Private labeling is by far the most popular business model on the Amazon marketplace. It grants sellers the freedom to build their own brand, have control over their product’s design, and maximize their margins.
The business model entails selling products manufactured by a third party but marketed under the seller’s own brand. Private label products are normally positioned as cheaper alternatives to name brand items. Generally, costs are lower for companies selling private label products which allows them to offer competitive pricing. Lower costs also translate to higher margins.
It’s clear that private labeling is a profitable venture. In fact, Amazon has found great success employing this retail method. Since 2013, the online retailer offers its own line of private label products under the AmazonBasics brand. It started with only 252 products but it has grown to more than 2,000 products currently listed on the platform.
How can you get started as a private label seller on Amazon? Here is a step-by-step guide.
Step 1: Find a product that sells
The first step to starting an ecommerce business as a private label seller is to find a product that will sell. The last thing you want to do is invest money into purchasing inventory that will sit in your basement. Perform diligent research into your market, competitors, and potential customers.
It’s important to invest time and money getting acquainted with the market. Brainstorm ideas for products that fit a certain criteria. When you’re getting started, the best products to sell on Amazon should be small, non-seasonal, unregulated, and uncomplicated. Small products will save you money on shipping costs. Minimizing costs is crucial at the beginning stages of your business. Spend your money strategically on what will help your business grow. Shipping costs should not overshadow your marketing and sales efforts.
Avoid seasonal products. It may seem like a smart move to invest in Christmas lights around the holidays. However, there is no guarantee that you will be able to sell your entire stock. Unless you are willing to hold inventory until the next season, you’re better off listing products which can be sold year round.
The last thing to consider is government regulations. Steer clear from highly regulated products which can make selling difficult. Regulated products can be expensive to manufacture and may require special certifications. For example, children’s toys are notably difficult to sell as a private label. Regulations require specific production materials and safety warnings. Stick to unregulated and uncomplicated products.
Once you have found a promising product, test it. Buy a small batch of the item and list it on Amazon as a proof of concept. If you find success, then it’s time to grow your inventory and create a brand.
Step 2: Create a brand
Once you have found your product niche, it’s time to create your brand. Create a logo and name. Ideally, you want a name that’s widely available across relevant social media platforms. The key word here is relevant. Think about your target market and what media channels will help you effectively reach them. If your product is aimed for young adults, don’t stress if your domain name is not available on MySpace.
When considering a name for your brand, plan for the future! Hopefully, your brand will become successful and you’ll need to expand your reach by starting your own webshop. Make sure your domain name is available. It will be important for expanding your brand.
Regarding your logo, it should be as simple as possible. Think about the costs associated with printing your logo on packaging. Intricate logos with many colors can be expensive and complicated. It’s better for your budget and for your brand. In fact, many studies have found that the most memorable logos are simple in design.
Step 3: Find a supplier
The next step is perhaps the most important: find a reputable supplier. Finding a reliable manufacturer can be a daunting task. However, if done correctly, you will have a business partner that will be the key to growing your private label brand.
Search for manufacturers in popular forums, online directories, or source locally. Another option is to find existing private label products on Amazon and contact their manufacturers directly.
Before you commit to a manufacturer, shop around for better pricing. Most manufacturers will be open to negotiating. Keep in mind that cheaper is not always better. Consider quality, customer, service, and minimum quantity order requirements. Use the lower price quotes as leverage during your negotiation with reputable producers. Don’t underestimate the value of good customer service.
If you’re choosing an overseas supplier, be aware of language barriers. When dealing with Chinese manufacturer, it’s especially important to be very clear with your supplier about your product requirements. Order a sample and perform a quality control check to make sure your product is up to specifications.
Step 4: Determine your fulfillment strategy
Sellers on Amazon have two options for fulfilling product shipments and returns. Namely, as a seller you can use Fulfillment by Amazon (FBA) or opt to ship merchandise yourself directly to consumers. Although shipping products yourself gives you flexibility over your costs, FBA could be the better choice when listing on Amazon.
Sellers using FBA earn the Prime and Fulfilled by Amazon badges. Additionally, your private labeling products will be more likely to win a BuyBox on the marketplace. Customers are more likely to trust products with Amazon badges. Therefore, badges and additional features can help you increase your conversions.
Step 5: Promote the brand
The downside of building a private label business is the lack of brand awareness. Creating a brand from scratch can be costly in terms of marketing. Competing with the market leaders is simply not an option for private labeling just getting off the ground. Large firms have spent millions of dollars in advertising to build strong brand recognition. However, a savvy marketing strategy can compensate for a smaller budget.
Create an effective social media marketing strategy. Take high quality pictures of your products which you can post on Instagram or other social media. Engage with your customers by replying to comments and questions. Send your products out to bloggers to write reviews about it, release unboxing videos on YouTube, or engage on Reddit threads. The goal is to build a relationship with your customers. If you have the budget for paid advertising, purchase ads on Facebook, Instagram, or even Amazon.
Step 6: Extend your brand’s reach
Amazon is a great starting point for any entrepreneur seeking to enter the ecommerce world; however, seller fees can quickly eat up your profits. Once you have found some success with your brand, consider branching out on your own. Starting an webshop can reduce your costs by eliminating seller costs incurred from selling on Amazon.
Running your own webshop gives you more control over your costs. Using your own webshop to sell your private label products can help reduce customer distraction. While Amazon is a great platform to get started, you’re competing with hundreds of other sellers. In contrast, your site is dedicated solely to your products.
Another benefit of using your webshop to list your products has to do with referrals. Customers who purchase your private label products on Amazon will likely refer friends and family to the online retailer. Chances are your product will not be the first one to come up in their query which could cost you potential customers. When shoppers buy through your website, you’re more likely to get referrals.
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