Selling on Amazon FBA: The Private Label And Wholesale Models

An overview of business possibilities on Amazon FBA.

In the year 2000, Amazon Marketplace was created, and twenty years later, theAmazon.com, Inc. global holdings are valued at over $1 trillion. A 2019 study by Marketplace Pulse calculates there are around 2.5 million sellers on Amazon, out of which 25,000 sellers have earned more than $1 million in sales.

AMAZON FBA

Amazon is one of the fastest growing e-commerce companies in the world, and FBA is one of the highest-performing platforms for online selling. With its optimised fulfilment and delivery times, and its supreme popularity with online buyers, Amazon selling through FBA has established itself at the forefront of doing business online.

“Profitability is very important to us or we wouldn't be in this business.” – Jeff Bezos

There are 2 models of business on Amazon FBA: Private Label and Wholesale

A brief comparative analysis of the two models is provided below:

Private Label

Recommended Start-up Capital: $15,000 - $25,000
Profit Margin: 20% - 30%

Private labelling for Amazon FBA means you sell existing products of your choosing, under your own private brand (label) on Amazon. After studying a product/market, you contact product suppliers/manufacturers directly, and they make the product for you, in bulk, at cost, under your brand name. They then ship the product, ready to sell, to Amazon.

You need to look out for the following factors when selecting your private label product:

1.   Ability to create recurring demand

2.   Exclusivity

3.   Falling within a specific price range

4.   Non-Perishable

5.   Small Size and lightweight

To procure from China, AliBaba is the way to go. AliBaba has emerged as the most popular site for wholesale B2B transactions exporting low priced generic products to the western countries. But remember, buying from AliBaba comes with its own set of challenges. There are a lot of undependable suppliers out there. The objective is to find out one or more that you can trust and get a great deal with.

Wholesale (Retail Arbitrage)

Recommended Start-up Capital: $5,000 - $10,000
Profit Margin: 10% - 12%

Wholesale for Amazon FBA means you sell existing brands’ products, under your own listing, or extending on the brand’s listing on Amazon. After scouting existing sellers on Amazon, you can begin contacting brands directly to create extensions of their product listings, and they make a certain percentage of their inventory available to you for purchase, with a specified minimum order quantity, at distributor cost, under your ownership. The inventory may already be stored with FBA.

You need to look out for the following factors when selecting brands to source products from:

1.   Ability to make direct contact

2.   Exclusivity in dealership for Amazon product listings

3.   Falling within a specific demand range with Amazon customers

4.   Reputable

5.   Offering ability to create sales margins of 10%-15%

To shortlist successful brands, we use specialised Amazon research tools. Following this, we begin profiling the brands to determine the best potential portfolio which yields the highest potential earnings for our clients’ Amazon wholesale businesses.

Additionally, brands look for credibility when choosing to work with resellers for retail arbitrage. We do this primarily through the creation of e-commerce websites to supplement their business requirements.

Other business requirements are:

1.   Registered company

2.   EIN

3.   Resale certificate

4.   Shipping address

5.   Calling phone number

6.   An Amazon Seller Central account

Don't be too nervous diving into your first Amazon business! There's plenty of resources online to help you learn , or you can always hire an expert to assist you with launching your Amazon store.

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