(Must-Read) How to Create Amazon Private Label Product to Beat Competitors

Despite the increasing competition on Amazon, many entrepreneurs still perceive it as an easy platform to generate substantial profits. However, I assure you that such opportunities to make easy money on Amazon no longer exist.

It is widely recognized that creating private label products is an effective strategy to mitigate competition. In fact, it is the most crucial aspect. However, I would wager that 90% of startups and small business owners lack a clear understanding of this strategy and even overlook its significance.

Today, I will discuss numerous factors that you must not overlook when selecting private label products. This information is essential and should not be missed. (Estimated reading time: 15 minutes)

1. What kind of products are suitable for private labeling？

So, what is the Amazon private label product? For big sellers like Anker, their private label products focus on disruptive innovation.

Take the iPhone charger in the following picture for an example, they make a complete improvement and great change based on its original appearance and performance.

For small to medium-sized sellers, their private label products primarily focus on small innovations. This approach can also be referred to as Differentiated Product Selection. Unlike the iPhone charger’s approach to upgrading, differentiated products involve making minor adjustments to factors such as product color, size, logo, or other small components.

Clearly, today’s guide is primarily intended for small to medium-sized sellers on Amazon. Now, an important question arises: how much can you invest in your Amazon private label business at the start? Will it be $10,000, $50,000, or over $100,000?

The strategy for selecting products varies significantly based on your startup budget, and the products you choose will differ greatly between a $10,000 and a $100,000 budget. In section 3, I will analyze the startup costs for an Amazon business, and it is crucial that you study it carefully.

Firstly, which private label products are most suitable for small sellers? If you are a small seller or a startup on Amazon, it is likely that you have limited funds or experience. Therefore, it is advisable to start with simple and low-risk products to minimize business risks.

Consumers want the product to be “I need it”, not “I like it”

What is “need it”? For instance, when considering a wrench, the primary factor to consider is the tightness of its grips rather than its various colors.

For these types of products, it is not necessary to prepare a large number of SKUs, which can alleviate the pressure of storage. Additionally, if you set an appropriate price for such products, your customers will be more inclined to place orders in your store.

What does “like it” mean? It refers to customers’ desire for unique products. They want to purchase something different, so they are attracted to products with unique styles, colors, appearances, sizes, and so on. However, such products are not advisable for small sellers due to two reasons.

Firstly, you will face significant inventory pressure if you stock a large variety of unique products. Secondly, you may not be able to invest your limited funds in creating a best-selling SKU, such as investing in PPC ads. As we all know, it is more worthwhile for you to invest $10,000 in a single ad group rather than dividing it among 10 different ad groups.

Product functions should be as simple as possible

Many sellers on Amazon will choose to differentiate their products from others by choosing multifunctional products or add an extra new function to the original type. Although it seems very reasonable, you need to invest more money and you can’t ensure the good performance for the improved one.

Hence, for small sellers, single functional products are more suitable as it is easier for you to control its quality, market the product and meet the needs of consumers.

Advertising competition is low

If you observe that the product’s PPC (Pay-Per-Click) is low and competitors’ display ads are minimal, typically, there will be less intense advertising competition for such products. As a result, you won’t require a significant budget for advertisements.

Avoid products with high return rates

• Clothing
• 3c products

The return rate for certain women’s clothing products can reach 30%. Additionally, the return rate and complaint rate for electronic products and 3C products are also significantly high, which poses a significant burden on after-sales service.

Furthermore, medium sellers can consider offering private label products that have higher requirements in certain aspects, such as certifications. This can help improve competitiveness, especially if you have a better ability to mitigate risks.

Enhance product differentiation

As a medium seller, you have the opportunity to make more significant changes to existing products compared to small sellers in order to enhance their performance and appearance. However, it is crucial to conduct thorough research before making any modifications to ensure that you stay aligned with customers’ interests.

Moreover, in such a scenario, you will need to allocate more resources to your production process as creating a new mold will be necessary. Additionally, you will face risks associated with an unpredictable market.

Some big items

For small sellers, it is advisable to steer clear of big items. Medium sellers, on the other hand, can consider venturing into large-scale and heavy products. However, it is crucial to conduct a thorough logistics analysis to ensure a profitable outcome.

2. Don’t fall for 6 pitfalls when private labeling (Amazon sellers often fall into)

Good quality but with a higher price

Many sellers mistakenly believe that a good quality product will automatically be popular with customers, leading them to think that a higher price is acceptable. However, customers generally prefer to get a product of relatively good quality at a lower price. Therefore, it is important to consider the price and quality of the product from the customers’ perspective.

Go for the perfect product but not MVP

Instead of obsessing over creating a “perfect” product, it is important to understand that not all buyers are willing to pay extra for perfection. They often just need a minimum viable product (MVP). Therefore, it is sufficient to maintain the right quality and focus on lowering costs to provide a more favorable price for customers.

Stop after building a hot selling product

it is unrealistic to expect a product to remain on the hot-selling list indefinitely due to the constantly changing market. Your products may lose competitiveness over time. Therefore, it is crucial to anticipate potential challenges and always be prepared to choose more competitive new products or upgrade existing ones.

Ignore the issues of product patent

Imagine a scenario where your products are accused of patent infringement as soon as you upload them to your store or start making a profit. The worst part is being informed that you must remove your products from your store after already sending a large number of them to an overseas warehouse due to product patents. This can be extremely disheartening.

To avoid such situations, it is crucial to take certain precautions before uploading your products. Firstly, you should prepare the necessary materials such as trademark applications and brand registry. Additionally, if you are purchasing existing products from suppliers, it is important to confirm whether these products are original or imitations. You should also inquire whether these suppliers have previously sold the products to other sellers on platforms like Amazon.

By addressing these issues beforehand, you can minimize the risk of facing patent infringement accusations and potential consequences such as having to remove your products from your store or warehouse.

Don’t care about niche products

Many small sellers often make the mistake of choosing to sell mainstream products, just like big sellers. However, I would advise you to consider trying niche products that have a daily sales volume of 50-150 in the best-seller list. If you can achieve a good product rank on Amazon and generate a steady profit of thousands or even tens of thousands of dollars per month, it can be highly beneficial for small sellers.

All in from the start

It is advisable to gradually invest money in your Amazon business and gain experience, rather than investing a large amount of funds at the beginning as if it were gambling. Many of our clients have achieved success in their Amazon businesses, and all of them started with selling small items. They then made adjustments and gradually transitioned to selling more complex products. This approach allows for a smoother learning curve and better understanding of the market before committing significant resources.

3. How much will you invest to start an Amazon private label business?

Many sellers often overlook an important step when starting their Amazon private business, which is calculating the costs involved. While it may be a rough estimation, it plays a crucial role in the product selection process. Many sellers may be pleased with their monthly sales but fail to consider the potential costs.

Now, let’s check how much you will need to invest to start an Amazon private label business.

• The cost for the first inventory
• Shipping cost from China to Amazon warehouse
• The cost for product picture
• Logo and package design expenses
• Professional selling plan $39.99 /month
• Potential advertising costs (PPC)
• AmazonReferral Fees
• FBA fee

The cost for the first inventory

The cost of the initial inventory can be determined by referring to your competitors’ monthly sales. Based on your actual budget, you can decide how many goods you need to stock. It is advisable to start with a smaller quantity to minimize risks. Then, based on the actual sales condition, you can determine the timing and quantity for your next replenishment.

Shipping cost from China to Amazon warehouse

When shipping from China to an Amazon warehouse, it is important to choose a suitable shipping method based on your specific situation. Here are 4 tips to consider:

1. Many Chinese freight forwarders promoted a solution that can deliver goods to Amazon’s warehouse in small quantities within a short time: SFUC & AFUC，you can ship small cargo to Amazon around 50-100kg，total shipping cost is about $2/kg.
2. Choose Courier if the volume of your goods is below 500kg. Around $6-7 per kilogram for shipping from China to North America and West of Europe. Shipping time is about 5-7 days.
3. If the volume is beyond 500 kg, you had better choose air shipping, which is 10-20% cheaper than express. The shipping time is around 3-5 days to the USA, 5-7 days to Latin America.
4. If the volume is beyond 2 CBM, you had better choose sea shipping, which is the most economical way, about $100-200/CBM to the western USA; about$200-300/CBM to the Eastern USA; over $300/CBM to the Central USA; about $200-300/CBM to Western Europe; about $400/CBM to the Southern USA.

But one thing you need to pay attention to: the above is just sea freight, you should include the cost from the seaport to the Amazon warehouse in real cases.

The cost for product image shooting & logo and package design

You can consider hiring a professional photographer to assist you with product images, including shooting, photo editing, and design. The cost may vary depending on the product, but generally, the expense for a finished product image can range from a few hundred dollars. However, this cost only accounts for a small proportion of the overall budget.

Many business owners may hesitate to spend money on this aspect, but it is actually a wrong decision. Only products with high-quality and visually appealing images can effectively persuade customers to make a purchase from your store.

Additionally, you have the option to design your product logo yourself or hire a freelancer on platforms like Upwork or professional agencies to assist you. When starting your Amazon private business, it is important for the logo to be simple and clear, highlighting the unique features of your products rather than solely focusing on aesthetics.

Potential Amazon advertising costs (PPC)

PPC stands for pay per click(just like Google ads CPC). It is a headache for many sellers to calculate the Amazon PPC cost in advance. But this is an important step for pricing your products. You can use some tools like Jungle Scout’s Keyword Scout tool to help you predict total PPC cost roughly.

Amazon Referral Fees & FBA fees

When you sell a product on Amazon, the platform will charge you certain fees like a referral fee, but the standard for the fees varies from different products. You can get detailed information in this post. (PS: pay attention to the marked four sections in the following picture)

4. Where to find private labeling product ideas? And how do you know if they’re right for you?

4 common resources of private labeling product ideas,

• Amazon
• Amazon tools data
• Social media, like Kick starter
• Other retail websites

Amazon & Amazon tools data

First, you can find private label product ideas from the bestseller list, the New releases list, Most Wished List on Amazon, which is the most common way. And then you can use some Amazon tools like Jungle Scout, AMZScout, AMZ Tracker to help you identify whether the product is good or not.

But there is a phenomenon, many sellers rely on the tools too much, which is an unwise decision. Tools can just provide you with data, but they can’t tell you why your competitors sell the products well. You need to do enough research about how your competitors sell the product by yourself and evaluate whether you will sell the product.

There are mainly 3 aspects you need to pay attention to when you evaluate the competitive product.

• Sales evaluation
• Product listing
• Store analysis

Sales evaluation

As Amazon won’t show sales data directly, you can predict the market capacity and sales of the product by multiplying the review quantity data by 100-130.

You can calculate the sales of the product with different ranks like 1-5, 10, 20, 50, 80, etc roughly. The result can be a reference for you to arrange the first inventory. Besides the method, you can also use some tools to predict the sales volume.

That means, if the prediction for monthly sales volume for the product ranking 100 is 10,000 orders, your inventory should be also around 10,000 to let your products get a relatively good rank like 120.

Product Listing & stores

Checking competitors’ product listing and store is a very useful step. Keywords, product selling point，product image，product description are the points that you need to pay attention to when you browse the competitors’ store and product listing.

Take Anker for an example, its product listing is designed for catering to customers well. So you can learn from the good competitors when you lack ideas.

And when you browse other sellers’ stores, you need to pay attention to the following aspects: product layout; product quality; the store’s business situation (you can check which products in the store are sold well). You can judge whether the store runs well from the above 3 aspects.

Social media

In addition to using the Amazon platform for selecting products, you can get product ideas from other social media channels or other retail websites, especially for those medium-scale sellers that plan to widen their business. Here are 3 channels,

Pinterest & Instagram

These two platforms are alike a picture base. Users can upload the picture they like, and other online surfers can save or forward the pictures they like. For businessmen, you can find some novelty and trendy product ideas.

Kickstarter

Users can share their product ideas and launch a fund-raising activity on Kickstarter. They can let their ideas into reality through the platform. As an Amazon private label businessman, you can get some novelty product ideas on the platform.

Google Trends

Google Trends is a free and commonly used online searching tool. When you take an interest in a kind of product, you can know the searching volume and growth trend of the product through the tool. All data are from Google searching, Google Shopping, YouTube, Google News, and Google Pictures. It can help you analyze the product’s development prospect and aim customers.

5. Find your reliable private label manufacturers/ suppliers

Searching for reliable private suppliers is a crucial and necessary step for a successful business. Sufficient stock is vital for maintaining a product listing ranking. If a product goes out of stock, it will result in a loss of ranking and advertising achievements for that product.

Furthermore, ensuring good quality is also essential for your store. It is widely known that low-quality products can lead to negative reviews and a decrease in the authority score of your product listing. This, in turn, may require you to spend more on running your store.

To reduce product costs, many sellers choose to wholesale or customize products from China. It is relatively easy to find suppliers on various China wholesale websites, particularly Alibaba.

The following is the regular process of finding Chinese suppliers

• Sample making
• Sample modification
• Sample confirmation
• Mass production
• Shipping to Amazon warehouse

It is often impossible to determine whether a supplier is reliable or not at the beginning. It is important to assess whether a supplier is suitable for long-term cooperation throughout the process.

Here are some key features of good suppliers: efficient communication, professional product knowledge, proactive problem-solving attitude, and patient service.

If you are primarily focused on marketing and do not have enough time to manage the product supply chain, it is advisable to consider partnering with a China sourcing agent like us. 13.7% of our clients are Amazon sellers, and three of them have achieved success in their Amazon businesses, growing from start-ups to sellers with annual sales ranging from $500,000 to $900,000.

While their sales may not be as high as those of big sellers, they have achieved success compared to small start-ups.

Being located right in front of the Guangzhou wholesale market, we have a lot of direct factory resources, allowing us to offer competitive wholesale prices. Moreover, we can assist you throughout the entire process, from sample making and mass production to quality control and shipment arrangement to Amazon.

We are undoubtedly a reliable partner of bags for Amazon sellers.

Final words

Choosing the right product is undoubtedly a crucial factor that needs to be considered. The products you select will determine your operational strategy, and choosing the wrong product can lead to failure right from the beginning. This is a valuable lesson learned from numerous Amazon sellers.

Therefore, if you only read guides without any practical experience, you may still be in the dark when it comes to implementation. You will gain more knowledge and a better understanding of today’s post once you actually start your business. If you have any questions, please feel free to leave a comment or email us.