Amazon sellers have seen a surge in lucrative opportunities found through private labeling. In fact, in 2013, Nielson found that private labels are worth $112 billion of the $643 billion total retail sales. And that number is only continuing to grow. In fact, nearly 50% of all sellers on Amazon are involved in private labeling either with a single product or an entire private label brand.
Why Private Labeling?
What makes private labeling so popular? Simply put, private labels make money. Those private labels that are ranked in the top 100 of Amazon’s best sellers bring in thousands of dollars in revenue per day. Those in the top 500 pull in hundreds of dollars per day, and even the top 2,000 can make a steady stream of supplemental income.
In addition, customers love private labels. Private labels can be up to 30% cheaper for consumers, according to SymphonyIRI Group’s 2011 report. Those labels that aren’t cheaper tend to have a higher value than larger brands. These
private labels also attract curious shoppers that want a differentiated, unique product outside of the traditional brand names. In this way, private labeling can help separate your business from the competition.
Even though private labeling can be lucrative, it also comes with severe competition. This means that, in order to succeed as a private label Amazon seller, you need to start out strong.
In this quick guide, we’ll give you a checklist on how to start a private label brand on Amazon. Keep an eye out for Seller’s Choice downloadable eBook for an in-depth look at starting a profitable private label on Amazon. If you want to learn more about the pros and cons of starting an Amazon private label, check out our article The Growth And Benefits of Private Labeling.
1. Choose a product.
Choose a product that is high-ranking, customizable, sellable, cost-effective, exciting, and promotes repeat purchases.
- High-ranking: Review Amazon’s best-sellers list. Which products typically sell the best and rank the highest? Which products are #1 for each category? This will tell you what products are already selling and thus have a strong target market.
- Customizable: Limit the list of products to those that are customizable and can host your private label. This means cutting pre-branded items like iPhones, Cards Against Humanity, and Nike sneakers. Learn more about the importance of private label packaging as an eCommerce seller here.
- Sellable: Think about your target customer. What pain point is your potential product solving? How will you use your private label to better meet the needs of consumers?
- Cost-effective: Select products within your budget. Look at those products that have low production, shipping, and storage costs. Remember that the way you price your product is directly correlated to the price at which you source your units.
- Exciting: Choose a product you’re passionate about. The more passionate you are, the better you’ll be able to promote your product. Work in a niche that excites you, and your customer will feel that excitement through your brand.
- Repeatable: Pick a product that will encourage customers to buy more from you. You want loyal customers that come back to your brand for re-purchase; this keeps sales and marketing strong and consistent.
2. Research the competition.
- Use the Amazon search bar to look up the products you’re considering selling.
- Open each listing on the first page of results. These will be your top competitors for that product.
- Record the following info: price, number of reviews, average star rating, Amazon ranking, and your own notes aboutthe quality of their listing.
- The ideal competition will have a high price point, a low number of reviews, low ranking, and low-quality listings.
- If it seems you’re up against heavy Amazon competition with lots of reviews and high rankings, try searching for other types of products in other competitive landscapes.
3. Find a supplier.
- Sourcing overseas is a common way to find cheap, customizable products. However, you need to be careful of scammers.
- To find credible, honest, and reliable suppliers, work with a third-party company (like our partner Ask Idea Sourcing) or a platform like Alibaba. You can find out everything you need to know about Alibaba here.
- Compare suppliers based on customization options, price range, style selections, lead time, MOQ, production schedules, exclusivity, turn around, samples, and contract.
- Always choose a supplier who will provide you with a healthy profit margin, as that margin will continue to be dwindling with Amazon and FBA fees.
4. Build your brand.
- While your supplier is busy producing your first batch of products, it’s time to get a logo and design for your private label.
- Hire a professional designer to create your brand’s look. Consider using a freelancer on Upwork or Fiverr.
- The design will go on your packaging and marketing materials. This is how your brand will differentiate itself from other products.
- Start promoting your brand outside of the Amazon platform as well. Use social media channels and a personal website to get ready for your launch. This will help gain a loyal following that you can then redirect to Amazon when you’re ready to push your new product.
5. Build your listing.
- Start building your listings on Amazon so they’re ready to start selling when your products arrive.
- Check out our Ultimate Guide to Amazon Listing Optimization to create highly optimized listings that sell products quickly and easily.
- Start taking professional photos of your products. Images are one of the strongest factors of conversion. Learn how to use images for conversion and profit on Amazon before you start selling your private label goods.
6. Use Amazon FBA.
- Set up an account with Amazon FBA. FBA will pick, pack, and ship for you, so you won’t even have to touch the merchandise.
- FBA takes a small percentage of your profits, but you’ll save money on traditional operation costs like warehousing and fulfillment. It will also free you up to focus on other aspects of your business.
- Amazon FBA also makes you eligible for Prime, which helps you win the Buy Box, convert customers, and gain sales traction.
7. Start selling.
- With a strong listing and product, you’re ready to launch.
- In order to increase your visibility and attract those first sales, you may want to run a kickoff sale or discount. Amazon sponsored ads and Amazon’s today’s deals are great ways to get your first product seen when you don’t have the reviews or rankings to get you to the top of search results.
8. Create a strategy.
- You’ve sold your first products. You can use that as a baseline. But don’t start selling willy-nilly.
- Make a plan for a longer-term product strategy with regards to marketing, orders, customer service, brand ownership, and more.
Keep an eye out for the Seller’s Choice eBook that will take you through the details and intricacies of starting a private label business on Amazon.