Selling private label products is quite popular among Amazon sellers as it’s a successful way to increase income.
Some people claim that private labeling is dead and it’s too late for beginners to get on board – completely wrong.
Amazon is growing day by day at an incredible rate, soon to take over the world. So, as though there are more and more private label sellers, the opportunity rate increases as well leaving enough room for beginners to gain their place.
What is private labeling?
Private labeling means finding a generic product from a manufacturer and selling it under your own brand.
Developing a brand identity increases the business success.
A well-established brand will generate more sales and get a bigger profit as it differentiates itself from its competitors.
How to start selling private label products on Amazon?
In order to private label your own products you have to follow a couple of steps. Some might be a little tricky, but don’t worry, if you take your time to understand the process then everything will become easier.
Also, keep in mind that this is not a get-rich-overnight recipe. It takes time and patience, but once it’s in motion, the results will worth all the waiting.
The steps to selling private label products:
- Setting up an account
- Finding a product to sell
- Finding a supplier
- Create listings
- Developing the shipping plan
- Estimating revenue
Let’s dive in into each step.
#1 Set up an account
Choose the account type
When starting to sell on Amazon you have two options for the account type:
Amazon Individual Seller Account
- You pay $0.99 per sale in addition to 15%
- You’re allowed to sell items already listed on Amazon
Amazon Professional Seller Account
- You can sell your own branded products
You can start by signing up for an Individual Seller Account until your products get to the Amazon warehouse so you won’t have to pay for the period you’re not active in.
When you start selling, you have to upgrade to a Professional Seller Account as you will sell private label products, meaning own branded products. Also, you’ll need to run PPC campaigns and use Amazon’s marketing platform and you can’t do that as an individual seller.
EIN stands for Employee identification number, so you have to be over 18 years old to open an account.
An EIN is a United States government issued tax identification number. If you live in the US and don’t have an EIN yet, you can secure one within minutes by visiting IRS website.
If you are a not from the US and want to import in the United States, you can follow some steps and get your EIN for foreign importers:
- Complete the IRS Form SS-4
You can find the form and the instructions here.
- After you fill it up, there are two possibilities: you submit the form by mail to IRS, or you complete it by telephone. It’s better to complete it on the phone as it takes less time. If you chose to do it by email, it takes lots of time (up to 30 days), and if something is wrong, you have to do it all over again.
- Place the Phone Call to IRS
You can do this by reaching to this number: +1 267 941 1099, between the hours of 6 a.m. and 11 p.m. EST, (GMT-5:00), Monday through Friday. It’s not a free call so make sure you have enough credit on your phone, Skype or Google Voice, and be prepared to wait between 15 and 45 minutes. Once the phone call starts:
- For a foreign EIN number press 1
- Tell the agent you want an EIN number for a sole proprietorship
- The agent will ask about the SS-4 form and a couple of questions about your business
- After everything is cleared up, you’ll be given your EIN number
- A copy of your EIN number will be sent to your US postal address in a couple of weeks
As Amazon states “For sales on Amazon.com, you must provide a U.S. checking account or a bank account located in the U.K. or any country in the eurozone (Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain), Australia, New Zealand, India, Hong Kong or Canada.”
If you are neither a US resident nor a resident of the countries listed above, you’ll have to open up a US bank account.
LLC and Insurance
Although they are not mandatory, it’s better for your own protection to invest in these two.
A limited liability company (LLC) “is a corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship. While the limited liability feature is similar to that of a corporation, the availability of flow-through taxation to the members of an LLC is a feature of partnerships.”, Investopedia states.
Although getting an LLC is not mandatory to sell on Amazon, if you want your business to be completely legal, you should take care of it. You can do it by yourself if you have the time and knowledge, or you can pay a couple hundred dollars for it. If you are from outside the US, you need to go over the legal aspects implemented in your country.
Having an insurance can keep you safe if something goes wrong. It doesn’t happen too often for sellers to be sued by customers, but it does happen sometimes. The costs for an insurance depend on the quantity you’re selling and the products’ value.
Designing a logo
Because you’re selling private label products, you’ need to create the image for your brand. You can opt for a simple logo with your brand name and some kind of icon which you can freely design on Canva. Or you can design it yourself in a program like Illustrator or Indesign if you have the skills and the time.
If you want something customized, you can go to a website like Fiverr, 99design, or UpWork to find professional graphic designers which will create an amazing logo for you at a reasonable price.
#2 Find the products to sell
Once you set up your account, it’s time to get ready to sell. What do you need to find the products to sell?
- Tools: To find the most profitable products to sell, investing in a tool that gives you more insights is the best idea. I know that me suggesting something that involves spending money is not something you wanna hear. But trust me, this investment will pay off big time. A tool like Jungle Scout gives you insights about the monthly sales and the competition of a product, which saves you lots of time and will get you specific data to work with. This eay you’ll make a decision based on facts rather than just guessing which product is better.
- Criteria: You need to figure out your goals here. How much profit do you want to make? Then make some calculations about how much the items will cost you and how much you can add to it for your sale price. You’ll have this in mind when conducting the product research. See what price your competitors are selling the product at and what’s the price you can buy it from a supplier. Your criteria can look like this: monthly sales: 200, selling price: $20, number of reviews of the first 10 sellers: 100. Once you made up your mind, find products that meet all those criteria.
- Stay away from restricted categories: These are harder to get approval for as you are required additional statements from suppliers. Restricted categories are beauty (some products like creams, oils and such), groceries, food, sexual health, baby products (except apparel), fine art, jewelry, watches. For complete details on categories that need approval check the Amazon Services.
For more insights about product research, you can refer to our post about how to find profitable wholesale products to sell on Amazon.
#3 Find the suppliers
Finding the suppliers is easier than it may sound like. The deal is closed through emails, so you don’t have to call anyone.
The first step is to go to Alibaba and find suppliers who sell the product you want. Then contact multiple suppliers asking for quotes. You can write a template to use when reaching out to them which contains: what product you want, where has the package to be shipped, how many items, and what kind of shipping.
Also, check with them to see if they allow private labeling.
When looking for suppliers take a look at their reputation and make sure they have at least 2 years experience and trade insurance. Also, keep an eye on the payment methods and choose suppliers who enable payments via PayPal as it keeps you safe in case of a rip-off.
If you click on the seller’s name, you’ll be taken to a page where you can find all the details about that seller’s reputation.
You need to choose the shipping method, which can be by air or by sea.
Shipping by air has higher costs but it delivers quickly and you don’t have to worry about any paperwork.
With sea shipping, you have lower costs but the delivery can take up to 3 months and you have to take care of customs, taxes, duties – a lot of paperwork is required.
With air shipping and door to door delivery, your order goes directly from your supplier to Amazon’s warehouse fast and without any other trouble involved. The price range differs depending on the quantity you buy, the dimensions of the package and its weight. The best approach is to ask for different quotes for the shipping so you can choose the best price.
One tip is to split test the shipping methods and see which one is more convinient in your case.
#4 Create listings
UPC stands for Universal Product Code and is a barcode made out of 12 digits. When you start to create a listing, Amazon will require the UPC code of the product.
You will only need the UPC code once when creating a listing, and you only need one UPC code per product. If you have, let’s say, 3k units of a product, you won’t need 3k UPC codes, just one. If you have more variations of a product, then you’ll need one UPC code for each variation.
Because we’re talking about selling private label products, you won’t be provided with a UPC by the supplier. You’ll need to buy one yourself. You can buy the UPC directly from GS1 at $250 with a $50 yearly fee to keep the barcode under your brand.
Because GS1 barcodes are quite pricey, you can also buy registered GS1 barcodes from NationWide Barcode for $10/each. However, be careful with buying from somewhere outside GS1 because it can get you into trouble with Amazon. Many sellers use UPC from Nationwide with no problem, but keep in mind that it’s at your own risk.
To create a product listing you’ll need to provide some images of the product. The images must be of high-quality and be at least 1000 × 500px wide so Amazon’s zoom-in feature will work.
If you are selling through the FBA program, you will probably never get to hold the product you’re selling in your hands, so you won’t be able to take your own photos. So there are a couple of options to get images with the products.
The first method is to ask your supplier for some images. Usually, suppliers have high-quality photos with products, so they can help you out. You take the images from the supplier and photoshop your brand on the image.
Another option is to have one item delivered to a professional photographer to take pictures of it. Once your items arrive at the warehouse, you place a removal order which costs $0.50 and you will have amazing images in a couple of days. You can also deliver one item to yourself if you prefer to be the one taking pictures of it.
#5 The shipping plan
Once you created your product listing it’s time to set up the shipping plan. These means giving Amazon details about the items you’re about to deliver to their warehouse. You’ll need:
- The box weight
- How many boxes you will have
- The dimensions of the boxes
- How many units are in each box
- Your supplier’s name, contact info, and address (province, city, and district) which you can get for your supplier
What you need to send to your supplier
- The FNSKU code
- The logo to put on the packages
- Print box labels: you’ll have one label for each box
- The warehouse address that Amazon will give you
FNSKU barcodes: They refer to the Amazon’s barcodes used for labeling your products to track them in Amazon’s database. The label with the FNSKU code will be placed above the UPC code.
While Amazon can let you ship the products to their warehouse only with the UPC code, the best approach is to also provide the FNSKU number. If your products don’t have FNSKU codes and another seller sells the same products as you, both of your goods will be handled together. This means if you place an order, the product that’s delivered might be from your competitors’ inventory and you can’t know the quality of his products.
You will get the FNSKU code from your Seller Central after you created the listing.
#6 How much can you earn from private labeling products?
Because there are so many variables that determine the profit a product can get you, there is no exact number. Even so, we can estimate the revenue a product will bring.
In order to estimate the revenue, you need to take into consideration all the investment required. For first time sellers, there are two types of investment.
One time costs
- Designing the logo
- Images (if you choose a professional photographer)
- UPC code
Monthly / Repeated costs
- Account fees
- FBA program fees
- Shipping from supplier
- Price you pay to the supplier for the products
- PPC advertisements
Most of these variables are directly dependent on the product you choose to sell. The FBA program fees, shipping costs, insurance, what you pay to the supplier they all rely on the product’s dimensions, weight, and price.
Let’s take an example of how to make an estimation.
First, let’s say you found a product worth selling on Amazon. Go to its listing. Because most sellers use images from the manufacturers, it’s easy to find the product on Alibaba through image search. Right-click on the product’s image and click on “Search Google for Image”.
It will take you to the Google search results showing where you can find that product. You have to find a link to the Alibaba page.
To make things easier, type “Alibaba” in the search bar as it will make the result you’re looking for pop up higher in the results.
We found a supplier who sells this flashlight at $1.5-$3.5 per unit.
Now using AMZ FBA Calculator Chrome extension (it’s a free tool), go back to the product listing on Amazon and add the product cost. Given that the seller on Alibaba has a price range of $1.5-3.5, we can probably negotiate to buy the product for $2. It will show you how much are the Amazon fees and what profit you can achieve. In this case is $5.25 per unit.
It also estimates the average monthly sales this merchant has, which is 2300 units per month, in this case.
For estimating the monthly sales, you can also use Jungle Scout free estimator.
All you have to do is go to the website and pick the category where your product belongs than add the sales rank of the product. To find the sales rank, go on the product listing on Amazon and scroll down to the “additional information”.
As you can see, the flashlight’s sales rank is 202 in the Tools & Home Improvement category, so we’ll add this data to the tool.
Once you add the sales rank, the tool will generate an estimation of the monthly sales that merchant has. In this case, the estimation is 2498 monthly sales. Don’t just do this once. If you choose to use this approach, it’s better to do this estimation a couple of weeks before deciding on something as things can change dramatically.
Now let’s wrap it up.
We have $5.25 profit per unit with 2300 units sold in a month (from Amazon’s estimator). This will lead to a monthly profit of $12075.
Of course, you’ll need to lower the monthly sales as you may not have as many sales as this guy has. Not in the beginning. You’ll be competing with him, so you’ll start sharing the sales.
Once you get an estimation, you’ll have to subtract all the expenses we talked about earlier and you’ll be left with an estimation of the revenue you’ll have ultimately.
Before reaching a decision, you’ll have to do a bit of research about the costs as they differ. The LLC and insurance depend on the country you’re from. The shipping costs depend on where your supplier is and how much the cargo’s dimensions and weight.
Now that you know everything you need for selling private label products it’s time to make the money.
It’ll be harder to sell in the beginning. You have no reviews, no reputation, nothing to vouch for you, which can be challenging.
For starters, you can run a promotion for your product’s lunch. This is the approach many sellers turn to when first launching a product. It helps get initial sales and generate some reviews.
Another way to make your product visible is by running PPC campaigns through Amazon Sponsored Products advertising platform.
Once you get the hang of it, your focus will be on increasing your ratings, ranking your products higher in Amazon search, and winning the Buy Box.
Like I said, selling private label products on Amazon is not a get rich quick technique, it takes time and perseverance. But once you learn how to do it right, you’ll be left with a steady and quite passive income of a couple $k a month.
Have you tried selling your own private label products? I’d be happy to hear about your journey. Feel free to comment any question or suggestion.