Many entrepreneurs who want to participate in the booming eCommerce industry would like to start their online business on Amazon. However, at the initial stage of their eCommerce venture, business owners find it challenging to choose between Amazon reselling and Amazon private labeling.
In this article, we will discuss the basic concept of private labeling and reselling on Amazon. You will learn some of the pros and cons of private labeling and the advantages and disadvantages of Amazon reselling.
Amazon Private Labeling vs Reselling on Amazon: Which Is Better?
What Is Reselling on Amazon?
Reselling, in general, refers to a business model where a person or the “reseller” purchases discounted products from multiple suppliers and sells them to consumers at a profit.
An Amazon reseller has several options when it comes to reselling on Amazon. The most popular choices for reselling on Amazon are Amazon wholesale and Amazon arbitrage.
Arbitrage generally means purchasing discounted products at a brick-and-mortar store or online retail shops to sell them online at a higher price. When arbitrage is performed online, it is known as online arbitrage. In contrast, retail arbitrage pertains to sourcing products from physical stores.
Some of the go-to destinations of Amazon sellers for retail arbitrage include department store’s discounted sections, thrift stores, and outlet shops. Amazon sellers who are into retail arbitrage utilize seller scanner apps to help them determine the product’s profitability.
Furthermore, an alternative to arbitrage is wholesale. Amazon wholesale ensues when an Amazon seller purchases low-cost or discounted existing branded goods in bulk and sells them individually on Amazon for a higher price.
What Is Private Labeling on Amazon?
Currently, Amazon private label is the widely utilized business model by Amazon sellers. A survey of nearly 5,000 Amazon sellers revealed that around 67% of sellers are into private labeling.
So what is private labeling on Amazon?
Private labeling refers to buying generic products directly from manufacturers and reselling them on Amazon with your logo on them.
Once the items have been ordered from manufacturers, Amazon sellers can have complete control of almost all aspects of the product. It may include but is not limited to product specs, packaging, marketing, and branding.
Essentially, a private label is having a product manufactured by a third party and selling it under the business owner’s brand name.
The Pros and Cons of Amazon Private Label and Reselling
To improve your understanding of the eCommerce landscape and Amazon marketplace, here are relevant insights concerning the pros and cons of private labeling and reselling on Amazon. Knowing these important details can help speed up your decision-making process.
What Are the Advantages of Reselling on Amazon?
Quick Start
One of the reasons why sellers choose to resell items on Amazon is because of the quick headstart it can give. Once you have created your Amazon FBA or FBM account, you can start listing the items you sourced from your retail or online sources.
Since reselling on Amazon can utilize the arbitrage model, you can have an advantage in terms of product sourcing proximity. You do not need to wait longer for inventory items from overseas since you can source your products from local sources.
Lower Financial Risk
Since reselling on Amazon will not necessarily require purchasing items in bulk, sellers have the option to start with a small investment. Hence, making it an ideal business for online sellers who are risk-averse and budget conscious.
Quick Expansion
Reselling on Amazon lets you quickly expand your business since you can add a wide range of products, even without having to shell out a considerable investment. Stocking more products for your inventory is less expensive because reselling sources will not necessarily require you to purchase items in bulk.
What Are the Disadvantages of Reselling on Amazon?
Less Pricing Control
Since you will not be selling your brand, you will likely have less pricing control over it. To improve your pricing strategy, you can use an Amazon repricer that can automate price adjustments in real-time. Thus, allowing you to obtain a competitive edge over other Amazon sellers.
Less Product Control
Since you will be purchasing and selling items of other brands, you have less room for product improvement. You cannot immediately introduce changes to the product since you are not its brand owner. Hence, you cannot build your own unique and cohesive brand.
What Are the Advantages of Amazon Private Label?
Brand Autonomy
Since you will not depend on other brands for your inventory, you can establish your own brand identity. You have the freedom to build your brand from start to finish. You can pattern your brand according to your business values and reputation, creating the brand reputation you envision.
Better Quality Control
You can have better control over the quality of the product you are ordering from the manufacturer, especially if you will set the product’s specifications to pass industry standards. If updates are needed, you can simply instruct manufacturers to apply updates based on the specifications you send.
What Are the Disadvantages of Amazon Private Label?
Waiting Period
Since inventory items for private labeling businesses are usually ordered from manufacturers from countries like China, India, and Vietnam, it will require a waiting period before you can list your products online.
Significant Investment
Unlike reselling, private labeling will require substantial capital. Private labeling can be costly because you will have to shell out more money to order items in bulk and have them delivered from overseas. Moreover, you will also incur additional expenses in the form of insurance and tax fees.
So Which Amazon Business Model Is Best For You?
Choosing between private labeling and reselling on Amazon likely relies on your preference and capacity to start a business. If you prefer to start your Amazon business with less effort and capital requirement, you can choose Amazon reselling.
On the contrary, if you want complete control over your product and have the capital to purchase inventory items in bulk, you can start your Amazon business using the private label model.
To maximize your business potential, strategic planning combined with the proper use of Amazon seller tools can help you achieve a competitive advantage regardless of the Amazon business model you choose.
