There are 3 types of physical e-commerce products that typically get sold online. 1) Arbitrage 2) Wholesale & 3) Private Labelling. All 3 business models have their advantages and disadvantages.
The vast majority of people that start e-com businesses fall into either the arbitrage or wholesale categories.
Take a look at the illustrations below.
Arbitrage is where people go out to thrift stores or purchase liquidated brick-a-brack stock to resell online.
This is a great way to pick up cheap and in some cases FREE products to then resell online at a profit.
The profit margins can sometimes be huge especially on things like collectibles and antique items.
However, the downside to this is that there is no LEVERAGE.
Sellers have to constantly go out there looking for different items to sell, they then have the time-consuming task of taking images and listing each and every product to resell.
It’s virtually impossible to scale an arbitrage business because there is no way to automate the buying and selling process.
Wholesaling, on the other hand, allows sellers to source products from suppliers in bulk to resell online. This is how most serious online sellers start out selling. They purchase brand name products in bulk from suppliers and re-sell them at a retail mark up.
When selling on Amazon it’s a leveraged way of doing business because you only need to list a product once and it sells repeatedly. You can purchase stock in bulk and send it straight to Amazon FBA, therefore, automating the selling process. The advantage of wholesaling is that you can leverage existing brand names that you know are already selling well online. However, there are two major downsides to this 1) Price & 2) Competition. As you are already buying an existing brand, you are paying a wholesale premium t product, therefore the mark-up that you can sell the product for is potentially a lot less than buying a generic version of that product and putting your own brand on it. Secondly, if you can source a product from a supplier to sell on Amazon so can most other sellers. This means you are all competing against one another and driving the price down, leading to huge reductions in profit. Also, if you are selling well known products on Amazon, then Amazon are likely to be in direct competition with you.
TAKE A LOOK AT THE ILLUSTRATIONS BELOW:
There are 19 sellers competing with one another all trying to sell the same product.
Each seller must constantly undercut one another to win the Amazon buy box and make a sale. They are paying a premium price for the already branded product, and they must compete with Amazon themselves who are retailing this product and hold all the buying power. Amazon DO NOT like sellers competing against them on the brands that they sell.
Another difficulty is that many wholesale suppliers will not supply anyone and everyone. You must register and go through certain distribution channels before they will even consider supplying you.
Also, many brands will not supply you if they know you are retailing their brands online as they already have online distributors (such as Amazon themselves) selling their brands online.
WHY PRIVATE LABELLING?
This brings us onto Private Labelling. Private labelling allows sellers to source products that are already selling well and put their own brand name on that product.
Sellers can source theses generic products at the cheapest possible price and then add value to that product by creating a brand for that generic product.
Profit margins are a lot higher due to the lower purchasing price and you aren’t competing directly with others sellers as no one else is allowed to sell your brand without your permission.
Amazon wants private label sellers to sell on their platform. They have even introduced tools to help private label sellers’ market their products on the Amazon selling platform such as Enhanced Brand Content. This is a brand new feature for private label sellers only to ensure their private label products stand out on the Amazon selling platform.
The whole process of private labelling can be tricky and there are a number of steps that must be taken before a private label brand can now be launched on Amazon. This includes product sourcing, packaging design, trademarking your intellectual property, registering your brand on Amazon’s Brand Registry Program and physically importing your private label products from China and the rest of the world.
Here at FBA Prep we have a wealth of experience in private labelling and can handle every stage of the process on your behalf. We have been selling private label products on Amazon since 2014 and know how it works inside out.
We have contacts in China who can speak both Cantonese and Mandarin. They have direct contact with factories and not just trading companies. They are also able to negotiate the best pricing on your behalf and will ensure you avoid all the pitfalls that come with trying to import yourself, such as being scammed.
We can trademark your brand on your behalf.
We work directly with trademark solicitors who can offer you the best prices on their services and ensure the quickest and most reliable service to get your brand trademarked. We know exactly how to get your brand registered with Amazon’s brand registry programme and have a branded product website developed at a fraction of the cost of hiring a UK based web designer.
This is an essential part of getting your brand registered with Amazon.
We also have a team of graphic designers who can create logos, packing design, graphics and info-graphics for any type of private label product. Again, this would be at a fraction of the cost of having to go out there and hire a UK designer.
We also work with a large shipping and road freight company and can broker air and sea freight on your behalf. We handle all the shipping and customs clearance.
Call us today to see how we can help you with your Amazon private labelling requirements.