Starting a Private Label on Amazon in 2021: Everything You Need to Know

By Drew Estes

Ready to launch a product online? Private labeling a product to sell on Amazon is one of the leading ecommerce business strategies right now. But what exactly does that mean?

In this article, we’ll answer all your questions about starting a private label online, so you can understand if brand ownership is right for you as a seller. Learn what private labeling is, the pros and cons of launching a private label product on Amazon, and all the little details about how to start your own private label business.

Table of Contents

• What is Private Labeling on Amazon?
• What is an Example of a Private Label?
• What’s the Difference Between Private Label and White Label?
• Why Launch a Private Label Product on Amazon? (Pros & Cons)
• Strategy Comparison: Private Label vs. Retail Arbitrage
• Is the Private Label Business Model Dead?
• How Do I Start a Private Label on Amazon?
• Product Research
• Competitive Analysis
• Source Your Product
• Create Your Brand
• Set Up and Optimize Your Listing
• Launch Your Product
• Key Takeaways

What is Private Labeling on Amazon?

Private labeling is when you have a manufacturer produce your product, but you sell it under your own brand name. The term is commonly used to describe products with small alterations from what’s currently on the market, as opposed to creating a new product from scratch.

When you own the brand like this, it means you’ve created all the logos and overall brand image, and it means you’ve trademarked it, so it’s legally yours.

This type of brand ownership is about more than just slapping your logo on something and calling it yours. You pick how it’s made, how it looks, how you package it, as well as the design of the label and other branding.

This is in contrast to other forms of reselling on Amazon (wholesale, arbitrage, or dropshipping), which consist of selling brands owned by someone else.

Perhaps the most obvious example of private labels in e-commerce is Amazon Basics. A good niche can often avoid competing with them, but if you’re concerned, read our article about competing with Amazon’s private labels.

What is an Example of a Private Label?

Some popular examples of private label brands include “Kirkland” (owned by Costco), “Great Value” (owned by Walmart), and of course, “Amazon Basics” (if you can’t figure out who owns this brand, you’re probably in the wrong place).

Notice how the companies who own these brands aren’t known as manufacturers of products: they’re stores or marketplaces. It’s not like Amazon is a leading producer of off-brand iPhone chargers, but they found someone to produce a decent version, made some small changes, and put their name on it.

Boom, profit.

What’s the Difference Between Private Label and White Label?

Private labeling and white labeling are similar, so they’re often confused, but the difference is important.

White labeling is when you sell a generic product to multiple retailers and often under multiple brand names (ibuprofen is a classic example, or those cheap plastic sunglasses that every brand slaps their logo on for promotions). White labeling tends to earn lower profits per unit, and is more susceptible to price wars.

Private label products meanwhile, are sold under a single brand name, and the product is often distinct from other competitors in the market.

Why Launch a Private Label Product on Amazon? (Pros & Cons)

You should lean towards private labeling as your business model on Amazon for several reasons, but sustainable profitability is probably the biggest. Here are some of the key pros and cons to choosing private label (brand ownership) as your ecommerce business model:

Advantages of Private Labeling

We may be a little biased here because we’ve had so much success launching private label goods with our software, but there are some serious advantages to going the private label route:

• Profitability: since you’re managing everything from manufacturing costs to the final cost of the product, you have a lot more freedom to decide your margins. Owning your brand also gets you the coveted Buy Box, which is a big boost for conversion rates.
• Quality control: since you’re working directly with the manufacturer to produce something with your specifications, you can refine your product until it’s exactly what you want to sell
• Quick iteration: as a smaller company on a different brand from your competitors, you can quickly make changes to the product and meet new demands in your niche, which helps you stay competitive in a busy market
• Branding: create a unique and recognizable brand, which not only distinguishes your product from competitors, but the brand recognition can then be used to boost sales if you decide to launch more products under the same brand name.
• Brand Registry: getting in Amazon’s Brand Registry will help you protect your brand from counterfeits, make awesome updates to your listing to personalize it for your brand, and even give you some extra marketing analytics.

Disadvantages of Private Labeling

Of course, if there were no disadvantages then everyone would be starting their own private label rather than wholesaling, so here’s what you can expect for potential downsides of launching your own branded product this way (summary: it’s really not much, beyond cost).

• Higher marketing costs: marketing and customer relations are essential in building your own brand. Any established brand is going to have recognition in stores, so you will likely experience some heavier costs early on to get noticed and chosen over the competition. You’ll need a strategy to generate early sales and reviews for your product to rank better, and this can create some heavier upfront costs.
• Bigger initial investment: simply put, this option is the most expensive one to get started. Even when you find a great niche with minimal competition to keep marketing costs low, you still first need to go through the process of developing your product, getting it branded, and trademarking it.
• Supply-chain dependency: while it may be cheaper to partner with some obscure manufacturer, more established companies are often safer. Remember, you’re dependent on this manufacturer for your supply chain continuing uninterrupted, so you want someone reliable. If they encounter issues, then you risk losing profits.

Strategy Comparison: Private Label vs. Retail Arbitrage

We wrote up an entire post comparing the four major business models in ecommerce, but for quick reference, here’s how private labeling differs from retail arbitrage or online arbitrage.

Arbitrage, much like wholesaling, involves buying someone else’s product at a discount and selling it at a higher price. It requires a much lower investment because all the marketing and brand development is done by the brand owners, so it’s a nice way to get your feet wet selling on Amazon.

Private labeling has a big leg up over arbitrage though, for many reasons. To start with:

1. Retail arbitrage sellers have to compete more on price, so their margins are thin
2. Retail arbitrage sellers have to fight for the Buy Box, which means you’ll be lumped together with every other seller, unless you have the best price and Prime shipping and great reviews (among other things)
3. Retail arbitrage is generally awful for long term growth, because competitors are quick to snatch up winning products, and there’s little to stop them from selling the same product as you (unless you form an exclusive reseller relationship with the brand).
4. Retail arbitrage requires less time and effort than private labeling in the short run, but also means you have to regularly dedicate time to finding deals, shipping and handling your items, and dealing with inventory.
5. Retail arbitrage often requires you to find a new product every several months. Sometimes this is because competitors will seize the opportunity, and sometimes it’s because the brand owner will force you to remove the listing, if you didn’t gain their explicit permission.

Is the Private Label Business Model Dead?

With so many big brands launching their own private labels these days, many people wonder if the private label business model is dead or dying.

While it’s true that trends come and go on Amazon, the private label era is still alive and well (for now).

The era of reselling and arbitrage has begun to fade (and the market is much more difficult for them now), and now the private label space is getting crowded in some categories.

That said, there’s still a lot of space for innovation and differentiation. You need to improve and adapt what’s out there, position it well in the market, and get the proper legal protection.

How Do I Start a Private Label on Amazon?

Ready to start a Private Label Brand on AMZ? Here’s your step-by-step guide to get your business going (and growing), so you can start selling private label products online ASAP.

1. Product Research

Before you start a private label, you need to figure out what to sell. We’ve covered Amazon product research a LOT already, so we’ll give you the Cliffsnotes here.

First off, you’ll want to find a product that has high demand, but low competition. You can use Massview’s product research tools to do this (using Amazon search volume for a keyword as a proxy for product demand), or just look for up-and-coming products on places like Kickstarter.

Either way, you’ll want to use these types of data tools and other tests (explained in the Amazon product research post) to verify this product is worth selling.

A few things to consider:

1. Seasonal products (think winter clothes or Valentine’s Day gifts) can be a huge hassle, and harder to gather reliable data on, not to mention harder to get sales for in the “off-season.”
2. Regulated categories (or gated categories) like food or batteries can be annoying to get into, since you’ll need certain permissions and fill out extra paperwork. That said, the more hurdles you face in order to start selling something, the less competition you are likely to face on the other side, so it’s up to you.
3. Specialized shipping issues (such as refrigeration or needing extra inspections) fall in a similar category of hassles that might help you filter out competition. Super large or heavy items will make shipping more difficult and expensive, but this may be worth it when selling premium products.
4. Pick something you’re interested in. This won’t always be easy, but the more you know and enjoy the product, the easier it will be to sell it and get people excited about it. If you find a category with a lot of enthusiasts, you’ll have an easier time getting sales, too. Furthermore, you’ll have an easier time asking the manufacturer exactly what level of quality and features you want. The more you can improve from the competition and differentiate yourself, the better your profit margins will be.

2. Competitive Analysis

For each product you find promising, you’ll want to do some extra competitive analysis to make sure it’s worth selling. Use a Sales Estimator to see how many monthly sales you can expect on page one, and (more importantly) how difficult it might be for you to get there in the first place.

Use an FBA Calculator to estimate the profits you’d make from a given item, once you account for manufacturing, shipping, storage, and other fees. But don’t forget about marketing costs!

Even if a product gets a ton of sales, if you can’t make a profit in the long run, you don’t have a business on Amazon. Check out our Amazon FBA Fee Calculator explainer video to see how it works:

These features are available in the Monocle Chrome extension for Amazon sellers, which you get free access to when you sign up for any Massview plan – yes, even the Free Plan!

To learn more about these tools, our review-boosting tool, and more check out the full Monocle intro video!

3. Sourcing Your Product (Finding a Supplier)

To get started finding a manufacturer or supplier, you’ll want to check out sites like Alibaba, Aliexpress, or IndiaMart for most foreign supply chain setups. If you want to source from within the US, check out ThomasNet.

Any reliable supplier will do in the beginning, but over time you’ll want to make adjustments to your supply chain. Get the full rundown of how to create your ecommerce supply chain here.

Don’t worry too much about getting the product perfect in the beginning, because you’ll want to test it before you go all-in. That means validating the keywords you’ve chosen to make sure they’ll actually generate conversions and get you the sales you need (with minimal ad spend).

If you’re not sure how to get started testing, read about researching a private label product and learn how to validate the keywords for the item you want to sell. Once you’ve verified the product is the best choice for you, it’s time for step 4.

4. Create Your Brand (Don’t Rush This!)

This step takes some time and money, but it can make or break your business. Creating your brand means several things, including: logo, packaging, product design, photography, voice, and trademark.

First, it means designing your logos and brand image (including the images you’ll use in your listing), to create a cohesive “personality” for your business.

Product photography is one of the most commonly overlooked factors that prevents Amazon merchants from getting sales, so make sure you do it right.

Your logo isn’t critical right off the bat, but you’ll want to have a solid logo as your brand grows, so people will recognize it and come to trust your brand. It’s generally wise to choose a simple, minimal logo and a legible font. For inexpensive logo design (usually $5 to $25), try finding a designer on Fiverr.

The brand personality you create will help define what kind of audience you’ll be targeting (i.e. your product positioning), so bear this in mind as you move through this process. Having a “voice” or writing style that matches your brand personality can help you build loyalty with your customers in the long term.

In the brand creation stage you’ll also work with your manufacturer to create great packaging for your product (if you haven’t already) and make any design improvements to the product itself, usually based on the feedback you received in your testing phase.

Last but definitely not least, you’ll want to get your brand trademarked.

Securing your intellectual property is incredibly important for any private label seller these days, because counterfeit products are everywhere, and they can seriously hurt your business. Plus the trademark gets you access to extra protections, marketing tools, and Amazon A+ Content, because trademarked sellers can register their brand with Amazon.

To learn more about quickly getting your brand into Amazon Brand Registry so you can protect your hard-earned sales, check out our post on the Amazon IP Accelerator.

5. Set Up and Optimize Your Listing (for Conversions, Not Just Search)

Now, you’ll want to read the post we mentioned above about product positioning on Amazon in order to best optimize your listing, because listing optimization is more complicated than simply adding the top keywords for Amazon’s SEO.

You’re writing for an algorithm, yes, but also you’re writing for the actual humans who land on your page, and you want to make sure that they feel encouraged to buy your product when reading your listing.

Of course, SEO still matters. Your product research and validation phase should leave you nicely prepared to target the best keywords in your listing, so now it’s a matter of working those keywords naturally into your listing.

Search Engine Optimization on Amazon is a bit different than you might understand from Google, so we recommend you read our Amazon listing optimization post, and this article on dynamic strategy for Amazon SEO.

6. Launch your product

Once you’re all set up (and your inventory is ready to ship when orders come in), it’s time to launch! A few things to bear in mind:

1. You’ll want a Professional selling plan on Amazon if you plan to get more than 40 sales a month.
2. We recommend using Amazon FBA for most sellers, especially if you need package prep service (some freight forwarders will provide this), and especially if you don’t want to deal with all the shipping and handling yourself. FBA frees up time for you to focus on the important part: getting more sales.
3. It’s really difficult to get early sales when your product has no reviews, which means your advertising costs per sale are going to be high. Use a product launch platform like Snagshout (for merchants), so you can get quick sales and boost your products ranking. (You can run your Snagshout campaigns from inside Massview)

Make sure you understand how Amazon’s ranking systems work if you want to get ahead. Otherwise, you’ll be wasting a ton of money and not seeing any results.

As a beginner, you may want to look into one of the many Amazon FBA courses out there to get you started.

If you have the budget to hire someone to launch your product for you, with a guarantee to get it onto the first page of search results for your keywords, Massview’s product management services may be right for you.

Key Takeaway

Private labels are a big undertaking at first: they’re expensive to start, and the time investment is bigger than any other business model on Amazon.

When done right however, a private label product can be massively profitable. Plus, you get a much greater feeling of stability and ownership over your brand. That means more creative control, easier marketing, and less of a constant hustle to stay ahead.