What is a Private Label

Private label involves purchasing generic products from 3rd party manufacturers, then selling them under your own brand on Amazon.  This means that the manufacturer doesn’t have rights over the brand label on the product, that’s yours – essentially, a “private label.”

Private labeling is markedly different from wholesaling. Private label sellers create their own brands, so this means they need to create product listings themselves. Each private label product has to have a variety of labels & identifiers stipulated by Amazon. These include GTIN, UPCs, SKUs, FNSKUs, and finally, a unique ASIN assigned by Amazon.

Private Label – Costs & Profitability

Private label brands aren’t established brands. This adds a couple of steps in launching a private label business compared to wholesale. Private label sellers have to create their own brand, design logos & brand content, market their products, and run much more robust PPC campaigns.

Over two-thirds of private label sellers spend well over $2500 in start-up costs. In terms of profitability, over half made over $5000 monthly.  Looking at pure numbers, there are no glaring differences between wholesaling and private labels.  The key difference here is how much more time-intensive creating your own private label brand is.

Private Label – Pros & Cons

As mentioned, private label is high risk and has a high reward. It’s a time-intensive business and the success of a private label brand on Amazon is very much tied to this. The more time and effort you invest into your private label business, the more likely it is to succeed.

Most of the benefits of private labels stem from the freedom you have as a business owner. For example:

Pros

1. You have full control over the creative processes, you can design your own logo and even create custom packaging
2. The only partnerships you have to maintain are with your manufacturers and any 3PL agencies you want to use
3. Order volume is highly negotiable and you can find suppliers who offer a lower MOQ
4. You’re automatically on the Buy Box as the sole seller of your product, you don’t have to fight for the Buy Box share
5. You are your own boss. You don’t need to ask permission to add any variations & customizations to your products
6. For new, specialized products there is much less competition compared to established brands
7. Profit margins can be very lucrative, depending on how in-demand your product is you can actually increase your margins very fast

Cons

• High workload, need to create your own brand, logo, product design, labels, packaging, and so on
• Have to incur marketing and advertising costs for your product listings, including Amazon PPC
• Very time consuming, have to frequently optimize product pages, product listings, images, backend search terms, and PPC ad campaigns
• No quality assurance for your products, because you have to find and vet your supplies yourself
• A longer lead time because most private label products are imported from cheaper, overseas suppliers
• Need to deal with listing hijackings, IP infringement, and other types of fraud on your own
• Without an established brand, there is no brand loyalty, so you have to generate good reviews & ratings to climb to the top
• Demand fluctuates for new products and is difficult to forecast which means your profitability and income are not always stable

A private label gives you full autonomy over your business but as you can see that can be a double-edged sword. It’s important to remember Amazon FBA provides sellers with an established supply chain. Launching your own business & creating a brand is easier on Amazon than anywhere else, so don’t balk at the challenges!

Clare Louise