Hey! Today I have a very special guest post for you from Sarah Kaiser on the topic of creating a private label business on Amazon. You can read about Sarah and her work at the bottom of the post! Enjoy! Stacey
What’s Private Labelling?
A private labelled product is a product obtained by contract or a third-party manufacturer then sold under the retailer’s own brand. The premise is pretty simple; it means that you get the raw product from the manufacturer then modify it as you see fit to create your own brand. You can practically specify anything you want concerning the product: its packaging, storage, labelling and so on. Even its cost is under your control, just remember not to get carried away. Examples include ‘Tesco Value’ baked beans or ‘Tesco Finest’ tea bags, both private label brands of the worldwide retailer, Tesco.
In contrast to private label products, branded products are a prominent brand created by a specific company and are well-known. A prime example is Coca-Cola which has dominated the world soft-drink market.
Private labelling allows many sellers to acquire a piece of the market, without having a huge investment capital to start their business.
Image source: Extracted from Finlandek catalog by godirek.com
In recent years, the private labelling business has increased dramatically, especially on platforms such as Amazon. Customers are becoming comfortable with the idea of private labelled products flooding the market. In fact, over 80% of customers now feel that private labelled products are just as good if not better than branded products.
Due to this, an ever increasing number of entrepreneurs are opting to delve into private labelling as a means of income with Amazon as their platform of choice. Given the fact that Amazon is continuously expanding their private label offerings and offering programs such as the FBA (Fulfilment by Amazon), the choice is understandable.
Where Did The Private Label Craze Start?
In the US alone, the market share of private labelled products in retail sales grew from 16.2% to 17.4% between 2009 and 2011. This was in the wake of the Great Recession that had plagued the US economy, forcing the buyers to reevaluate their priorities and focus on price instead of quality. Essentially, consumers turned to private labelled products due to their lower costs.
The preference for private-labelled brands has only grown stronger, since private labelers’ are now focusing on quality to compete with their branded counterparts. The result of this is notable; private labels now account for more than 20% global grocery sales and up to 70% in some categories!
This situation is pretty evident in Europe with private label products in the UK having the greatest market share at a whopping 51.8%.
Amazon is making great use of such consumer interest, constantly making in-roads into the private labelling industry worldwide and giving you an opportunity to sell your private labelled products globally.
How Do You Start A Private Label Business?
Private labelling starts with identifying the product you want to sell.
It’s not as simple as you might think. The product has to be generic to sell and preferably small to reduce shipping costs. Also be sure to perform some research into how many people are already selling the product on Amazon before making your decision.
Steer clear of products with too many sellers as ranking your product on their platform could be difficult with too much competition.
The next step is to secure a supplier or manufacturer to provide you the actual product.
Many entrepreneurs opt for overseas factories especially in China due to lower costs. However, it can be really difficult especially for someone just venturing out. Rick Frasch at Forbes.com offers some insight into this in his article, ‘Sourcing goods and suppliers in China: A how-to guide for small businesses’.
Once you source your products, the next part is the branding.
This is where you make the product your own and prepare to sell it. Add any modifications you can think of that will appeal to the consumer. The modifications you decide on depend on wherever your imagination takes you; just ensure you focus what will arouse interest in potential customers. For example, is there anything you can do to ‘improve’ the product?
Additionally, think very carefully on what you will label your product to ascertain that it can be easily found by a potential customer. Finally, list your product on Amazon with a suitable price and start selling using the FBA program for maximum benefits.
Selling Via Amazon’s FBA Program
Amazon has created one of the most advanced fulfilment networks in the world, and that’s the Fulfilment by Amazon (FBA) program.
FBA has been a major help to any seller trying to make a buck on Amazon, because it handles a large part of the entire selling process. Making much of the business model ‘hands off’.
Your first step is to determine the products you want to sell, list them and ship the products to Amazon. Then sit back and relax
Amazon will unpack the products and store them in their warehouses.
The moment your product is sold to a customer, Amazon will package it, ship the product and perform any necessary customer service on your behalf!
With such time-consuming aspects of the job out of the way, you can focus on branding your product effectively and marketing to increase your sales.
That’s the major advantage of the FBA program.
Another important aspect of the FBA program is Prime Eligibility.
People who join the Amazon Prime program are accorded numerous benefits by Amazon at the cost of about 99$ per year. One of these benefits is free 2 day shipping on products bought on Amazon. By selling your product using FBA, your product is automatically Prime Eligible, allowing customers who are members of Amazon Prime to enjoy free 2-day shipping.
In direct contrast to this arrangement, prime members buying from sellers who do not use the FBA program have no such option, having to pay extra shipping costs and rely on the seller’s shipping arrangements.
Think about it, paying 99$/year and having the option to buy from a seller with free 2 day shipping or having to pay for shipping with no guarantee of the duration? It’s a no-brainer. In this case, the FBA will be a great way to secure such customers and maximize your sales.
Private labelling is a great business model if you want to get started in E-commerce but do not have huge investment capital.
Sarah Kaiser is a digital marketing manager at Casino Global Sourcing, the sourcing division of a French retailer Groupe Casino. Godirek.com is the product catalog of Casino Global Sourcing, which offers helps and tips from product sourcing, cost saving to sales boosting for Amazon third party sellers . She’s a fan of sports and has studied business management in France. Her works have been published on dozens of websites and blogs.