Private label selling has been a staple for many Amazon sellers. Recently, however, private label selling has been attacked. Amazon has made changes that affect private label selling, and there’s more competition than ever. So, is it possible to be successful with a private label? Let’s find out!
Basics of Private Labeling
Private labeling is a technique used by Amazon sellers worldwide. The basic principle is that sellers buy cheap, easily manufactured products and package them in branded packaging to make it their own before selling.
Most of these products are sourced from China, where it is cheap to manufacture products. Private label sellers often choose to send their inventory straight to an Amazon FBA facility so that they don’t have to worry about storing, packaging, and shipping their product.
The goal of private labeling is to find generic products that will sell with minimal effort. While there are a lot of other considerations that go into private labeling, that’s the main idea.
Private labeling allows sellers to offer a wider range of products and run their own businesses from home without having to worry about the cost of manufacturing. This has been a low-maintenance business option to help sellers rake in profits.
Private Labeling in Jeopardy
While private labeling has been a great way for sellers to compete on Amazon, this model is under scrutiny. Let’s take a look at some of the difficulties facing Amazon private label sellers and what sellers can do to make a profit.
1. Chinese Private Labels
Because private labeling was such a successful way to make money on Amazon, it didn’t stay a secret for long. In recent years, more and more private labelers have entered the market, creating a lot of saturation.
You’ll notice that some product categories have products that look identical but that are sold from different brands. As a result of this saturation, it has become harder for private labels to distinguish themselves from the competition.
And these private label sellers are now starting to come from China itself. In the past, Chinese manufacturers would sell to American or European white labelers, but now they are joining the competition. After seeing how easy it can be to make a profit, they have started creating their own Amazon brands.
This Chinese competition can be a threat to other private labelers because the Chinese sellers may be manufacturers themselves; therefore, it’s easier for them to create more of their product or make adjustments to the design as needed. As a result, they can sell their products at a lower price and undercut other private label sellers.
What Sellers Can Do
Private label sellers can combat this market saturation in a few ways:
- Source products locally to appeal to buyers in your area
- Look for products that Chinese sellers aren’t selling (although this advantage might not last long)
- Invest in high-end products that aren’t as oversaturated
2. Competition from Amazon
Amazon is a business too, and it has its own array of products offered in its marketplace. It first started offering their own private label in 2009, offering commodity products. Today, however, it offers products in almost every product category.
Amazon is becoming more aggressive with its own branded products, and in addition, Amazon launched a program last year to encourage third-party sellers to become part of the Amazon family. As an added benefit, these brands get promoted over other sellers in search rankings.
By increasing the number of private labels under the Amazon brand, it has become harder for private label sellers to rank organically in search results. And if sellers don’t show up in the top results for a search, consumers won’t be able to find them to purchase their products.
These Amazon-owned brands are causing private label sellers to go head-to-head with the eCommerce giant itself.
What Sellers Can Do
Private label sellers can still compete on Amazon using these tips:
- Diversify your products to compete in several product categories
- Focus on building a bigger, more established brand, which involves looking outside of Amazon
- Offer promotions and create relevant PPC campaigns to get your product in front of potential consumers
3. Dirty Tricks
Inevitably, there are a number of sellers who try and cheat the system to make a bigger profit. Because competition is so fierce, more sellers are willing to break the rules and pull dirty tricks to get ahead.
Some of these tactics might include a seller going to creative lengths to get good reviews for their products and bad reviews for their competition. Other tactics might include false infringement claims that can damage your Amazon reputation and cause you to get suspended.
Additionally, there are hackers who try to hijack your account to get you suspended. They might change the details of your product listings or make other changes because they know that if you get suspended, your business will suffer, and some sellers may never recover. These tactics pose a huge threat to sellers.
What Sellers Can Do
Private label sellers have to be more involved with their accounts. Here are some ways private label sellers can protect themselves.
- Do not get involved with shady tactics yourself
- Monitor your account closely
- Act immediately if you see any suspicious signs or activity
Future of Private Labeling
Despite dirty tricks and high competition, private labeling can still be a viable option for your Amazon business. Based on these threats, it seems like real brands that take the time to become established will be the ones that will be able to compete. Brands that rely on shortcuts and making a quick dollar will be forced out of the market by larger competitors.
To be a successful private label, you will need to think like an established brand with a bigger picture in mind. Consider diversifying and offering products in several product categories. Look for opportunities to manufacture your own product or source more unique products locally instead of looking to generic products from Chinese manufacturers.
We know that this can be difficult, but Nozani’s Amazon experts can help! We have our own private labels in the marketplace, so we understand the growing pains facing Amazon private label sellers right now. We would be more than happy to help you build a brand that can compete on Amazon. Reach out to us today!