBA private label and steps on how to start private labeling
Amazon FBA Private Label
A complete Analysis of Different Amazon Models and Importance of Amazon FBA Private Label
Selling on Amazon and making it a success is a huge achievement considering the competition on such a
platform. However, success becomes even more celebratory if you are selling your private label on
Amazon.
This is because the highest number of sellers on Amazon are those who are selling their private labels.
Wholesale, retail arbitrage, and drop shipping follow the Amazon FBA private label. This shows that this
model is yielding better results than other models.
6 Different types of Business Models on Amazon:
There are 6 other Sale methods which are being used by the sellers to sell products on Amazon. They are
as follows:
1) Wholesale:
Under the wholesale business model, sellers select an already existing product of some brand, purchase
those products in large quantities from some manufacturer or distributor and sell them on Amazon or in
any other.
2) Retail Arbitrage:
Retail arbitrage is another popular business model prevailing both offline and online. Arbitrage means
finding a price difference of a product and taking advantage of that difference. You take advantage of
the price through buying from the lower price market and selling the product in a high price market that
could be amazon in this case. This is called retail arbitrage.
3) Online Arbitrage:
Online arbitrage is similar to that of retail arbitrage. However, it differs only at one point that in this case
arbitrage is carried out in an online marketplace. This means that under this business model a seller
buys a product from an online marketplace and sells it on another online marketplace such as Amazon
at a higher price.
4) Drop Shipping;
Drop shipping is another popular business concept being used on Amazon. This business model is
popular among the sellers because in this model you do not need to have a huge investment to get your
product manufactured for private label or to buy goods for retail arbitrage. It is quite a unique and
seamless concept in practice in which you do not need to buy the product for inventory stock. Rather
you just run an online store comprising different products or a single product. Once an order lands on
your store, you notify your supplier or producer about the order, pay them, provide them with
customer’s details, and then ship the order directly to the customers. This is a seller who is saved from
buying inventory stock of his product in this model.
5) Handmade:
Amazon has provided a very unique platform for artisans to sell their handicrafts to a large number of
potential buyers. This platform by Amazon is strictly for the artists who produce handmade products.
This platform does not allow any product produced on a large scale rather to sell on Amazon Handmade,
the product must be handcrafted.
6) Amazon FBA Private Label:
To completely understand this phenomenon, we need to understand private labels first. In business
terminology private label is used as a synonym of personal brand. That means when you get your
product manufactured by someone and sell it under your own brand name, it is called a private label.
Furthermore, under private labels if you get a new, innovative, or a unique product manufactured, you
will have a competitive edge over your competitors. However, usually homogenous or somewhat
differentiated products are being privately labeled. In other words, normally products are already
available in the market but you choose a product and get it manufactured to sell it under your private
label.
When a private label product is ready and you sell it on Amazon FBA, it is called Amazon FBA private
label. In addition, Amazon FBA is a service provided by Amazon known as Fulfillment by Amazon (FBA).
In this Amazon provides the services of order fulfillment and shipping.
6 Reasons why you should use Private Label on Amazon:
Aforementioned different business models are popular among the sellers on Amazon on different levels.
However, these models yield varying levels of profitability, and are different based on the operational
difficulty.
Notwithstanding, Amazon FBA private label is the model which is used mostly by the large number of
sellers. In the following paragraphs we will dive into the reason why one should use a private label on
Amazon.
1) Brand Ownership
In a competitive business, more important is what aspect of your product you control. That control gives
you a competitive edge over your competitors, and hence contributes to the profit margins. The control
includes, the price control, brand image, and supply control. If you have control on any of these aspects,
you will be better off.
● Amazon FBA private label gives you the control over your brand. With ownership of a brand, you
are responsible for your brand image, you will have the power to improve and protect your
brand image and goodwill. In contrast, in case of retail arbitrage, you do not have brand
ownership and therefore your business is indirectly in the hands of those who are responsible
for brand image. If brand image or goodwill goes down, your business will have a direct negative
impact.
2) Price Control
Furthermore, once you own your brand you have control over the price as well. A large price margin in
hand enables you to increase your sales by decreasing the price below competitors. However, in case of
other models, you have very little margin that contracts your ability to control the price.
3) Control over Supply Chain
Brand ownership aspect of private label provides you the ability to control the supply chain to some
extent as well. This is because you are getting your product directly from the manufacturer in a bulk that
makes a smoother supply chain.
4) Control Over Product Quality and Customization
When you own a brand, you have direct control over the product quality and customization. This is
because under private label you can get manufactured of a tailored quality. Furthermore, you can
customize the product through your innovative insight. It makes your product stand alone in the market.
5) Low Costs High Profit Margins
When you buy a product from a supplier or a distributor, he gives you the price after adding his own
profit margin. That shrinks your profit margin and costs increase. As a result your competitive edge in
the market. However, in case of private labeling, you get your product manufactured directly from the
producer. Now you do not have to pay the supplier his profit margin. This increases your profit margin,
decreases cost and enables you to play with the price and earn more profit.
6) Amazon listing is made Easy
When you launch your own brand and create an account under Amazon FBA private label, it gives you
the creative freedom to design and improve product listing according to your own requirements and
keywords research. You will have control over personalized images with high quality, and editing images
will be easy for you.
On the contrary, you do not have such freedom if you are selling an already existing product.
3 Main Steps to start your own Amazon FBA Private Label:
1) Product Analysis
Before selecting a product for private label, carry out a large scale market research to identify a product
with high demand. The recommendation is to identify more than one product, so that you can run a
comparative analysis and select the more appropriate product.
●high demand,
● less cost of production,
● a necessity product,
● And have relatively less competition.
Note: Select a product in which you have creative freedom to customize or innovate.
2) Selection of Manufacturer
The process to select a manufacturer is similar to that of selecting a product: Carry out a suppliers’
market research, select more than one supplier, and contact them. Provide them all with your
requirements and take their rates and conditions. Next, compare their responses and select the one
with the lower rates, and the one who is ready to agree to own your terms such as long term
agreement.
3) Create Sale Strategy
Once your product is ready, the third step is to design a strategy to sell your products. For that, start
creating your amazon listing:
● Make high quality images of your product
● Carry out keywords research and select the relevant ones
● Write a comprehensive description of your product
4) Amazon FBA
In the fourth most important step choose Amazon FBA private Label as your fulfillment method. It is the
best method and is used by most sellers on Amazon. It takes the burden of shipping the product to the
customer off from the seller, and makes him free to focus on his core responsibilities.
Conclusion:
To sell on Amazon, different sellers use different models. However, Amazon FBA private label is the
popular one. Amazon FBA frees you from the operational stress of shipping the product to the
customer. Whereas a private label provides you with brand ownership that yields healthy profit margins.
You can start creating your private label and start selling on FBA by following simple steps: Market
research to identify the product, selection of manufacture and by creating a creative sale strategy.