16 Feb-2016

The Lucrative World of Private Labeling – What You should Know

If you are like most Amazon sellers you are always on the lookout for new items to sell that don’t have as much competition. Not only are sellers becoming increasingly tired of heavy competition driving down their profit margin but there’s also the fact that Amazon can sell your products and that’s not an easy fight to win. Selling private-label items is becoming more and more attractive as the private label seller is the only seller of the item and they don’t have to worry about Amazon selling identical items or other sellers piggy-backing their listings.

As lucrative as this sounds, there is quite a bit of due diligence that goes into launching your private label lines. While it’s tempting to simply order unlabeled products from the manufacturer in Asia and just put the items in a package with your logo on it, this is a slippery slope.  Always tell the manufacturer that this is what you want to do and ask them for permission. Even if they say yes, other Amazon sellers, including the manufacturer, could also be doing this and all of a sudden your private label items aren’t so private. It’s always worth having an exclusivity agreement, in writing, to ensure that you are the only seller of this product on Amazon.

Even if the manufacturer declines your request for exclusivity rights, there are still things you can do to make their products your private label items. This includes bundling the product to include it in a set, changing colors or patterns that can be exclusively yours or otherwise modifying the existing product. Again you should get the manufacturer’s permission before altering their product and selling it as your own.

When it comes to which products you would like to label and sell as your own, the first thing to keep in mind is you want your brand to add value to the product to make it stand out in the sea of similar products offered on Amazon. Bundle you product with other products, have crazy colors and designs that no one else has, make a different size or hire an industrial designer to modify the product. Read the product reviews of similar products to get an idea of what shoppers like and what they don’t. It’s also important to make sure that the market for your product isn’t dominated by popular and established name brands.

When starting off as a private-label seller it pays to start small. If you’re already a seller on Amazon take cues from what sells best in your inventory and private-label something similar. If you want to private-label a product that is electrical or has a lot of mechanical parts, make sure you have a quality control procedure in place as faulty products can ruin your brand’s reputation before it even exists. We always recommend to start with simple items without a lot of moving parts.

Once you know what items you want to sell as your own private labelled merchandise, go through these steps to protect your investment and the fruits of your hard work:

Make sure your items aren’t counterfeit items of existing products. Amazon is a haven for counterfeit products and don’t assume just because a manufacturer in China will sell you items that they aren’t infringing on existing patents. If you’re lucky you will just receive a cease-and-desist letter. If you’re unlucky you’ll find yourself at the wrong end of an ugly lawsuit. I’ve heard one case where an Amazon seller settled out of court for 3X the sales they made on the impeding items.

Design a logo and come up with your brand name and invest in the procedure to get a federally registered trademark.

Get product liability insurance. You don’t want that electric soup maker to start a fire or for that baby high chair to collapse while a toddler is sitting in it. You would be responsible for any damage your private labeled products cause.

Check and see if the law requires you to have your products tested for safety, and get it done.

Contact different lawyers to find a go-to expert to represent you if another seller files a claim against you, if another seller lists your trademarked merchandise and for setting up your warranties.

These are just a few helpful guidelines that we have picked up through experience and speaking with other Amazon sellers over the years. Before you dive into private-label selling on Amazon you should already have a solid understanding of your products’ market. You should also understand that getting started with private-label items takes capital. You need to pay for manufacturing, packaging, perhaps an industrial designer and legalities. When it comes to selling on Amazon, there’re no guarantees for selling success. Generating a consistent profit on your private label endeavors will require time and the flexibility to tweak your products and sales strategy.

 

Patrick McDaniel

Amzaar.com