Is Amazon Private Label Profitable?

If you’ve ever been involved in selling with Amazon, you’ve surely heard the chitchat regarding private labels. “Is Amazon’s private label still profitable? It seems saturated now with high competition!”

The truth is that while competitive, private labeling can still be highly lucrative with the right plan. However, it requires far more work and risk than other models.

In this post, we’ll explore whether building a private label on Amazon FBA can really pay off right now and beyond. You’ll learn what it takes, weigh the major pros and cons, and get tips to maximize your chances of earning strong margins long-term.

Table of Contents

Quick Answer – Is Amazon Private Label Profitable?

The quick answer is – yes, you can absolutely generate strong profits through Amazon private labeling if you execute well.

However, nothing is guaranteed automatically. 

Profitability depends greatly on the following:

• Selecting viable products with sufficient demand
• Building compelling product presentation and packaging
• Pricing intelligently to drive sales with good margins
• Investing heavily in marketing and promotions
• Closely monitoring and optimizing listings.

To highlight the popularity of private labeling, Jungle Scout says 54% of Amazon sellers utilize the private label model. With the right product and strategy, you can achieve profit (net) margins of 10-30% per unit at scale.

Also, there is a way to increase this profit margin by claiming owed reimbursements from Amazon. If you’re already selling with Amazon FBA, chances are you’ve overlooked some discrepancies — things like damaged or unaccounted-for inventory, FBA fee overcharges, and more. 

Managing and tracking these issues by yourself can be extremely difficult and time-consuming. That’s why, at Eqappo, we audit your Amazon seller account to identify any missed reimbursement opportunities you may have. 

What Are Amazon FBA Private Label Products?

Amazon FBA private label products refer to goods manufactured by one company that you then customize and sell exclusively under your own name on Amazon’s marketplace. 

This differs from reselling existing other products that are already available. 

FBA stands for Fulfillment by Amazon, meaning you use their storage, shipping, and distribution network while owning your customized listings.

Examples of Private Label Products

Let’s look at some real-world examples of successful private-label products on Amazon:

• Amazon Basics: One of Amazon’s most popular private labels, offering high-rated fitness, kitchen, bathroom, bedroom, outdoor, and daily living products at low prices.
• Jungle Creations Washable Pee Pads: This Jungle Creation listing stands out with professional photos and videos that fully inform customers without needing a long description. Under this private label, they also sell Jungle Stix and Jungle Slider.
• Anker Electronics Accessories: A top third-party private label on Amazon, Anker sells quality chargers, cables, and tech accessories at lower prices than other major market players.

Pros and Cons of Selling Amazon Private Label Products

As with any business, there are benefits to consider and tradeoffs to weigh when deciding to sell private-label products on Amazon: 

Pros:

• Full control over packaging design, pricing, etc.
• No competition on your listings from other sellers
• Exclusive access to Buy Box
• Higher profit margins (than retail arbitrage or wholesale) by cutting out middlemen
• Can use Amazon’s infrastructure without customization restrictions
• Can replicate trending niche items quickly under your label
• Can continuously improve product

Cons:

• Large upfront investment for new product development
• Researching and sourcing reliable manufacturers is difficult
• Rising advertising costs to compete for visibility
• Ongoing efforts for marketing, product refinements
• Limited product recognition compared to major names
• Risk of violations if packaging/listing too similar to others

Amazon Private Label Requirements

To sell private label products on Amazon FBA while meeting their guidelines, you need to check some key boxes:

• Account approval: Your selling account must be in good standing without any compliance violations. Approval for categories like grocery may require additional steps.
• Product compliance: Depending on the product type, items must meet Amazon’s demanding policies for safety, testing, packaging, labeling, registration, and more.
• Intellectual property: Your store name, logos, and product designs cannot infringe on the existing IP rights of other sellers. Thorough trademark research is needed.
• Inventory tracking: All items must have a unique FNSKU barcode for tracking through Amazon’s fulfillment network. Other identifiers may also be required.
• Fulfillment: All units must be labeled and prepped per Amazon’s requirements to utilize FBA. Or you must meet standards for merchant fulfillment.
• Customer service: Amazon has demanding service level requirements for response time and support. A clear return strategy must also be provided.

Amazon carefully checks for compliance in all these areas and can shut down listings or accounts for violations. You must follow all guidelines.

Here is a 10-step checklist you can use to form your private label on Amazon:  

General:

    1. Business entity formed
    2. Tax information provided
    3. Product compliance standards met
    4. Detail pages wholly owned to control product presentation

Product Specifics:

    5. Safety and testing documentation
    6. Proper labeling displaying required info
    7. No infringement on existing intellectual property

Operations:

    8. Ability to meet order demands at scale
    9. Timely shipping and reliable tracking
  10. Responsiveness to buyers’ issues and inquiries

Detailed Answer – Is Amazon Private Label Profitable?

Data shows Amazon’s private labels remain highly profitable despite increased competition. Many experienced sellers report strong sales and profits even in recent years. It’s “absolutely an amazing opportunity” if you know what you’re doing.

The numbers back this up: According to the 2024 State of the Amazon Seller report mentioned above, over half of private label sellers (54%) have profit margins above 20%. Top performers exceed $100k per month.

You can also sell quite a bit, as 63% of sellers report sales above $100,000/month, and 40% say they sell over $500,000/month! 

The key to profitability is starting in a niche with lower competition. This allows time to perfect your products and strategy before expanding. 

As they say, “Riches are in the niches!” With the right preparation and commitment, six-figure profits are very much achievable.

Looking to tap into the profit potential of private labels?

A great first step is getting an audit of your Amazon account. At Eqappo, we specialize in uncovering owed reimbursements for FBA sellers. 

How to Private Label on Amazon

If exploring Amazon’s private labeling interests you, here is a high-level overview of getting started in 6 steps:

1. Choose Winning Products

It is crucial to pick the right private-label products to sell on Amazon. You need items that have strong demand but not too much competition. No matter how good your product presentation is, profits ultimately depend on sales volume.

Here are some tips for finding promising products:

• Get ideas by looking in stores and on Amazon (the “Hot New Releases”) for new popular trends before there is too much competition. You can also check social media and crowdfunding sites.
• Consider small (8 11/16″ x 5 7/16″ x 1 3/4″), lightweight (not more than 2 pounds), non-seasonal, and uncomplicated products. They’re easier and cheaper to source, ship, and manage. Avoid anything heavily regulated.
• Research ‘demands’ using tools like Product Opportunity Explorer. Look for a monthly search volume between 250 and 400 units and under 100 reviews per product. This indicates solid demand without excessive competition.
• Compare competitor pricing and reviews. Make sure you can realistically compete on price and value.

Add good customization, packaging, and marketing, and you have a winning private label formula.

2. Find Suppliers for Your Products

After picking a good private-label product idea, you must find a supplier to manufacture it. A great option is Alibaba (if you can’t produce yourself).

Alibaba connects you with wholesale suppliers and manufacturers in China. It’s like Amazon for sourcing products.

Here are some tips for using Alibaba to source your private-label products:

• Create an Alibaba buyer account
• Search for suppliers selling similar products
• Reach out to 3-5 suppliers about:
  • Pricing for 500 units
  • Getting a product sample
  • Payment terms
  • Customization options
• Order samples from top suppliers

Vetting suppliers on Alibaba is key. Review their ratings, capabilities, and production capacity before choosing one. Request and evaluate quality samples to select a reliable partner.

3. Focus on Product Identity

With private labeling, you get to create your own unique product identity. Compelling yet Amazon-compliant packaging and design, along with a memorable logo and a consistent look across products, are key.

Here are some tips for making your private label stand out:

• Design a unique, eye-catching logo. You can hire freelance graphic designers to do it affordably.
• Customize the product slightly from competitors – change colors, sizes, materials, etc. Work with your manufacturer on this.
• Create thoughtful packaging that improves the unboxing experience. Include your website and other info.
• Develop integrated marketing and social media (that tells your product’s story) versus FBA advertising.

Your goal is to build product recognition beyond chasing the Amazon algorithm. Make your private label more than a generic product with a different label.

4. Choose How to Fulfill Orders

After making and customizing your private label product, you need a fulfillment strategy to deliver it to customers. 

Here are some popular options:

• Self-fulfillment from your warehouse or garage: This requires handling storage, packing, and shipping yourself.
• Third-party logistics (3PL) providers: They handle warehousing and order fulfillment for you.
• Fulfillment by Amazon (FBA): Amazon stores, picks, packs, and ships your products. Customers get quick Prime delivery. FBA is the easiest way to fulfill private label orders. You send bulk inventory to Amazon, and they handle the rest. 

The downside is that Amazon charges fees for storage and fulfillment. 

Weigh the pros and cons of fulfillment options for your business. A good customer experience is crucial.

5. Create & Optimize Your Amazon Listings

Once your private-label product is made, you must create a compelling listing on Amazon.

Follow these tips to maximize sales:

• Have your listing fully ready to publish when inventory arrives.
• Get professional product photos. 
• Optimize titles with relevant keywords so you rank well in searches. Put key terms first.
• Describe key features and benefits in the description in bullet points. Focus on solving customer needs.
• Apply A+ content best practices for organic and paid discoverability.
• Consider Amazon PPC ads to get on page 1 and competitor product pages. Adjust bids based on performance data.
• A/B test elements like images and pricing. Let data guide optimizations.

Great content and visibility in search results are critical for any new private-label product. Continuously refine your listings based on real buyer data.

6. Employ Multi-Channel Marketing

Relying solely on Amazon search, suggested products, and sponsored ads can limit your profitability. 

To grow a strong product line:

• Build an appealing website to stand out from pure Amazon sellers. Share your story and mission.
• Post engaging social media content on Instagram, Facebook, etc. Partner with relevant influencers.
• Consider expanding to retail stores once you reach a large scale.
• Run giveaways, sweepstakes, and email marketing to build an audience.
• Attend conventions or events to showcase your products.

Use the launch of initial products as a platform to keep expanding your catalog, fine-tuning processes, and reinvesting revenues to fuel further growth.

Frequently Asked Questions (FAQs)

Got more questions about Amazon’s private label? 

Below are answers to some common questions you may have:

How Long Does it Take to Realistically Private Label a Product?

The entire process of finding a viable product, sourcing a quality manufacturer, finalizing product design and packaging, and launching with well-optimized Amazon listings typically takes 6-10 weeks for your first product launch.

Once you achieve a proof of concept, you can streamline and scale additional products faster by replicating what works.

Amazon Private Label vs. Wholesale: What is the Difference?

Wholesale involves purchasing inventory from other established sellers in bulk to resell on Amazon.

With a private label, you have an original product developed and customized exclusively for your business. It enables far more control, higher margins, and differentiation.

What are the Profit Margins for Amazon Private Label?

Experienced Amazon private label sellers generally target more than 30% net margins when factoring in all production, shipping, Amazon fees, and marketing costs. This depends greatly on order volumes, manufacturing relationships, product selection, and overall efficiency.

See how we can help you increase your profits by claiming unnoticed FBA reimbursement opportunities.

Conclusion

One of the most important aspects of selling private-label products on Amazon is ensuring profitability and minimizing losses. 

However, this is not really possible if you lose 1-3% of potential revenue yearly due to FBA discrepancies like unaccounted/damaged inventory and fee overcharges. It may not look like much, but if you’re selling $1 million a year, that’s $30,000 left on the table!

This is where Eqappo comes in. As an authorized Amazon partner, we uncover and recover lost reimbursements. Our team handles the entire process — auditing, documentation, and claims management — while providing full visibility into each status through our dashboard.