"Private Label Selling on Amazon in 2022 is dead!"
Have you looked online about the idea of selling products on Amazon, and came across the concept of “Private Label Selling”?
If you look at recent discussions online on the topic, you’ll see comments like:
“You can’t compete anymore on Amazon with private label.”
“You used to be able to get away with private label selling a few years ago, but now it’s impossible.”
People seem to pretty much agree you can’t sell private label like you used to.
For the most part I agree, they’re not wrong about the old way no longer working.
But where they are wrong is that it’s still possible, and it’s how most successful newcomers make it as an Amazon Seller.
In this post we’re going to go over what exactly Private Label Selling is, what’s changed, is it still profitable, and how to be successful.
How exactly do people sell products on Amazon?
Before we dive into the details, let’s look at the 4 main ways individuals and small businesses begin selling on Amazon.
#1 Private Label Selling
This is the topic of this article and what we will go into further detail on in a bit.
Private Label Selling, historically, is when you take common products that exist, go directly to a manufacturer to have it made, then put your logo (or "Private Label") on the product to then sell on Amazon.
I know I started this post off with the idea that private label is dead, we’ll address that soon.
Pros of Private Label Selling
- Get started quickly. Simple product research can land you a potential product to sell, and dozens of manufacturers likely make that exact product you choose.
- Not much work in terms getting your product made. Contact manufacturers, pick the best one, ship it.
- Low starting cost. Simple private label products have decent scale, so prices of getting products produced is low.
Cons of Private Label Selling
- Competitive. maybe too competitive these days with international competition.
- Lack of differentiation. Hard to stand out from other offerings.
#2 Retail Arbitrage
Retail Arbitrage is when people buy products at a discounted price either online or at a physical retail store and then sell it on Amazon at a profit.
It’s an extremely simple concept, but it works.
This type of selling on Amazon has the lowest cost to get started, but it’s more about constant deal hunting than it is about creating a scalable business.
Regardless, many people have success with this method and it’s still profitable even in 2022.
Pros of Retail Arbitrage
- Lowest cost to get started. Buy a few products on sale somewhere local and flip them on Amazon.
- Simple. No logistics needed, no negotiations with manufacturers, spare yourself from a lot of headaches that typically come with running this kind of business
- Products already exist. You only need to find deals and resell them.
Cons of Retail Arbitrage
- Hard to scale. You’re always looking for deals. No deals? No sales.
- Huge time investment. You’re spending a lot of time in retail stores and thrift stores hunting for products.
- Surprising learning curve. Knowing what sells, what is allowed to be sold on Amazon, what to look for, and hitting your margins can be more difficult than one realizes.
Possibly the most difficult of the 4, a wholesaler will find products from established brands, buys them at wholesale prices (hence the name), and sell them on Amazon.
This method is tough because it’s harder to turn a profit, it’s difficult to find product opportunities, and you have to compete with other sellers on a product listing to “Win the Buy Box”.
Pros of Wholesaling
- Nothing to create. You can sell already established brand products. No need to invent, design, or come up with anything innovative. You’re selling what already sells.
- High money making potential. Securing wholesaling deals across a wide variety of brands can create a company that generates a lot of cash.
Cons of Wholesaling
- You’re competing against others on the same listing. If you aren’t selling the lowest priced version of a product, there’s a good chance no one will buy it due to you not controlling the Buy Box.
- The most “traditional” of the business types. Wholesaling requires more to keep running when it gets big. That typically means warehouse space, equipment, employees, etc.
#4 Create Your Own Product
Now this is where things get interesting.
Creating your own product is exactly what it sounds like. You invent a product that doesn’t exist on the Amazon marketplace, and then you sell it.
Pros of Creating Your Own Product
- Less competition. You made it up, so you have the advantage of being the first to sell it. Bonus if you have any patents to protect your product.
- Sustained time at the top. On Amazon, those who sell existing products have the issue of having something that sells well, the competition finds out about that success and makes cheaper alternatives, then that seller is forced to expand their product line again to keep pushing growth. When you create a brand new product, this is much less of a concern.
Cons of Creating Your Own Product
- It’s not easy. Inventing products is tough, from design to finding a manufacturer that can actually produce the product.
- Expensive. This might be the most expensive option of the 4.
- Can’t tap into search data easily. Most people on Amazon know what they want, product discovery isn’t high on the list of reasons why people come to Amazon.
These are the 4 main ways to sell on Amazon, but what if I told you there was a 5th way? One that was better than these 4?
I don’t have a fancy name for it, but let’s call it:
#5 Private Label Selling, The New Way
If you combine selling methods #1 (private label) and #4 (creating a new product), you can create a way of selling that combines the benefits of both while minimizing the weaknesses.
With the new way to Private Label, you can still tap into existing demand on Amazon, you can create something unique that will take a long time for competitors to catch up with, and you can minimize costs to develop your product.
Instead of buying a generic product and private labeling it or creating an entirely new product, you innovate on existing products on Amazon.
This is how most people starting out on Amazon today will see success. It’s more work, sure, but any mature system like selling on Amazon will eventually become saturated and require more work to be successful.
How to Innovate Private Label Selling
Now that we’re no longer slapping logos on generic products, and have committed to innovating, how do we accomplish this task?
There’s quite a few ways to innovate on Amazon.
While this isn’t all you can do, some popular ways to innovate:
#1 Check Reviews for Opportunities
This is a tried and true method that successful sellers utilize all the time.
If you’ve identified the niche you want to create products for, you can start to list out products you want to compete with.
Then, what a lot of sellers do is look at each of these products and their respective 1-star and 2-star reviews.
What you’ll find is unhappy customers, typically giving reasons as to why they weren’t satisfied with the product.
Analyzing reviews, you can start to figure out how to innovate:
- Product came damaged often? Invest in better packaging.
- A plastic moving part of the product constantly breaks? Use metal or something more sturdy.
- Someone not happy with size/quantity? Offer a better size or a bulk version.
The possibilities here are endless, and you don’t have to think of any pain points to fix because the reviewers do it for you!
#2 Innovate on Logistics
Amazon charges fulfillment fees based on the dimensions and weight of your product, called product size tiers.
When your product is on the larger side, it moves from a “small standard” size product into the “large standard” and then into small/medium/large/special oversize tiers.
If you can cleverly package a product, by reducing the dimensions of the box or by making it lighter, you can move it down a tier and greatly reduce fulfillment costs.
While this may not seem like much of a benefit, if you can knock $4-$5 off the fulfillment cost of your product, you’ve effectively increased margins in a way your competitors can’t.
You can offer your more efficiently packed product at a lower price than your competitors, and still take home a bigger margin. Win-win.
Any other advantages you can squeeze out, like manufacturing your product in a country that is cheaper and isn’t subject to tariffs, or managing your inventory perfectly, are great ways to save on costs that can give you an advantage on Amazon.
#3 Create an Eco-Friendly Version
Everyone loves an eco-product.
The price of manufacturing environmentally friendly versions of products these days is remarkably close to their traditional counterparts.
If you can create an “eco version” of an existing product on Amazon, it will give you a great advantage.
No one will buy your sponges, that market is cornered. But eco-sponges made of coconut fiber, wood pulp, and are also biodegradable? That’s a compelling product people will take a chance on.
You can get into product categories you normally wouldn’t be able to compete in when you take the eco-angle.
#4 Go All In On Your Niche
There’s power in branding and design.
A weakness of classic private labeling is that the products available are extremely generic.
People today don’t want anything generic. They want something that feels purpose-made for them.
If you can narrow down an audience to a dedicated group of people that are passionate about a category, you've found opportunity you can turn into profit.
Let's look at an example:
This is Fellow. They make minimally designed products for coffee enthusiasts.
Their products are for people who take coffee seriously and will pay a high premium for something they’ll be proud to have on their countertops.
There’s countless kettles, travel mugs, and coffee grinders on Amazon, but Fellow went all in on a clean, coherent design that has garnered them an absolute ton of sales and reviews.
See how you can serve your niche better than what exists.
When you find that out, you can charge a premium that people will happily pay.
Is Private Label Right for You?
Private label selling today is hard because you essentially have to innovate for every single product you sell.
However, this is what you should be doing as a seller regardless of if classic private label selling was still viable or not.
Sustainable businesses offer great branding, uniquely designed products that their customers are proud to pay for.
If you can put in the extra effort to innovate, private labeling (the new way) is a great opportunity.
Is Private Label Selling on Amazon Profitable?
Most people don’t want to invest their money into something that isn’t profitable. This makes sense, as the whole point of investment is to see a return.
If you’re curious on the profitability of Amazon, a great resource on the recent profitability of being an Amazon seller is the Jungle Scout State of the Amazon Seller Report.
A few highlights that can be gleaned from this report:
- Profits are going up yearly for most existing sellers
- 85% of Amazon sellers run profitable businesses
- 64% are profitable within their first year
There are currently over 200 million Amazon Prime members. That number grows with each year, and is an audience you can tap into utilizing Private Label Selling.
So to answer the question, yes, Private Label Selling on Amazon is very profitable right now.
Despite its increased difficulty, private label selling on Amazon is still one of the best opportunities for creating an independent source of income that you own completely.
With the information in this post, you should have a good understanding of how you can be competitive with private labeling.
It’s still one of the best ways to make a brand from the ground up that you can actually start relatively small and grow into something huge.
So get out there, start innovating, and start selling!