What is Private Label? An Introduction to the Popular Amazon Selling Method

Most people have heard of the online retailer Amazon. A lot of people use it as one of the main ways they buy products and goods. In fact, in early 2016, it was reported that Amazon had more than 310 million active customer accounts worldwide. And in 2017, net sales totaled $178 billion. What a lot of people might not know, is that a good portion of Amazon sales come from private label products.

And the great thing is, anyone can learn how to sell on Amazon, especially through private label.

In this post, we’ll go over private label products and how you can use them to build an Amazon business from the point of view of a seller. We’ll cover what a private label product is, where to get them and how to pick the right one.

First, we need to answer the question:

What is Private Label?

The concept of private label as it applies to Amazon and selling is actually pretty simple. Think of all the products that are on Amazon. Everything from phone chargers and first aid kits to kitchen utensils, toys and everything in between. Have you ever stopped to think about where these products come from and who is selling them? More often than not, the “company” behind the product listing you’re looking at isn’t so much a company as a single person or small team selling products.

So where do they get the products? People who sell private label products on Amazon “source” generic products from manufacturers and then market them under their own brands as a “third party seller.” This is actually one of the most popular ways to sell on Amazon because it’s the most scalable. As a third party seller, you buy your product in bulk from a manufacturer at lower per unit prices and then re-sell on Amazon for profit.

Sourcing Private Label Products

So this next step in understanding what private label is learning how sellers find them. One of the most popular ways to source products is through the website Alibaba. In short, Alibaba connects you with overseas manufacturers allowing you to purchase your selected products in bulk for resale. However, there are some things you have to keep in mind. Many of the manufacturers you work with will be from another country, so you’ll have to think about possible communication issues and cultural differences when dealing with them.

Just to give you an idea of what the Alibaba interface looks like, take a look at this example search we performed for a random product, in this case a phone charger.

Private Label

 

You can’t see on that screenshot, but there are literally 100 pages of products related to phone chargers that you could source and sell under your own brand. By just browsing through the searches, you can get an idea of what the per unit prices will be for products like these, what the minimum order the manufacturer will accept is, and there’s even a button to “Contact Supplier” directly through Alibaba. And once you choose a specific product listing, there’s even more information available.

All this available information will allow you to do your homework on the manufacturer, to ensure they will be a good partner to work with. Alibaba also has its own quality assurance metrics to help you pick legitimate manufacturers to work with, but a lot of the work will still come from your end during communications with prospective partners.

Picking the Right Product

Now you that you know where to get a product from, let’s talk about how to choose the right product. Like with everything on Amazon, this process takes a good deal of research. You don’t just browse Alibaba, find a product you think is cool and then sell it. First, you need to do your homework.

Choosing the right product to sell private label is crucial to your success. One wrong move can cost you time and money, or worst, ruin your Amazon business before it begins. When thinking about what product to sell there are a lot of factors to consider like price/profit margins, marketplace viability, popularity and much more. By using a product finding tool, like Product Discovery from Viral Launch, you can generate a list of possible products that align with your goals.

After you’ve got a list of items you think could be winners, it’s time to validate. There are a lot of market research tools out there for Amazon sellers, including our own Market Intelligence. This type of software eliminate guesswork so you can steer clear of risky products that might lose you money.

For instance, our tool allows sellers to see demand for a product by looking at estimated sales numbers, keyword search volume, and market trends. You can also take a look at how top competitors have performed and are performing with similar products.

Our tool also allows you to look at potential barriers to entry like reviews, big brands and high initial investment.

Want to learn more about how to find great products? Check out this video:

Next Steps

Now you know where a vast majority of the products available to buy on Amazon come from, you might be thinking about getting involved. If so, there’s still a lot to learn about how to become an Amazon seller. You’ve got to start an Amazon seller account, figure out how you want to fulfill your orders, learn what makes an effective listing and how to market your product and much more.

One of the most important things to keep in mind as you continue on your journey of becoming an FBA seller is to never stop learning. Things can change on Amazon in what seems like the blink of an eye, so it’s important to stay up-to-date. What’s great is that information is out there, you just have to be willing to put in the time and effort to research.

Your friends at Viral Launch would love to be there every step of the way by providing tools and resources for your Amazon journey. If you’re interested in learning more information about all things Amazon, we encourage you to subscribe to our blog, check out our Youtube channel or listen to our podcast Follow the Data.

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