If you’ve ever daydreamed about building your very own online empire, it’s time to wake up and smell the opportunity brewing right in front of you.
Amazon Private Label vs Wholesale vs Arbitrage are the three titans battling it out for supremacy in the world of online retail. But which one is right for you, and how can you leverage their strengths to rake in those sweet, sweet profits?
Fear not, dear reader, for you’ve stumbled upon a treasure trove of knowledge that will help you navigate these seemingly treacherous waters.
Just as my husband and I discovered the golden goose of Amazon FBA selling and watched our humble beginnings blossom into a million-dollar enterprise, you too can unlock the secrets of this lucrative playground.
With hundreds of millions of customers eagerly browsing Amazon’s vast digital aisles, the potential for success is limited only by your imagination and determination. So grab a comfy seat and a warm cup of ambition, and let’s delve into these exciting models and determine which is best for you!
Amazon Private Label vs Wholesale – What is Amazon Private Label?
Quite simply a private label seller sells products on the Amazon platform under their own brand name.
To be a private label seller you’ll need a registered brand name complete with logo and other brand identification material and high-demand profitable products with low competition.
The private label model is what most people are talking about when they mention Amazon FBA. You’ll use the fulfillment by Amazon service to store and ship your products, meaning your main job is to source and manufacture your products and then market them appropriately to increase sales.
The benefit of using Amazon rather than just your own website is that you get access to Amazon’s database of over 300 million customers to market to!
Here is how the Amazon private label model works:
Step 1: Perform product research
The first step is to find products in demand, with lower competition levels. A tough call in todays competitive Amazon world.
This is why this first stage of product research is so important.
When researching a product try to always ensure;
- The product can be sold for between around $20 – $50
- The product is small, light and cheap to ship
- The product doesn’t have too many moving parts or is easily breakable
- The product has high demand (can be assessed using best seller ranking numbers)
- The product isn’t sold by huge brands dominating the market
See my article on what to sell on Amazon for a full breakdown of how to research and find profitable products to sell on Amazon.
Your best bet is to use a tool such as Jungle Scout from the get go. The Jungle Scout FBA product research tool quickly finds winning products with high demand and low competition, saving you weeks and months of work.
Step 2: Find suppliers
After you identify your winning products, it is time to find reliable suppliers. Even today most sellers on Amazon source products from Chinese suppliers. Even with duties, tariffs and shipping costs, it’s still cheaper to source from China than to buy locally.
However there are now many more supplier options available as selling on Amazon and ecommerce in general has become more popularized.
To find suppliers, you can start with Alibaba.com, or you can look into websites such as globalsources.com or dhgate.com.
Trawling through supplier websites however, is a laborious job to do manually and so once again I recommend Junglescout. They have a massive supplier database where you can quickly find and track reliable global suppliers.
Step 3: Create your brand
Once you’ve picked your products and found your supplier, you’ll need to add your branding. If you already have a brand and design then this part is easy. You simply need to get the packaging sizes and style from your supplier and modify your design to fit the packaging or product.
If you don’t yet have a brand, now is the time to create one! Look to other products and packaging for inspiration and talk with your supplier about the best branding and packaging options and costs involved.
When we started our cooking brand on Amazon, we picked a name of a Chef and had a cartoon chef designed which was then added to all our packaging. We also picked two main colors which we used across all of our packaging, brand designs, content, A+ content and eventually products to make us stand out.
Step 4: Decide on a fulfillment strategy
Most private label sellers use FBA or Fulfillment by Amazon, which basically means Amazon will pick, pack, and ship the products to customers from their warehouses. You will, however, need to dispatch the products to the Amazon warehouses. from your manufacturer. (They’ll help you with that and can usually offer the best quotes for overseas shipping).
The benefit of FBA is that you don’t need to worry about storing or shipping your products to the customers. Amazon will even take care of customer care, however of course this service isn’t free and you’ll need to pay selling and FBA fees to Amazon.
Other sellers prefer selling private-label products with the FBM or Fulfilled by Merchant model. You will be responsible for storing your products, shipping them to customers, and providing customer service.
I always recommend FBA.
Summary: The Amazon private label business is all about buying profitable products in bulk from third-party suppliers and selling them as retail through Amazon under your own brand.
Learn How to Build Your Own 7-Figure Amazon FBA Business
Part of the Junglescout suite of excellent FBA tools, the learning academy is a comprehensive video training library containing hours of content, including training videos, webinars, and interviews with successful Amazon sellers.
Whether you’re just starting your business, or growing your brand, get expert training from Amazon sellers without the hefty price tag.
Amazon Private Label vs Wholesale – What is Amazon Wholesale?
Wholesale and private label businesses may sound similar, but they are not. While wholesale and private-label selling models require bulk purchases, they have a core difference.
In the private label model, you will buy generic products and use your branding. In the wholesale model, you’ll acquire reselling rights for branded products and then buy from them in bulk to sell retail.
In wholesale, instead of purchasing the products from a retail store, you buy directly from the brand (manufacturer) from their inventory.
While you’ll buy at a discounted price because of bulk orders, you’ll sell individual items on Amazon at or around MSRP (Manufacturer’s Suggested Retail Price).
In the wholesale model, you don’t need to establish your brand as you’ll be selling a pre-established brand that has already done the heavy lifting in marketing and advertising its products.
Wholesale sellers have a better chance of winning the Buy Box because they can sell at a lower price than other retailers offering a similar product.
Winning the Buy Box means you are the seller when buyers click the Buy Now or Add to Cart buttons on the product listing page.
However, there is a risk. Another Amazon wholesale seller of the same brand can offer a lower price than yours to win the Buy Box, thereby starting a race. This can quickly cut into your profits.
Summary: In the Amazon wholesale model, you purchase branded products in bulk and sell them on Amazon at or around MSRP to make a profit.
Amazon Private Label vs Wholesale vs Arbitrage – What is Retail/Online Arbitrage?
Amazon arbitrage is another popular business model. It’s far easier to start and requires minimal investment as you don’t need to purchase products in bulk.
Arbitrage is the process of buying a discounted product from one store and selling it in another marketplace for a higher price to make profits.
There are two types of Arbitrage options – Retail Arbitrage and Online Arbitrage.
Retail Arbitrage:
In retail arbitrage, you’ll buy products from a physical retail store. You must physically visit a brick-and-mortar store to find discounted products.
Once you find discounted products, you’ll use the Amazon Seller App to scan the product to ensure you can resell it on Amazon.
If there are any restrictions, the app will let you know. If there are no restrictions, you can see the existing listing details including the price of the product on Amazon. You can then decide whether it will be profitable to resell the product on Amazon or not.
Online Arbitrage:
Online arbitrage is similar to retail arbitrage with the only difference being that you source discounted products from online stores rather than brick-and-mortar stores.
There are various online sources like BrickSeek where you can find discounted products available through different online marketplaces and retail stores.
Alternatively, you can use a tool like Tactical Arbitrage to find arbitrage opportunities and identify profitable products.
When To Select Amazon Arbitrage?
Unlike Amazon Wholesale and Private Label businesses, the arbitrage model is easy to start because of minimal entry requirements.
You can start your arbitrage journey with just one product and use the profits to buy and sell new products. If you own a product, you can sell it through the arbitrage model, effectively bringing the initial investment down to zero.
Amazon arbitrage is best if you don’t have enough startup capital to move straight into the private label or wholesale businesses models.
Summary: In the Amazon arbitrage model, you will find & buy discounted products from physical or online retail stores and sell them on Amazon at a higher price. The price difference minus the fees will be your profit.
What’s Common Between Amazon Private Label, Wholesale, and Arbitrage?
There are two common aspects of all three business models and they are:
- Product Research: In all three cases, you’ll need to conduct in depth product research to identify profitable products with high demand and low competition.
- Fulfillment: You can choose FBA or FBM for all three models. However, with FBA, Amazon picks, packs, and ships products and also provides customer service. This saves time that you can invest in other aspects of your business such as product research, responding to customer queries, promotion, etc.
Pros & Cons of Selling on Amazon Using Wholesale
Advantages of Wholesale Business:
- Wholesale products are branded products that people already know and like. You won’t need too much extra effort for marketing.
- Profit margins can be high if you can acquire inventory in high quantities as you’ll negotiate heavy discounts during purchase.
- Once you identify high-demand products that sell well, you can sell the product repeatedly to make money and reduce time spent on product research. Once you build a reputation, you can reach out to other popular brands and quickly scale your business.
- The restocking process is simple. Mostly, brands will maintain inventory in the same geographic location, so your stocks will arrive soon once you place an order.
- Brands will deal with copyright infringement cases, marketing campaigns, and even pay for advertisements, meaning you don’t need to spend extra time and money.
Disadvantages of Wholesale Business:
- You need a significant up front investment. To enjoy heavy discounts, you must purchase in bulk, which can go up to several thousands of dollars.
- If the brand decides to end the contract with you, your business ends. Such a situation can arise because of many reasons. For instance, if the brand decides to sell on Amazon, it may not want any competition from independent sellers and decide to end all such contracts.
- You must register your business (usually a limited company) and hold a professional seller account with Amazon.
- Other independent sellers may be selling the same product. If those sellers start a price war and offer lower prices, it can quickly make a dent in your profits.
- Brands may refuse to partner with you if they already have multiple partners. Adding more partners means everyone loses.
Pros & Cons of Selling on Amazon Using Arbitrage
Advantages of Arbitrage:
- You’ll need little to no investment to start the arbitrage business.
- You’ll mostly deal with products from established brands so you don’t need to spend on PPC ads, or spend time writing headlines & descriptions and clicking photos.
- Since you will sell mostly branded products, you don’t need to spend time convincing people. You’ll be selling products already in demand.
- Depending on how many products you sell you may not need to sign up and pay for Amazon’s professional plan.
Disadvantages of Arbitrage:
- Since you’ll mostly buy from retail outlets with limited stocks, it’s more difficult to maintain large stock levels even if the products are in high demand. Restocking can be difficult.
- Researching products for arbitrage is time-consuming. Since you may face stocking issues, you must constantly look for new profitable products, which takes a lot of time and energy.
- You may face brand gating challenges in which you must get approval from brands to sell their products. If you cannot get permission, Amazon will prevent you from selling.
- Brand Registry Protection is another issue for arbitrage sellers. With this feature, private-label brands enjoy protection against people trying to resell their products.
Amazon Private Label vs Wholesale – Is Private Label The Best Method (Pros & Cons)
Yes, Amazon Private Label is the best method to sell on Amazon. Here are the reasons:
Advantages of Private Label:
- With private label, you have your own brand with complete control over the products you sell. This means you can sell on any platform you want. Therefore if you ever choose to sell off of Amazon, you can sell your products through other platforms.
- You will mostly buy non-branded products from global manufacturers and use your branding. As a result, you can buy at a very low price and enjoy excellent profit margins.
- With Amazon Brand Registry, you’ll enjoy protection from arbitrage or counterfeit sellers. Also, you’ll have a lot more control over your listings because Amazon understands that it takes a lot of effort to create and sell your own products.
- There will be no limitation on how much stock you can buy. Even in the wholesale model, brands can restrict excessive stocking.
- If a manufacturer decides not to manufacture products for you, you can quickly find another manufacturer. You can maintain a steady supply chain with greater stability and predictable income.
- You can add additional products to your brand whenever you want to scale your business.
Disadvantages of Private Label:
- If you can find a profitable niche product, so can other sellers, who can snap up the opportunity quickly. As the competition keeps increasing, profits keep decreasing.
- Starting a new brand means putting a lot of effort into marketing your products and earning trust. You may also have to spend a lot on advertising your products on Amazon.
- You will be competing directly with Amazon, which is also a private-label seller. Amazon often pushes its Amazon-branded products over other sellers making it difficult to compete with Amazon’s financial muscle.
- If you are sourcing products from overseas manufacturers, shipping products can take time and communication can be an issue. On point inventory management is crucial.
- You have to spend a significant amount of money on acquiring your private label product, brand creation, and advertising. You’ll therefore need significant up front investment.
- Amazon can ban your business if your product quality is bad and you receive too many negative reviews.
Learn How to Build Your Own 7-Figure Amazon FBA Business
Part of the Junglescout suite of excellent FBA tools, the learning academy is a comprehensive video training library containing hours of content, including training videos, webinars, and interviews with successful Amazon sellers.
Whether you’re just starting your business, or growing your brand, get expert training from Amazon sellers without the hefty price tag.
The Final Verdict: Amazon Private Label vs Wholesale vs Arbitrage
So which business model is best for you?
Arbitrage, Wholesale or private label? Well, it comes down to personal choice and budget.
If you have a limited budget, you can start with arbitrage until you’ve built up enough funds to create a private label brand. Unless you’re a larger seller with a huge budget, wholesale is probably best left until you can easily prove your selling muscle to an established brand.
My preferred route is the private label method, as you’ll be creating a long-term asset that you can sell someday for a profit.
If this interests you, see my article for a step by step guide to start and grow an Amazon private label business using FBA or check out the Jungle Scout Academy.
In the meantime, I hope this article has helped and good luck with your business!
