Amazon FBA Private Label as a Business Model

The phrase “Amazon Private Label” can refer to two different things, both dealing with the sale of various product brands on Amazon.com.  In this post, I will discuss the popular business model of creating and selling private label branded products on the Amazon marketplace. If you are instead looking for a list of Amazon’s own private label brands then check out this post here.

What is Amazon FBA Private Label Selling?

Many businesses and individuals have started their own “private label” brands that they market and sell through Amazon.com.  This means that they have created the own brand of products for sale and are using Amazon’s marketplace to generic awareness and sales for their brand.  Typically these sellers utilize Amazon’s FBA program (“Fulfillment by Amazon”) in order to facilitate the delivery of the products to their customers. Hence the “FBA” acronym.

The Amazon FBA private label business model has been a hot topic over the past several years, as many people are looking for ways to make money online or run their own side hustle e-commerce business. 

Indeed, selling your own branded products on Amazon can be a viable business model if you do it right – as Amazon has a huge volume of online shoppers who trust their platform with the purchase activity.  But this business model can also be a quick and easy way to lose a lot of money if your execution is poor.  And even in a positive scenario, scaling an e-commerce business requires a lot of cash as you will continually need to replenish inventory.

How Does an Amazon FBA Private Label Business Work?

Here’s how an Amazon FBA private label business works in a nutshell.

First, the entrepreneur selects a product (or group of products) to sell. Typically you want products that you can sell at a good profit margin, that are relatively easy to ship, and that are in demand (i.e. not something new-to-market). This is commonly done while also looking for a factory to produce the products.

Then you create a brand around this product. This might involve tweaking an off-the-shelf product that currently exists – maybe adjusting materials, colors, size or other features to either improve the product or to make it more suited to a particular market. Then create a brand name (that you can trademark) and build out the brand values and positioning. Next, design your product packaging and get the first order of inventory produced and shipped either to you or to Amazon directly.

While the product is en route, its time to perfect your product listing – the photography, bullet points and copy, and all of the details shown on the Amazon listing page. Once the products are at Amazon and are live, its time to pull all of the marketing levers – get reviews, rank in organic search, run paid ads, etc.

If successful, the sales will start to come in and now its time to place another order with your manufacturer to replenish your inventory so you don’t run out of stock.

That’s the model in a nutshell. Here’s a post about how to sell private label products on Amazon FBA with more detail.

The process is relatively simple to understand, albeit a bit involved and time-consuming. The challenge is not in knowing the process, but rather in the proper execution of each step. If you pick a product that is not in demand or where the financials are poor, you’ll struggle to make a profit. If you picked the right product but the manufacturing quality is poor, then eventually your review rating will take a hit and that product will be a loss. If you order way too much inventory (or too little) then you’ll significantly hamper the profitability of your brand. Its a difficult business to get right. And it requires a lot of cash up front. That said, when all of the operations are humming along, then an Amazon FBA private label business can be a very nice business to own!

Should I Start an Amazon FBA Business?

In answering this, its important to disclose that I have personally started three separate Amazon private label businesses. I sold two of them and continue to operate the third. I’ve created a total of six brands across these three businesses. And furthermore, I have started and continue to run an agency that helps businesses sell on Amazon. So I certainly have a biased viewpoint on the topic.

My honest opinion is that most people should not start and Amazon FBA private label business.

I’ll now explain why.

1. Cash flow. In business there is a big different between profit and cash flow. Many new or budding entrepreneurs don’t understand this. But if you are looking to make some extra money online or generate a little cash from a side hustle then this particular business model is about the worst one imaginable.

The issue revolves around cash flow, which I explain in this blog post here.

2. Competition. If you have no experience selling on Amazon then it will likely take you much longer to figure out all of the aspects of this business and optimize them accordingly. And if you do not have experience in online marketing and e-commerce in general then I would caution you to find a different business model. The risk with an Amazon private label business is not just in making nothing. Instead you can easily lose money and be at a net negative. This is because you must buy inventory in bulk up front, with no guarantees you will be able to sell it. Also, its common for a brand new product to lose money while you build up reviews (social proof).

3. Lack of Control. I often say that Amazon is both a blessing and a curse. When you build a business where the majority of your sales are through one channel, you are then highly impacted by any changes that channel makes. Each year Amazon increases their fees charged to sellers. And each year the cost of advertising increases due to the bidding model. What’s more, at any point Amazon could change a policy or kick a brand off of Amazon and that effectively kills your business. For this reason, I view selling on Amazon as a great opportunity in the here and now but not necessarily something I’d want to bet on for the next 5 or 10 years. If you are going to start a new business today then I think you should want to feel comfortable about that business on a longer timeline.

Instead, I would encourage someone who was interested in this business but with no experience to find a way to get some initial experience. Perhaps begin by reselling other brands on Amazon (i.e. retail arbitrage). Or do some freelance consulting for a friend or family member who runs a business that is not yet selling on Amazon.

The truth is that its hard to make a profit selling private label products on Amazon in 2024. Five to ten years ago it was easier – the fees were less, the paid advertising was more profitable, and there was just less competition in general. It can certainly be done today, but its difficult.

Who Should Sell on Amazon?

If you are an experienced e-commerce marketer AND you can afford to risk $30k+ and six months of time to give this business model and shot then I think it could certainly be worth trying. Even in that scenario I might encourage you to first do a little consulting or retail arbitrage but you should be able to quickly get the hang of it and start selling your own private label products.

Also if you have or work for an existing brand or manufacturer that sells through other channels, then certainly selling on Amazon is something you must consider. In this case you likely would not think of the model as private label but rather Amazon would simply be another sales channel. Even if you are already selling on Amazon but not having the success you want, then its worth working with professionals to optimize your sales growth and profitability. It is this market that Vocational Media Group serves with our full-service Amazon consulting services and Amazon SEO campaigns. If you need some help with Amazon sales, please reach out to us and we’ll set up a time to talk and jump into the details related to your brand.

About the Author

Jon Payne

Jon is the founder and lead consultant of Vocational Media Group. He works directly with brands to increase their sales on Amazon, while also tightly controlling costs and protecting margins. Jon also practices what he preaches, by building, acquiring and operating his own private label brands on the Amazon Marketplace.

Vocational Media Group is a digital marketing agency located just outside of Charlotte, NC. We specialize in full-service SEO for businesses looking to improve their presence in Google, as well as Amazon FBA channel management to include Amazon SEO and PPC campaign management.

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