According to the State of the Amazon Seller Report 2024 by JungleScout, the private label remains the top Amazon business model for sellers and SMBs, with a share of 54%. But what exactly does private labeling mean on Amazon? In simple terms, you will be selling a product manufactured by one company by just putting your branding to it on Amazon. While private labeling offers an excellent opportunity to build your brand, many sellers struggle with setting up their store and managing fulfillment efficiently.
This is where Fulfilment by Amazon (FBA) can help you build a profitable business. By opting for FBA, you can focus on branding and marketing while Amazon handles storage, packing, and shipping. However, integrating FBA with a private label store isn’t always straightforward, and many sellers find it difficult to navigate the process. If you are someone who is struggling with the same, here are essential strategies and expert tips to simplify the process and set you up for success.
Why Sellers Prioritize Private Labels on Amazon?
Amazon sellers are prioritizing selling via private labels as it brings several advantages to them! Here is a detailed look at why you should start selling via private label on Amazon:
1. High-Profit Margins
Private labels allow sellers to source products directly from manufacturers and sell them under their own brand. As no intermediaries are involved in this model, private label sellers get high profit margins (with no product costs) compared to those reselling products by other brands. This can be validated by the fact that 35% of private label sellers turn profitable within the first six months of Amazon store setup.
2. Full Control over Amazon Listings
You earn full authority to create and optimize your Amazon listings with a private label. This includes experimenting with various product descriptions, employing targeted keywords, managing pricing strategy, and editing product images as per your creativity or interests (something which is not possible when you are reselling some other brand’s products). By personalizing every aspect of the listing, you can have a more substantial brand presence and boost conversion rates.
3. Exclusive Ownership of the Buy Box
Private label sellers face no direct competition for the Buy Box since their products are uniquely branded. This way, they can have more control over pricing and inventory.
4. Product Customization
Private label sellers can design and customize their products the way they want, which is not possible when you are reselling them. They can analyze competitor products and see what issues they have. Then, they can come up with a better strategy and product ideas to outrank competitors and gain more profits.
How to Setup an Amazon FBA Private Label Store?
Setting up a private label store on Amazon requires considerable research and understanding of how an online business works. Here are some steps to follow if you want to establish your brand on Amazon:
1. Product Research
Before setting up a private label on Amazon, you must find out about high-demand products. How to do this? Start with deciding on a product category. According to the JungleScout 2024 report, top Amazon product categories for SMB sellers include home and kitchen, followed by beauty and personal care. To find profitable products in the said category, you can use tools like Helium 10, which comes with a Free Chrome Extension. After deciding on the product, source manufacturers and test out product samples.
2. Brand Creation
Once you have selected the product, the next step is creating your brand. A recognizable brand is what stands out in the market. So, think about a unique name, logo, and packaging that aligns with your product and target audience’s preference. After that, enroll in the Amazon Brand Registry to protect your intellectual property, grow listings, and access brand-building tools to establish your loyalty.
3. Seller Account Creation
The next step is to create an Amazon Seller account, by deciding between an individual seller account and a professional seller account. If you are selling large volumes of product, a professional seller account is recommended. This is because it allows you to list products in bulk, use Amazon’s advertising tools, and access advanced fulfillment strategies.
4. Creating Amazon Listings
After creating your Amazon Seller account, it is time to build and optimize your Amazon listings. Here, you need to purchase a Universal Product Code (UPC), use high-quality product images, write compelling product descriptions and titles, and target relevant keywords.
5. Setting Up a Pricing Strategy
Research your competitor’s pricing within your niche to understand the market range. Production costs, Amazon fees, and fulfillment expenses are some factors you should keep in mind. Don’t keep the product prices too low, as it can devalue your product, or too high, as it might take potential buyers away.
6. Choosing the Fulfilment Method
Finally comes the logistics side of the business, where you need to manage storage, shipping, and customer service. An Amazon private label seller can carry out fulfillment either by themselves, hire third-party logistics, or use Fulfilment by Amazon (FBA). For 82% of businesses, FBA is a preferred option because it allows them to send their products to the Amazon warehouse, and the rest of the shipping workflow is managed by Amazon’s team.
Image Source: Data4Amazon
Now, as an Amazon FBA private label seller, you have two options – do everything on your own or get help from skilled professionals. If you are not able to choose between the two, we are here to make the decision easier for you!
Limitations of the DIY Approach to Setting Up an FBA Private Label Store
You might prefer the do-it-yourself approach to save money, but do you realize it can actually cost you more? Here’s how:
1. Product Selection Pitfalls: In a DIY approach, sellers often overlook critical compliance requirements such as safety standards and restrictions on prohibited goods. This usually happens due to a lack of in-depth market knowledge, inadequate product research, or unfamiliarity with Amazon’s evolving policies. Ignoring these compliance factors can lead to serious consequences, including unsellable inventory, costly recalls, and even account deactivation.
2. Navigating Amazon Guidelines: Overlooking frequent Amazon policy updates on restricted items, content standards, or shipping rules can trigger immediate listing removals and penalties.
3. Listing Optimization Challenges: When managing your Amazon listings without professional expertise in SEO, it’s easy to overlook crucial elements like targeted keywords and Enhanced Brand Content (EBC) optimization. The lack of strategic optimization can cause your products to get buried deep in Amazon’s competitive search rankings, significantly reducing visibility and sales potential.
4. Inventory Mismanagement: Miscalculating sales velocity, ignoring Amazon FBA capacity limits, or failing to forecast seasonal spikes can cause costly stockouts or massive overstocking.
5. Keeping Up With Updates: Many in-house teams are stretched thin as they have to focus on day-to-day tasks like order fulfillment and customer service. They often don’t monitor Amazon’s algorithm tweaks, FBA fee changes, or new program features, leaving your private label store lagging behind competitors.
Hire an Amazon Professional for Private Label Store Setup and Overcome Challenges
By hiring a professional for a private label store set up on Amazon, you can avoid situations that cost time, money, and lost opportunities. Here is how outsourcing Amazon store setup services can help you:
- Brand Registry and Compliance: Once your trademark is ready, a service provider can help with Amazon account setup and registration, branding, compliance checks, initial product upload, and store navigation.
- Listing Creation and Optimization: Service providers have experienced Amazon listing professionals who know how to perform keyword research for high-quality titles, bullet points, and product descriptions that meet the platform’s guidelines. They also offer A+ content creation services and make necessary changes to product listings to improve search visibility and rankings.
- Inventory and Stock Management: They can provide real-time stock tracking and immediate restock alerts to ensure that the inventory is always updated and there is no sales disruption.
- Ongoing Account Health Monitoring: The team checks your Amazon account health and advises you on compliance and policy updates. By reacting promptly, they safeguard your store’s reputation and drive continuous improvement.
Wrapping Up
While setting up a private label store on Amazon with FBA opens doors to vast growth opportunities, handling its complexities requires more than just enthusiasm. From strategic product positioning to maintaining compliance, every decision impacts your brand’s performance. Whether you go the DIY route or collaborate with professionals, staying informed, adaptable, and customer-focused will ultimately determine your success.
Guest article written by: Sophie Hayes is an eCommerce consultant and a keen blogger, currently working at Team4eCom. With over 11 years of experience in the industry, she specializes in topics revolving around the eCommerce domain, such as online marketing, product description writing service, store optimization, listing optimization, and product listing. Moreover, she has a great knowledge of the leading eCommerce platforms and marketplaces like Amazon, eBay, Walmart, Target, and others. She incorporates this understanding in her write-ups to help online retailers and businesses follow the best practices, take their business to new heights, and gain a grounded footing in the market.