Is Amazon private label dead in 2023? Considering that 54% of Amazon sellers are currently doing private label, Amazon private label is not dead. However, it has become much more difficult to be successful than just a few years ago because of factors like an explosion in the popularity of selling on Amazon and Chinese manufacturers bypassing the middleman private label business to sell directly on Amazon themselves. In the following article, we discuss the current selling opportunity on Amazon for private label sellers and outline how to do private label successfully. We also tell you how to get access to exclusive product listing protection, advanced analytic reports, and enhanced content to increase your sales on Amazon.
Another online business model that is alive and thriving is local lead generation. Local lead generation is a business model where you sell potential customer leads to small businesses. A single local lead generation website can make upwards of $3,000/month. Local lead generation business owners often run multiple websites at once because they are low maintenance. Both local lead generation and Amazon private label are online business models worth considering.
Top 5 reasons many sellers think Amazon private label is dead in 2023
1. Amazon sells many of its own private label products
Just a few short years ago, in 2017, Amazon only sold 30 of its own private label brands on the platform. Today, Amazon has over 118 of its own private label brands like Amazon Essentials, Mama Bear, and Happy Belly, according to CNBC. These private label brands generate upwards of $5 billion for Amazon. That's a large chunk of money Amazon is taking away from third-party Amazon sellers.
The big fear among Amazon sellers is that Amazon better positions its own private label products on the platform to get more customers. The company has even been called out for doing this by politicians like Elizabeth Warren and news agencies like The Washington Post. Studies show that products on the first page of Amazon get 80% of all the clicks, according to JungleScout. If it's true that Amazon gives preference to its own products to appear on the first page, third-party private label sellers are at a major disadvantage.
2. Chinese sellers are taking over the market
Before, US-based Amazon sellers found an incredible opportunity by sourcing their products from cheap manufacturers in China and selling them for huge margins in the United States. However, times have really changed. According to EcomCrew, 63% of all third-party sellers on Amazon are now from China, as Amazon has been holding regular summits across the country to attract new sellers.
Chinese Amazon sellers don’t have the same language barrier struggles as US sellers trying to source from China. Therefore, they can communicate better and potentially form better relationships to get even better product margins within their own country. Furthermore, many of these Chinese sellers are likely manufacturers themselves listing their own products on the platform. They can make a profit from you by selling you your products, and then undercut you on Amazon with a cheaper product of higher quality because they have more resources and so can operate on slimmer margins.
3. Private label production costs have risen considerably
China not only dominates the Amazon seller landscape, but it’s also where most sellers source their products and so is hugely responsible for the supply chain. However, China's manufacturing costs have risen significantly in the past decade. In fact, a recent study by the Boston Consulting Group found that manufacturing costs are now only 5% lower in China than in the United States for many product niches. Therefore, private label margins are much thinner than they were just a few years ago, leaving private label sellers with less take home profit from their efforts.
4. Extreme competition because of the explosion in the popularity of Amazon
There are around 2 million active sellers on Amazon. Approximately 3,700 new sellers sign up to sell on the platform every day, according to eDesk. Between Amazon and its third party sellers, there are over 350 million products listed in Amazon’s product catalog. Getting customers to see, let alone buy your products, is extremely difficult with so many options to choose from.
One reason Amazon has become so competitive is because there are so many online gurus that promote Amazon FBA in an effort to sell their course. What’s worse, these courses all teach people to use the same strategies and tools to find low competition products. Because everyone is doing the same, the effectiveness of those strategies and tools has fallen considerably. Finding a product niche that isn't already saturated is nearly impossible now.
5. Amazon seller fees continue to increase
It’s not only the increasing competition that is making Amazon seller profit margins thinner. It’s also because Amazon has a history of consistently increasing its platform fees. In fact, between 2020 and 2022, Amazon increased its FBA fees by a staggering 30%!
Furthermore, increased competition naturally pushes up Amazon PPC advertising costs because there are more sellers bidding to run ads on the platform. In the last few years, it hasn't been uncommon for Amazon advertising fees to rise as much as 50% year-over-year. In total, Amazon currently takes a 50% cut of third-party seller revenue on average, according to Entrepreneur.
Is Amazon private label still profitable?
Yes, Amazon private label is still profitable in 2023. The majority 54% of Amazon sellers are profitable within a year of starting, according to JungleScout. Considering that most Amazon sellers use the private label model, it’s more than likely that many private label sellers are profitable in under a year. However, the data indicates that Amazon private label is losing profitability over time.
According JungleScout's State of the Amazon Seller report series, just 56% of Amazon sellers had profit margins ranging between 0% to 20% in 2020. Fast forward two years to 2022, and a greater 67% of sellers were in that lower profit range. Therefore, Amazon sellers across the board are keeping less in profits than they were before.
Is Amazon FBA private label worth it?
Yes, Amazon FBA private label is worth it. Amazon private label sellers make between $500 to $5,000+ in profit/month on the platform. If you outsource order fulfillment to Amazon FBA like most sellers do, you can earn a full time income with very manageable business operations. Amazon handles much of the work for you, like shipping and customer service. For those who want to make money from home and who have cash to invest into a business, Amazon FBA private label is a good option.
3 Tips for success with private label in 2023
1. Don’t compete on price alone
As a private label seller, trying to compete on price alone is one of the worst mistakes you can make that will cause your business to die. There are just too many sellers with more resources in almost every product niche that can drive you out of the market by selling a similar product for less. Instead, you should compete on Amazon by providing more value. You can provide more value by offering a product of higher quality, creating a product that solves an unaddressed issue no other products are solving, or even bundling your product with other items.
2. Join the Amazon Brand Registry
You can do private label on Amazon without brand registry. However, that doesn’t mean you should. The Amazon Brand Registry legitimizes your brand on Amazon and can be accessed by registering a trademark for your product with the platform. Joining the Amazon Brand Registry has many benefits for an Amazon business selling private label goods, including:
3. Get your products "Made in the USA"
Getting products made in China is not the bargain it used to be and international shipping costs can add a major expense to your overall production costs. Furthermore, a recent survey by Reshoring Institute found that 70% of Americans prefer American-made products. Therefore, if you’re selling in the US, getting your product manufactured in the US avoids the additional expense of internationally shipping while diversifying your product from the competition in a way that American customers prefer. There are many online supplier marketplaces with North US-based manufacturers like ThomasNet or MFG.
How much money do you need to start Amazon private label?
You need between $4,000 and $12,000 to start Amazon private label, according to Seller Metrics. The primary costs you need to consider are:
You should have enough cash to cover at least two product orders worth of inventory. Many manufacturers require a minimum order quantity (MOQ) of around 500 units. Even if you find you can produce your product for just $5/unit, $5 x 500 is still $2,500. Therefore, in this scenario, you should have at least $5,000 of cash available for your products so you can ensure you remain in stock if your first product order does well. Staying in stock is important for your product ranking on the Amazon Marketplace to help you better ensure customers continue to see your products.
2. Factory inspection
Typically, you pay a 50% down payment to have your manufacturer start producing your products and then the other 50% when the products are complete. Before accepting your private label products, it’s important to have a factory inspection agency like QIMA verify the product quality. The cost of a China factory inspection is around $300, according to EcomCrew.
3. Shipping to Amazon fulfillment center
Ocean freight from China, where most Amazon sellers source private label products to the USA, is between $2 to $4/kg for ocean freight and $5 to $8/kg, according to Freightos. Let’s say your product fits within Amazon’s large standard size at 2 kilograms/unit. With 500 units and estimating with $3/kg ocean freight, your shipping cost would be approximately $3,000 for the order.
4. Private label product photos
In Ecommerce, you need high quality product photos to show off your private label product’s features. Professional grade product photos will set you back around $200 to $300, according to JungleScout.
5. Product branding and packaging
With a private label product, you need your own custom logo and product packaging that converts. You can have a graphic designer on Fiverr or Upwork create this for you for around $100. Depending on your specific product needs, custom product packaging can cost anywhere from $0.25 to $1.25/unit and up with packaging companies like Salazar Packaging and Arka.
6. Amazon PPC
Amazon PPC is Amazon’s on platform advertising. Nearly every seller uses Amazon PPC to be competitive on the platform because it enables you to sell more products. It also improves your organic ranking because Amazon’s algorithm takes into account how many units you’re selling. Even sellers that have products ranking well on Amazon invest into Amazon PPC to maintain their position on the platform. If you want your private label product to do well on Amazon, having an advertising budget for Amazon PPC is essential. The cost per click of Amazon PPC sponsored ads is $0.15 to $6 depending on the niche and keyword being targeted, according to Helium10.
How long does it take to realistically private label a product?
It takes 4 to 12 weeks to realistically private label a product, according to Ecommerce operating software company Wonnda. You need to consider the time it takes to do product research, find a supplier to produce the product, and add your custom branding to the product. Therefore, even though it takes longer than just selling another brand's product, a private label business can bring a product to market in just a few short months.
How to start Amazon FBA private label for beginners
- 1Use a product research tool like JungleScout, Helium10, or Viral Launch to do comprehensive product research and find a selling opportunity
- 2Partner with a reputable supplier to produce your products by searching through an online supplier directory like Alibaba
- 3Hire a designer from a remote freelance platform like Fiverr to create your brand logo and packaging
- 4Coordinate with the manufacturer to package your products with the custom packaging
Ship your private label products from the manufacturer to the Amazon warehouse
Set up your private label product listing in Amazon seller central
Advertise your products using a solid Amazon PPC strategy to generate sales and spread awareness of your product
- 8Analyze sales volumes and re-order product inventory when running low to ensure you always remain in-stock
What is the best private label Amazon course?
Is Amazon scaling back its private label business?
Amazon is scaling back its private label business operations because of weaker than expected sales, according to the Wall Street Journal. In fact, Amazon has even discussed exiting its private label business completely. However, it appears the company will continue its private label business for now despite pressure from regulators stating that the company’s actions are potentially unfair to the third party seller.
Other ways to sell products on Amazon FBA
Retail arbitrage is an Amazon FBA business model where you find products selling for a cheaper price than on Amazon at retailers like Walmart or Home Depot, and resell them on Amazon for a profit. You can also buy these products online, called online arbitrage. This business model has the lowest startup costs and therefore lowest risk of any Amazon FBA model because you don’t buy products for thousands of dollars in bulk, you only pick up a few at a time.
A wholesaler buys products from established brands in bulk to get a discounted price per unit and resells them on Amazon for the marketplace price for a profit. Unlike private label, you have to share Amazon product listings with other sellers selling the same product and compete for the buy box. Wholesaling can be a good business model if you have a lot of money to invest into Amazon PPC advertising and strong partnerships with brand name suppliers.
Develop your own product
If you have an idea for a product that’s not selling on Amazon, you can make it yourself! Whereas private label is just using a generic product and potentially making some minor updates, you can create something that truly sticks out by developing your own new product. Travis Marziani teaches this method in his Passion Product Formula course. Although you may have to use more resources researching and developing the product, it improves your potential to carve out market share on the platform because you aren’t directly competing with others selling the same exact product.
Is Amazon FBA private label dead?
Amazon FBA private label is not dead in 2023. There are still hundreds of thousands of FBA sellers selling their private brands on the Amazon marketplace. Although it’s not as easy to make money with Amazon FBA private label as it was 5 years ago, there are still opportunities for success on the platform for those with money to invest and realistic expectations. That being said, just because Amazon private label isn’t dead, doesn’t mean it’s the online business model you should choose. In fact, local lead generation is a much better alternative business model for those who want to create passive income without the extreme competition of Amazon.
A local lead generation business focuses on ranking websites in specific geographic locations for local business niches. The websites attract interested customer leads that you can then sell to a local business for hundreds to thousands of dollars in passive income each month. The best part about local lead generation is that you completely own your website assets like pieces of virtual real estate. Unlike being an Amazon FBA seller where Amazon can take away your selling access, no one can take your website from you. Whether you choose Amazon private label or another online business model, your income possibilities with online business are infinite!