Since 2005, Amazon has been focusing on creating its own private label brands. For an e-commerce giant like Amazon, utilizing this powerful business model has become an essential part of their astronomical growth. But why would Amazon go through the trouble of making their own private label products? And more importantly, how profitable is private labeling? Spoiler alert: it’s extremely profitable!
Let’s dive in.
Unless you’ve been living under a rock for the past 20 years or so, you’ve probably heard about and even used Amazon’s services. Although Amazon’s core business is its international e-commerce platform, it has now expanded into several different areas such as cloud services, entertainment, logistics, smart home devices, as well as opening physical stores. Albeit their biggest source of revenue by far is online retail, Amazon still actively seeks to find new way to maximize the growth of their e-commerce platform. Recently, there has been one key driver for that growth — private labeling.
What is a Private Label?
Creating a private-label brand is essentially when a seller finds an attractive product, manufactures it in China, and sells this product under a unique brand name. Since 2015, this business model has overtaken drop-shipping in popularity due to its many advantages and the recent shift in consumer buying trends.
Learn more about the advantages of private labeling in our recent blog post Creating Your Own Signature Brand.
Amazon Exclusive Brand
Amazon launched its Amazon Exclusive Brand initiative allowing third party sellers to partner exclusively with Amazon, and thus gain an edge over their competition. By opting-in for this service, sellers will secure much better visibility on Amazon and in turn sell more.
The success of this strategy was clearly visible from the get go, with numerous third party sellers acting quickly to get on board. However, although this was a splendid marketing strategy, something else was becoming clear. To maximize their profits, Amazon needed to have their own private label products.
Amazon Private Label Brands
The first Amazon-owned private label brand was launched in 2005 – Pizon. The extraordinary success of this bed & bath brand, just went to prove how powerful the private labeling business model can be. And with the launch of AmazonBasics later in 2009, private label brands became an essential part of Amazon’s business growth.
Now there are over 158,000 private brand products across more than 100 different private label brands, owned and sold exclusively by Amazon. Amazon-owned private labels now hold a significant world wide market share in almost every category of products sold on its platform.
Moreover, recent analysis done by Statistica shows that about 50% of all of Amazon’s private label brands are in the fashion sector, followed by home and kitchen at 11.1%.
How Profitable is Private Labeling?
Creating your own private label brand allows for three main things:
- Have unique and differentiated products
- Minimize product development costs
- Sell at a low price with a high profit margin
In retail, a 20% profit margin is generally accepted as the norm. Yet, with the advantages of private labeling, a more realistic profit margin figure would go well over 50%. This comes down to driving product development costs and maximizing selling price. Having the right partner in China is vital, as this will facilitate finding the right products at the right prices and optimize the every part of the procurement process.
Your Private Label with WeLabel
The main point here is this: consumer purchase behavior has shifted away from buying only internationally recognized products. Consumers are now focused more on the overall experience, innovation, and most definitely price of a product.
Moreover, these days it is not sufficient to simply buy cheap goods and sell them online for low prices. However, to achieve brand loyalty and higher ROI, it is essential to present a differentiated product to customers. That is where WeLabel comes in.
At WeLabel, we have been working on and developing an optimized process to help our clients achieve private label brand success. Due to our extensive experience in this specialized field, we are able to provide entrepreneurs with the right tools to create their own brand in China at a low cost, yet without compromising quality.
Learn more about our services on WeLabel Services page.
It is fair to say that in the world of e-commerce, Amazon knows its business! There is a clear reason to why Amazon would go the trouble of making their own brands, and that is profit.
Recently, it is evident that the popularity of private label products is growing exponentially. However, the process of turning an idea into an actual brand can have its obstacles, especially when dealing with China. This is in essence why WeLabel was launched, to simplify the process, and turn your idea into a product on a shelf in no time.
Have any questions? Get in touch today, share your ideas with our consultants and learn how WeLabel can help you propel your business to new heights! Contact Us Form