Amazon is one of the most successful companies on the planet. According to Statista, about 50% of all sales on the platform come from the third-party vendors. To achieve this, Amazon retailers have developed a variety of sales techniques, and one of them – Amazon Private Label.
If you are planning to sell on Amazon, you have’ve heard about the Amazon Private Label and how it has helped millions of retailers increase sales.
For several years now, this business technique has been used in practice. However, it is important to note that trading with the Amazon Personal Label is not as easy as it used to be, for the simple reason: the more people on Amazon, the more competitive it becomes.
So, in this article we will tell you about some of the main conclusions from this sales strategy!
What is the Amazon Personal Label and how does it work?
Before we get into details, you need to understand that there are four main ways to sell on Amazon FBA: Amazon Private Label, retail arbitration, wholesale, and creating your own product.
Amazon Private Label is a search on Amazon for high-quality products, but perhaps with a small number of reviews; then you receive this product and tag it if it was yours. Naturally, you are trying to update the presentation of an existing product by creating your own brand!
In retail arbitration you go to retail stores looking for products at great discounts; then you buy this product; find its real price and sell it on Amazon to make a profit. Finally, these can be a real problem, because you have to go from time to time looking for lucrative deals.
The wholesale is associated with the rush of various manufacturers; buy their products at wholesale prices and resell them on Amazon at the normal retail price. The only drawbacks are that this strategy is very comprehensive. There are already many manufacturers that produce similar products, which in some cases prefer to sell themselves on Amazon.
And creating your own product will require a little more effort and investment. But by doing so, you will surely have a better chance of standing out from the competition, which will increase sales!
Private Label is an Amazon strategy where you promote a product on Amazon from scratch under your own brand. If you go to Amazon and look closely at various ads, you will see that Amazon sells as many products without any labels (usually, other sellers are connected to such ads that sell goods without labels using the Online Arbitrage strategy) .
But there are goods with a brand – it can be like some very well-known brand that is sold by official distributors (it is strictly forbidden to sell fakes on Amazon, just like any brands without sales permits), as well as it can be new brands that are unknown to anyone. These are the branded sellers who work with the Private Label strategy on Amazon.
To make money on Amazon using the Amazon Private Label strategy, you need:
- Register with Amazon as a seller.
- Find a product that can be sold on Amazon
- Find a quality supplier in China (or any other country).
It is important that according to this strategy it is necessary to sell a high-quality product that will be at least as good as that of the market leaders. Ideally, of course, it is desirable to refine the product based on feedback from other sellers, and make it the best in the niche.
Some “experts” present information about Amazon in such a way that you can buy a product for a penny in China and sell it at exorbitant prices on Amazon. Such a scheme does not work and cannot work. If you buy the cheapest product, then it will not be 100% of high quality. There is no quality product for a penny, those times in China are long gone.
China is an economically developed country with an expensive labor force, so you have to pay for quality there. If you bought a low-quality product, then you will regularly receive bad reviews, and this will kill your sales on Amazon.
Therefore, look for a quality supplier and do not go after the cheapest price.
- Next, you develop product improvements, develop your own design and unique packaging.
- After that, you order a batch of goods in China.
- The Chinese suppliers send you a branded sample for photography.
You need to take sales photos that will catch customers and set you apart from the crowd of competitors.
While the product is being manufactured, you need to make a listing (selling product ad).
The listing should be designed so that it is indexed correctly and correctly describes the benefits of your product.
- When the shipment arrives at the Amazon warehouse, you need to run an ad. Amazon has in-house PPC ads – these are pay-per-click ads and you need to customize them to your target audience.
There are many programs for analyzing advertising, and with the help of them you need to select the queries for which you will be promoting and calculate the budget in order to reach the top without extra costs.
- Once you have your first sales, then you need to buy reviews. The fact is that if there are no reviews on your listing, then sales will go very poorly and you will only buy goods at the lowest possible price. You need to buy reviews so that special people buy your product in the USA for the requests you need, receive this product, and write a good review.
How many reviews do you need to start selling? It all depends on the niche. Someone will need 5-10 reviews, while others will need 100.
- When you
have good reviews and a good rating, you need to test the photos.
Even a seasoned salesperson cannot guess the first time which photos will sell well and which will not. Of course, there are certain secrets to creating selling photos for Amazon, but you still have to test photos. To do this, you need to make several options for photos and choose the best combination of photos on the listing, which will give the maximum conversion to sales.
- Further, with the growth of reviews and the selection of optimal photos, you start to increase the price a little bit, and over time you reach the price level of the market leaders.
- In the process, you have to deal with advertising optimization.
You need to remove those keywords from ads that eat up money and don’t generate sales. This is a long job that needs to be done manually. Over time, you will only have sales queries that convert well.
- With an increase in the number of sales and with optimization of advertising, your listing will begin to appear in the top for the key queries you need, and you will begin to receive sales without large investments in advertising.
Next, you only need to control the quantity of goods in the Amazon warehouse so that the goods are always in stock.
For good earnings according to this strategy, it is enough to have only 1 product, and as soon as you promote it, it will bring you sales for several years almost automatically.
If we talk about profitability when working with this strategy, then you can expect that a good product will give you from 50 to 120% of net profit in dollars when a batch of goods is sold.
When you are shown an example that a certain product can be bought for $ 3 and sold for $ 25 on Amazon, then you need to understand that in addition to the purchase price, you have many more expenses that need to be taken into account, and the real profitability will be from 50 to 120%.
Working according to this strategy, from now on you can register a brand in order to develop a product range and launch new products. In this case, other sellers will not be able to connect to you. Likewise, when you understand that your product is selling well, you can patent the product so that no other seller can sell it.
That is, even other sellers with their own ads will not be able to sell your product if you patent it. In this case, you can disconnect your competitors from the sale of this product, or competitors themselves will contact you to allow them to sell their product for a certain percentage of sales. Thus, according to this strategy, you can take income from the entire niche in general.
How much money you need to start Amazon Private Label business
It is important to understand that to launch a product on Amazon using the Private Label strategy, you will need at least $ 20 thousand, and this is the very minimum, it is advisable to have cash in reserve.
You can find information online that it is possible to start using the Private Label strategy with investments of 3-5 thousand dollars, but this is absolutely unrealistic. More precisely, it is real, but you will not have sales, and you will work 100% in the negative.
Let’s explain with a simple example how the product is launched and how much investment you need to launch.
Let’s say you find a good selling product that costs $ 3 in a standard bulk order. You need to improve this product, that is, correct its shortcomings based on feedback from competitors, or somehow modify it, make an attractive packaging. At the very least, it will take a couple more dollars to make a product in a beautiful attractive package and, most importantly, in good quality.
We also add delivery of goods to the USA and sorting of goods at the prepcenter, let there be another $ 3 per unit of goods. In total, to work on the Private Label strategy, about $ 8 will cost you the simplest competitive product with improvements and improvements.
You can say that you have seen a lot of products in China for $ 2-3 with US shipping, and you’d be right. But great product quality is critical to us, otherwise your customers will make returns and you will lose money. It is also important to sell a product at a price of at least 15 dollars, and preferably 20-25 and more, and such a product will actually cost at least about 8 dollars, so this is a completely real cost price in the required quality.
How much should you buy per batch?
Usually, for testing, they buy from 500 to 1000 units of goods, so that they will last for some time, and in order to have time to bring the second batch of goods if the product sells well. It will be from 4 to 8 thousand dollars only a test batch of goods.
As soon as you understand that your product is selling well, you need to immediately buy additional goods and in no case should you allow the product to run out and not be in stock for a long time. Even if you need to buy additional goods, this is another 8000 dollars, let’s say you will take half of them from the sale of the first batch of goods, but this is risky, because the goods may run out, and you will not have time to bring a new one.
Why can’t your product, which you sell under the Amazon Private Label strategy, end up in the Amazon warehouse?
When you promote a new product on Amazon, you are launching an ad. You pay for ads first, and over time, as sales start to roll in, Amazon pushes your ad up in organic search. In a nutshell, product promotion looks like this.
You spend money on advertising, and your goal is to get your ad for many key queries to the top of organic search. So, when you run out of goods in the warehouse (this situation is called out-of-stock), then Amazon lowers you in organic search to the very bottom, and you again need to pay for advertising.
Therefore, if you run out of goods, then you lose a lot of money, and all the work on promoting the goods must be done anew.
So, with the availability of the goods it is clear, now we will continue to count, and let’s say it took $ 10,000 for the goods and you were lucky, you bought part of the second batch with the money raised from the sale of the first batch. In total, 10 thousand dollars is the very minimum for a good product.
Amazon ads
Next, you are tedious to make an ad (listing), that is, if you yourself are not a professional copywriter who works in English, then you need to find a copywriter who will make high-quality text that will be indexed correctly and who will sell.
You also need small expenses for sending a sample of goods to Russia for a photo session. Well, of course, you need to include in the cost of design services, services of photographers, well, before ordering goods, you need to include services for checking a supplier in China, and so on.
Also, you need to pay for services for setting up ads on Amazon.
Keep in mind that on Amazon you work in the American realities, and you need to pay contractors at US prices, especially with regard to advertising. Let’s take at least 2.5 thousand dollars at the very least.
Now we go further, at least you need active advertising at the start in order to promote sales. Experienced sellers spend about $ 10,000 for testing ads for 1-2 months in order to quickly promote sales. If you take your time and work carefully and economically, then you need to lay at least $ 5000 for promotion for 2 months.
And of course, you need to have money in reserve in case of unforeseen expenses. At the same time, we did not calculate the costs of programs, services, the purchase of reviews, and so on.
Of course, you can find some absolutely terrible quality product in China for 1-2 dollars, do not make any improvements, and save a lot, but such a product will not be bought, and it will not lead to anything good.
Now let’s talk about who the Private Label strategy is for
This strategy is suitable for those who want to dive headlong into Amazon. You will have to study a huge amount of information, you will have to understand advertising, you will have to learn all of Amazon’s algorithms. If you are looking to launch a Private Label, then be prepared for a tremendous amount of work to be done.
You should go to Private Label only if you have big plans, if you later want to launch several products, and if you want to register a brand, develop a company in the USA, in which case this strategy is suitable for you.
In another case, if you just want to make money on Amazon by buying and selling goods, without spending a lot of time on business, then it is better to consider the Online Arbitrage strategy.
Here we are!
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