Amazon Private Label 101: Choosing a Product Development Strategy
by Liz Adamson
Private labeling is probably one of the hottest trends on the Amazon marketplace right now. With more and more resellers competing for the Buy Box, creating a new product that is exclusively yours can be enticing. There are three main ways you can do this, some more difficult or more profitable than others.
I’ll go into what those are and how to approach your brand positioning on Amazon.
1.) Amazon Private Labeling
The term private label gets thrown around quite a bit. Let’s talk about what it really means. A common definition of private label is, “a retailer's name, as used on a product sold by the retailer but manufactured by another company.” This essentially means that one company puts in all the work to research, design and produce a product. Retailers then purchase it from the manufacturer and sell it under their own brand or label. There has been a big influx of private label products on the Amazon marketplace in the past couple of years, and it has resulted in many sellers all essentially selling the same product under different brands. The Vitamin C serum niche is a good example of this.
This is probably the easiest way to get started with your own brand, but without careful research it can be the most difficult to really grow. You are basically buying someone else’s product and reselling it. Quite possibly, so are a few hundred other sellers, so you have to be smart about which niche you get into and how you differentiate your brand.
This is the next step beyond basic private labeling. Instead of just buying whatever the manufacturer has to sell, you work with them to create new features to differentiate the product from other brands. Some manufacturers can easily tweak a product that they already produce so you are not designing from the ground up, just making some changes. This could be adding new features, sizes or other benefits that similar products do not have.
While this requires more research and development, it will set you apart from similar items and give customers a reason to buy from you instead of a competitor. One way to explore how to differentiate your product is to read product reviews for existing products. What are customers complaining about? What features are they asking for? The Amazon marketplace is a treasure trove of ideas. Look for popular products that seem to be selling well despite having a less than four-star review. This is a good indicator that there is demand, but customers just aren’t thrilled with what is currently available.
3) Developing a New Product
This will take the most time, expertise and money, but it can also have the biggest return if it is well executed. This can range from inventing something that doesn’t exist yet to taking an existing product and totally reinventing it. You work with a manufacturer using your own designs and ideas, not being constrained with choosing from the range of products they mass produce. Again, you can get ideas from product reviews, watching market trends or by taking advantage of new technologies.
As an example, one industry that is always changing is health and wellness. New trends in exercise, diet and updates in medical research can lead to whole new niches for products not invented yet. In technology there is the smart home and solar trend that has exploded over the last year with new ideas. Being at the forefront of trends like these can be very profitable. One brand owner I know simply didn’t like the existing choices for a personal care product, saw an opportunity when some new research came out that cast a negative light on existing products, and hired an expert to totally reformulate the product in a way that was appealing to a very targeted niche of customers. Combined with a well executed marketing strategy, he is now outranking national brands on the Amazon marketplace.
I’d suggest starting with an industry you know well. Be sure you can offer insight into how to develop something truly unique that customers will want to buy.
No matter which approach you choose, you’ll still need to create your own brand positioning. Simply coming up with a catchy name and sharp logo is not going to cut it long term. As one of my business professors used to say, you have to be prepared to tell customers why you are “different, better, special.” That’s a mantra I repeat with my clients: what makes you different, better, special and why should customers buy from you vs. someone else? What problem do you solve for them in a way that is better than any other brand? Unique selling or value proposition is another name for this.
Don’t shortcut this step and just create a brand that looks cute. Create one with a story and a unique solution for buyers. Define your target audience and create a message that will specifically appeal to them. And no, "all men and women ages 20-65" is not a great target audience. Think smaller and more specific and create messaging that will speak to a very specific demographic. I’ll talk more about this and marketing your private label brand in a future post.
Don't Forget the Homework!
Know your options and opportunities when choosing an Amazon private label strategy, choose one that matches your capabilities and interests and do your homework on existing trends and competition. Don’t forget to put thought into the branding, as well. Private labeling can be a profitable venture if done thoughtfully instead of just following the next get-rich-quick scheme.
Originally published on October 17, 2017, updated June 3, 2019
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.