It’s no secret that reselling on Amazon is a highly competitive business model. There can be tens or even hundreds of companies selling the exact same brands as you. This often results in the companies with the most efficient operations finding success while leaving little reward for the creatives.
As an Amazon reseller, you have access to highly valuable data. And this data, coupled with your operational expertise gained from reselling and a little creativity, can be leveraged to build a more profitable, defensible business with significantly less competition by expanding into a private label offering.
Here is a quick, comprehensive guide explaining how Amazon resellers can start a private label brand.
What is a Private Label Brand?
A private label brand finds existing items manufactured by a third-party and sells them under its own branding.
For example, let’s assume you wanted to sell vitamins. Instead of trying to track down all of the individual raw materials, formulations, bottles, and labels, you could instead work with a contract manufacturer that has pre-made vitamins ready to ship. Then, all you have to do is supply them with your logo and packaging concepts so they can add your “label” to the products.
Unbeknownst to the consumer, there are many brands that are selling the exact same product made by the exact same supplier. They’re just branded differently.
Why You Should Start a Private Label Brand
There are many reasons why you should start a private label brand, opposed to just reselling other brands on Amazon. And while reselling on Amazon can provide consistent, low-effort cash flow, it doesn’t give you much control over your business, and profit margins can be low.
However, when you start a private label brand, you can take advantage of the Amazon flywheel and remove yourself from some of the headaches of reselling.
Here are some additional benefits of creating a private label brand:
- Higher profit, since you choose your suppliers and don’t rely on reselling other brands that you’re buying at a markup.
- You retain more control over your listings through IP and Amazon brand registry and have the ability to optimize for higher conversions.
- You have a better opportunity to build a brand outside of Amazon and start accumulating customers loyal to your brand.
- Your business would earn value if you were to sell it since you own your IP, your customer relationships.
Steps to Start a Private Label Brand as an Amazon Reseller
Now that you understand what a private label brand is and the benefits of building this type of brand, let’s walk through the steps you can take to create a private label brand as an Amazon reseller.
Step One: Find What Private Label Products to Sell
Leverage your existing data and expertise.
You are selling existing brands on Amazon. And whether you’re selling a few hundred dollars or hundreds of thousands of dollars worth of product, you have data.
This means you can leverage this data and category expertise to identify products with the most potential.
Consider the products that (1) are most profitable (2) you possess the most expertise and confidence in 3) have minimal competition and (4) cause the least amount of issues and complications with Amazon.
For example, you may find that generic shampoo is highly competitive with thin margins and is therefore, likely not worth getting into. However, you may find in your data that some of the more niche shampoo brands perform well. And over the years, you’ve developed expertise in the hair care category so it might make sense to explore the idea of a niche hair care brand.
Your products represent your brand. Even though you aren’t physically making the products, each products’ quality will directly impact the success of your brand. So, take the time to conduct extensive product research to ensure your brand offers the best products on the market for your target category and price point.
Here are a few tips for conducting product research:
Step 1: Use the Right Tools
While you have plenty of internal sales data, platforms like Helium10 or JungleScout will allow you to leverage third-party data to further evaluate existing products being sold on Amazon. To find more product research tools, visit this Amazon seller tool directory.
Step 2: Identify Competitor Shortcomings
To determine this important factor, look at competitors’ Amazon product reviews and Q/A. With a little competition recon, you will understand their shortcomings. Once you garner this information, you can devise how you can make improvements and differentiate your new products.
Amazon.com: A Screenshot (cropped) of customer review, Retrieved May 13, 2021; From https://amzn.to/33TnsXe
Step 3: Avoid Saturated Categories
The line between popularity and saturation can be fine. Yet, you must choose products with proven selling potential that aren’t overly saturated and have no opportunity to differentiate.
Step 4: Reduce Complexity
- Product Dimensions
- You want your products to be small and compact. Ideally, you want your items to weigh 3lbs or less and fit easily into an average shipping box. The easier it is to transport, the lower your shipping and FBA storage fees.
- Item Price
- The higher you can feasibly sell your products, the more opportunity you have to capture higher margins. Shoot for items that can sell for at least $20. Additionally, the use of an Amazon repricing tool will also streamline your pricing strategy.
- Seasonal products can be tricky, for the simple fact that they are inconsistent and are difficult to forecast sales. For example, if you sell Christmas sweaters and you under forecast inventory, you could sell out of inventory in November right before the busy season and thus, lose a considerable amount of sales. On the other hand, if you over forecast, you could be stuck with excess inventory going into the new year.
- You can have seasonal products to boost sales for that season and offer evergreen products to balance the seasons. Additionally, you don’t want to start with a seasonal product as your very first product.
- The simplest manufacturing plan is the best plan. The fewer moving parts you have for your product to be sold and reach your customer, the better. For example, a bar of soap will be much easier to manufacture than a custom electronic device.
Bonus Tip: research your competitor’s businesses, not just their products. Evaluate their operational efficiency and try to find gaps in their process.
For example, your primary competitor may have a 70% 30-day feedback score on Amazon. After reading a few customer complaints, you may find the competitor has issues 1) shipping orders on time and 2) that products are frequently damaged.
Since you’ve been reselling on Amazon for a while, you likely have a good system in place and can fulfill orders on time (if you’re not using FBA) which will give you an edge. Additionally, since you know customers are unhappy about the condition of the product they’re getting from your competitor, you’ll want to ensure you have a more thorough quality assurance process in place and perhaps use more protective packaging.
Step Two: Finding Suppliers
Finding suppliers sounds much more complicated than it is. Here are a few ways to find the best suppliers:
- Find the right platform:
- You could find a private supplier, but it might be easier to leverage a platform like Alibaba that has thousands of suppliers available for your choosing.
Alibab.com: A Screenshot (cropped) of homepage, Retrieved May 13, 2021; From https://www.alibaba.com/
- Ensure each supplier meets your criteria:
- Make sure the company has at least a five-year history.
- Only work with gold status suppliers.
- Find a supplier with a lower Minimum Order Quantity (MOQ), at least for your initial order and until your sales ramp up.
- Order samples and evaluate each product.
- Get samples from three potential suppliers and carefully inspect and test each one to ensure quality.
Step Three: Branding
Branding is how you’ll differentiate your private label products and emotionally connect with your customers. If you’re not skilled in this area, seek out professionals – it’s worth spending extra to get this right.
Here are the key elements of branding:
Choosing a Name
Make your brand name unique but easy to remember (and spell). Remember, if a customer wants to look up your private label’s offerings directly, you want them to find your brand easily. Make sure the name is available for a domain name and social media handles.
Creating a Logo
Much like your label’s name, you want your logo to be easy to recognize without being obnoxious. You want to use colors that reflect the tone of your brand. For instance, if you are selling baby items, you might want to use light, bright, fun colors. You can find graphic designers on Upwork or Fiverr.
Your packaging should display your label’s name, logo, and the name of the product. Ensure your packaging abides by all legal parameters (such as child-proofing, if applicable).
You want your packaging to be appealing to customers. However, the colors and the information need to reflect the product in its entirety. Therefore, if a warning label or specific usage direction is required, make sure the statement is clear, visible, and meets all requirements.
Step Four: Creating and Optimizing Your Amazon Listings
As a reseller, you may not have as much experience creating and optimizing listings since you’re typically ASIN matching. Here are a few quick tips on how to optimize your listings:
- Title optimization: Always put the best keywords in the title and keep it under 70 characters.
- Description: Be concise and exact, using plain language and offering as much detail about the product as possible while highlighting the benefits and differentiators of your product.
- Product photos: Product photos should be well-lit, conducive to detail, and show every relevant side of the product.
Amazon.com: A Screenshot (cropped) of product detail page, Retrieved May 13, 2021; From https://amzn.to/3hy5pOc
Step Five: Getting Reviews
Getting reviews is an easy way to build customer trust and activate the Amazon flywheel. First and foremost, the only way to get good reviews is to provide a quality product with quality service. Then, you can leverage a platform like FeedbackWhiz to automatically ask customers for reviews.
Starting a private label brand as an Amazon reseller is one of the most productive ways to expand your business, which you retain the rights to, and have Amazon work for you. Even though it could take a healthy amount of work to gain traction with a private label brand, if you leverage your existing expertise and follow the steps outlined in this guide, you will find success.
About the Author:
Wesley Stryker is the founder of Commerce Caffeine, an ecommerce Software Discovery Platform that helps brands find the best Amazon seller tools and Shopify apps for their businesses. Wes has over 10 years of experience operating and consulting ecommerce businesses.