- 12th Apr '23
- Sell SaaS
- 19 minutes read
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In today's world, it seems that more and more people are trying their hand at starting up an online store or eCommerce website. This can be done using any number of different platforms such as Shopify, eBay, Bigcommerce, etc., but one platform that has been gaining popularity over time is Amazon.
Whether you already run an existing site or want to start from scratch, there are several ways that you could use Amazon’s marketplace to generate income. One way to make this happen is by creating your own private label goods. A private label item (or private label) refers to a branded good or service that only uses your company name or logo rather than the name of the actual producer.
The main advantage to doing so is that you don't have to pay royalties or fees to other companies when they use your trademarked name. Instead, all revenue generated through sales goes directly into your pocket. However, if you've never sold anything before, setting up shop on Amazon might seem like the best option available. Here we'll take a look at what exactly private labels entail, how profitable they can be, and whether they make sense for newbies who haven't had experience yet.
Is selling on Amazon still profitable in 2022?
It's important to note here that not every single seller will succeed at making big profits off of their private label items. It's also worth noting that Amazon doesn't release exact figures regarding its private label sales, nor does it disclose information about individual private label brands. But given that it's estimated that there are approximately 50 million active private label brands on Amazon alone, it's safe to say that most of them aren't breaking even.
That being said, some sellers have reported earning anywhere between $200-$700 per month, while others have gone on to earn thousands upon thousands of dollars each year. Of course, these numbers vary widely depending on many factors including which niche you decide to focus on, the quality of the products you choose to offer, and whether you follow the right marketing strategies.
What makes private label profitable?
You can find private label products on Amazon for virtually any type of consumer demand. From beauty and health care supplies to pet accessories and electronics, there are almost no limits to where you can go. The key factor behind this is that because the products themselves are made specifically for sale on Amazon, there's little need for additional research beyond choosing the ones that appeal to customers most.
This means that if you know what the average customer wants, then you should easily be able to come up with a few ideas that are both unique and appealing enough to grab attention in the eyes of potential buyers. In addition, since Amazon owns the market itself, there's very little risk involved in going down this route. If something sells well, then great! And if it doesn't, then just move onto the next idea until you get lucky.
If you're looking to get started, here are some tips to help guide you along the way:
Choose wisely – Before taking the plunge, consider which categories you think will perform well based on past experiences and trends within similar markets. For example, if you plan on offering makeup brushes, then keep in mind that Amazon tends to favor certain types of products over others. Also, if you're planning on launching a line of jewelry, then it may be wise to avoid focusing too heavily on fashion accessories instead of luxury pieces.
Research competitors – While researching specific niches won't necessarily guarantee success, it will definitely give you a better understanding of why certain things sell well and which ones don't. Knowing this information can save you countless hours of trial and error.
Make sure everything looks professional – Just because you're selling a private label product doesn't mean that you shouldn't put in the same amount of effort as if you were working with another vendor. After all, your goal isn't to simply slap together whatever you feel like putting out there…your aim is to create high-quality merchandise that stands apart from the competition.
Keep in mind that Amazon offers free shipping for all orders above $25, meaning that it's easy to justify spending a bit extra on packaging materials and promotional material.
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How profitable is Amazon private label?
As mentioned previously, Amazon doesn't divulge details about how much money private label products actually bring in, so it's hard to tell exactly how lucrative they really are. That being said, according to stats released by Statista, around 80% of all Amazon private label products currently listed on the platform are either losing money or barely break even. However, according to the same source, those percentages are expected to rise significantly in the coming years due to increased competition among smaller brands.
There are several reasons for this shift towards profitability. First, Amazon has recently introduced several new features that allow users to customize their listings and promote them more effectively. Second, the company now allows third parties to add private label options to their catalogues, allowing them to compete head-to-head against larger brands. Finally, the overall economy continues to improve, resulting in consumers becoming increasingly aware of the importance of shopping locally whenever possible.
How much do private label Amazon sellers make?
Despite all of the aforementioned challenges facing sellers operating on Amazon, statistics show that many continue to thrive regardless of the obstacles thrown their way. According to Forbes, a majority of top earners report making upwards of $1,000 per week through their private label businesses, with some even pulling in tens of thousands annually.
Of course, these are extreme outliers compared to typical results. Most private label entrepreneurs tend to fall somewhere in between. Some make hundreds of dollars per month, whereas others struggle to earn less than $20 every three months. There are certainly some exceptions, though, as anyone who has spent any significant amount of time browsing Amazon knows.
Ultimately, it comes down to a matter of patience and dedication. As long as you stay focused on building a strong presence on the platform, you'll eventually be rewarded with higher revenues.
For more info on private label and other related topics, check out our articles below:
Amazon Private Label FAQ
Private Labeling vs Branding Your Own Products
Why Should I Sell My Own Goods On Amazon?
Do You Need To Have An Ecom Store Or Website To Make Money Selling Private Label Merchandise?
What Is The Difference Between Selling Private Label Online Vs Offering Custom Services?
Are Private Labels Worth Their Cost?
A lot of people are looking into starting their own businesses in order to generate income and be able to provide more time or focus to their families. As someone who's been running his own online store for over 5 years now, I can tell you that there are some things you need to know before taking the plunge.
When it comes to building an internet business, many entrepreneurs will choose between either working from home (i.e., being their own boss) or becoming employees at larger companies like Google, Facebook, etc. If you want to build something fast and flexible, then one way to do so is by opening up your own retail storefront using platforms such as Shopify, BigCommerce, WooCommerce, Volusion, Magento or any of the other hundreds of ecommerce solutions available today. The problem with this approach is that when you get started, you'll have very little money saved up to invest in inventory. And if you don't already have a large customer base, you might find yourself having trouble getting enough traffic to keep your sales numbers high. If you're interested in creating a new revenue stream but aren't sure how to start, take note of these four tips below!
However, if you have a bit of cash set aside to buy inventory, another option is to open up your own "private" online store where you can create custom items and ship them directly to customers around the globe. This type of model allows you to avoid all the headaches associated with shipping inventory back and forth across borders -- which is why it has become increasingly popular among those looking to turn a profit quickly. The best part about this strategy is that you no longer have to worry about managing your own fulfillment center because you've hired a third party company to handle everything for you.
One downside to this approach however, is that most people aren't familiar with the terminology used within the industry. They may not understand what "manufacturing costs", "inventory turnover rate", "margins" mean, etc... So here we break down exactly what private label means:
What does Private Label Mean?
For starters, let's talk about "private label". In its simplest form, private label simply refers to the act of purchasing goods from a 3rd party supplier and reselling them through a private website. By doing this, you essentially bypass the middleman and cut out the retailer altogether. It sounds pretty straightforward right? Well, yes and no. Because when you purchase products privately, you typically give up certain control over pricing, branding, marketing, shelf placement, packaging design, etc.. Basically anything else that could affect overall profits.
Now, I'm going to go ahead and say that the majority of people reading this article probably won't be considering a private label solution anytime soon. But if you were planning on making money off of your existing inventory anyway, wouldn't it just make sense to skip the headache of dealing with returns, refunds, customer service issues, etc.? That said, if you'd rather learn more about what makes private label profitable while avoiding all the hassle, read on.
Are private labels worth it?
In my opinion, private label is definitely worthwhile IF you're willing to put in the effort required to succeed. Here are three reasons why:
1. When you run a private label business, you only pay manufacturing costs once. After that point, you have full ownership of every single item sold through your site. No matter whether they sell well, poorly, or even remain unsold, you always keep 100% of the profits.
2. Most private label retailers report higher than average margins due to the fact that they never had to deal with returns or refunds. These types of expenses usually eat away at profits.
3. Being your own boss gives you complete flexibility. Since you operate your own storefront, you're free to change prices whenever you want, add/remove products whenever you feel necessary, and generally manage your entire business based solely on your own preferences.
But what happens if you decide you don't want to continue operating your own business someday? Will you lose access to your current profits? Can you afford to stop and start again later? Let me answer both questions with a resounding YES!
Most successful private label brands use multiple channels to market their products. For example, some opt to advertise on social media sites like Instagram & Twitter, others utilize YouTube videos, and yet others rely heavily on affiliate programs. However, regardless of which method you choose to promote your products, the key to success lies in choosing a reliable platform that provides consistent results.
Is selling private label on Amazon worth it?
So far, I've talked about ways to increase your earnings by cutting out the middle man. Now let's look at the flip side of the coin. What happens if you decide to leave the world of private label behind and instead sell items through a marketplace like Amazon? Well, first thing's first, the good news is that you won't have to spend thousands upon thousands of dollars upfront to begin. All you really need is a few hundred bucks to cover initial startup costs. Once you have a basic setup in place, though, you'll likely end up spending much less each month compared to what you earn from private label sales alone.
To illustrate this point further, consider this scenario: Let's say you spent $500 total on a basic private label operation. Then let's also assume you ended up earning $1000 per sale after paying 15% commission fees to Amazon. On top of that, you also paid Amazon $50 monthly hosting fee plus additional bandwidth charges. Finally, let's round it all up and say that you lost 20% of your sales due to bad reviews. In this case, you'd actually come out losing $400 each month.
On the other hand, if you decided to sign up for an Amazon seller account and began selling private label products immediately, you'd instantly save yourself $200 per month -- along with countless hours spent setting up your listings, uploading images, writing descriptions, verifying accounts, etc.
Of course, the truth is that neither situation is ideal. Either way, you're left with the same amount of money coming in each month. The difference is that if you stay private label focused, you can rest assured knowing that your income will grow over time as long as you stick to your guns and put in the work. Whereas if you jump straight into Amazon, you'll risk ending up stuck with a stagnant business that requires constant maintenance.
Is private labeling hard?
Let's face it, creating a successful business takes a ton of effort. There's no doubt about that. But if you truly believe that private labeling is the direction you want to head in, then you should expect nothing short of a grueling process filled with frustration and setbacks. And honestly, unless you enjoy putting in the extra hours needed to maintain your business, it's unlikely you'll ever make major progress.
That said, if you think you'd prefer to delegate tasks like listing your products on various websites, promoting your offerings via social media, etc., you can absolutely hire help to take care of all that tedious stuff for you. Just remember that outsourcing doesn't necessarily equate to saving tons of money. Instead, it tends to cost more since you'll have to cough up for labor + equipment rental fees, etc.
Additionally, if you plan on expanding beyond Etsy and eBay, you'll eventually have to contend with taxes, licensing requirements, international trade regulations, etc.... And although none of these factors sound too daunting, they certainly add up over time.
As you can see, private label isn't easy. But if you're serious about turning your passion project into a thriving business, then you owe it to yourself to push past your fears and take action. Don't wait until tomorrow morning to wake up and wonder what happened yesterday. Make a decision today and live with it for the next 30 days. Only then will you be prepared to move forward with confidence.
Is Amazon FBA private label profitable?
Finally, if you haven't noticed yet, the topic of private label vs. Amazon Fulfillment by Amazon (FBA), has popped up several times throughout this post. To recap, private label is basically a direct sales program whereas FBA involves utilizing the services of a third party logistics provider. Both methods allow you to skip the middleman and sell directly to consumers.
Here's the catch: Both models offer similar benefits. Yet, they differ significantly in terms of operational complexity. While private label sellers must devote significant resources towards designing a unique shopping experience and maintaining a robust backend system, FBA operations consist mainly of sending packages out to customers.
The idea behind private labeling is simple -- instead of selling directly to retailers or customers, you can buy a license from an existing company and then use that same logo and branding when you create new items. This allows you to take advantage of all the benefits of being a well known brand while avoiding some of the drawbacks of having to manage inventory yourself.
In this article we will discuss how private labels are different than branded goods, what makes them more difficult to launch successfully, and whether they have any advantages over other types of ecommerce businesses like affiliate marketing or dropshipping. In short, if you want to know if private labeling is right for you, keep reading!
Most people first hear about private labeling after seeing a successful example online. The most famous one was probably Starbucks' "Venti" coffee drinks, which started out as a private label but has since become its own brand. If you've seen those VENTI cups, you might be wondering why anyone would bother making their own version at home.
Let's talk about exactly what private labeling means before moving onto the pros and cons of starting a private label brand in detail.
How much does it cost to start a private label?
Unlike creating your own website or launching an affiliate program where you only need to pay hosting fees, there are a lot of costs involved in setting up a private label. Many companies won't even offer you a free trial period so you'll likely be expected to invest several thousand dollars into getting everything ready to go live. Here are just a few things to consider:
-- Custom packaging: Depending on your target audience, you may need to design custom packages such as boxes, bags, etc. A good quality printer should also come with package printing services (although many printers charge extra).
-- Graphic Design: Creating high resolution images for social media, websites, catalogs, brochures, flyers, emails, etc., is another area where you could spend thousands of dollars. It isn't uncommon for graphic designers to be paid by the hour, so hiring an outside designer who specializes in private label can help reduce upfront expenses.
-- Inventory Management System: Managing stock and shipping logistics is another huge expense for any type of business, especially a retail store. However, it becomes exponentially harder when you're trying to run two separate entities simultaneously. When starting a private label business, it's important to find a reliable software provider that offers both order fulfillment and point of sale functionality.
-- Merchandise Manufacturing & Packaging: While you don't necessarily need to manufacture your own merchandise, you do need to figure out how to best pack and ship your products. There are plenty of third party options available, from drop shippers to professional packing houses.
If you decide to opt for outsourcing production, expect to shell out anywhere between $500-$10,000 per item depending on the complexity of the project. For comparison purposes, I checked out three popular private label manufacturing companies and found that each charge roughly $1,200 to produce 100 units. That comes out to nearly 10% markup compared to traditional manufacturers, though it depends heavily on the specific model chosen.
What are the cons of private labeling?
While the process of designing, producing, and distributing your own products sounds great, there are definitely downsides. One key disadvantage is the time commitment required to get set up properly. As mentioned above, you'll need to hire a graphic designer, purchase equipment, and develop a system for tracking orders, shipments, returns, and customer support. Even once these tasks are complete, you'll be managing inventory, ordering supplies, shipping, handling returns, responding to customer inquiries, and communicating with staff members across multiple departments.
Another downside is that you won't be able to reap the profits immediately. Unlike with direct sales, you won't receive payment until your products actually reach buyers. And because your products aren't sold through Amazon or eBay, you won't benefit from the massive economies of scale provided by big box stores.
Finally, you won't be able to rely on established distribution channels like big box stores, grocery chains, or mass market retailers. Instead, you'll have to build relationships with individual merchants throughout every step of the supply chain. Not only is this challenging due to the lack of inventory visibility, but it takes longer to establish trust and credibility with potential partners.
Is FBA private label worth it?
One option that's gaining popularity among entrepreneurs looking to cut back on overhead is the flexible marketplace called Flexible Storefronts. Essentially, it lets you open an account with a wholesaler and sell your products using the company's platform. Once you've reached a certain level of success, you can move your entire operation to the wholesalers warehouse or continue working independently.
Flexible storefronts typically provide higher margins and lower minimum quantities than regular brick and mortar locations. They also tend to be less expensive to operate than traditional physical stores. Because you don't have to maintain inventory, rent space, or deal with staffing issues, you can focus exclusively on growing your business.
However, Flexible storefronts are not ideal for everyone. For instance, if you plan to eventually expand beyond niche markets, they might not be suitable for you. Also, while you can sell virtually anything through Flexstorefronts, you must abide by strict terms and conditions designed specifically for digital products. Finally, you won't be able to leverage Amazon's infrastructure and customer base, nor will you gain access to Prime Shipping benefits (which can save significant amounts of money).
As far as private labeling goes, the main difference between FBA and non-FBA alternatives is that you'll always need to fulfill orders yourself. While you may earn slightly better margins by choosing a service, you'll lose flexibility and control over pricing and promotions. You'll also need to ensure that the vendor you choose provides enough return policies, insurance coverage, and warranties to protect against damages or losses.
Is private labeling worthwhile?
Ultimately, deciding whether or not to pursue a private label business requires careful consideration of your goals, resources, and risks. If you want to maximize profit, avoid the hassle associated with maintaining inventory, and enjoy the freedom of running your very own business, then private labeling could be perfect for you. Just remember to research your options thoroughly before jumping in headfirst.
For more information on starting your own private label business, check out our guide to becoming an indie seller here. We'd love to hear about your experiences with private labeling and share tips for succeeding with your startup! Leave us a comment below and let us know what you think.
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