Private labels are products sold by a third-party manufacturer and sold under a retailer’s brand name. Amazon sellers can take advantage of private label by scouting out and purchasing a generic product and applying their branding to that product. Not all products can be privately labeled, take Kitchenaid or Kate Spade for example, so sellers need to know what to look for. Most product suppliers will be found overseas (like Alibaba), and the best products for private labeling will be non-perishable, smaller, and lightweight.
Advantages of private label:
Control: Retailers have control over the negotiation process with the third party supplier, supplies, look, and branding of the product
Price: Thanks to product control, retailers can better manage and control pricing.
Brand: Retailers determine what the brand name, packaging, and marketing of the product will be, which helps customers with customer recognition and loyalty. Also, specific private label products are only available from the retailer which lowers their competition as customers can search for their product under that name.
Profits: Because retailers determine the production costs and pricing, they also determine what their profits are. Additionally, private label items are usually cheaper to make, thereby increasing the profits of the retailer.
Speed: Private labeling allows retailers to get the products customers are demanding in stock quickly.
Disadvantages of private label:
Third Party Reliance: Retailers become dependent on the third-party manufacturers to fulfill their orders promptly with a few manufacturing problems as possible. Therefore, it is essential to the only partner with well-established companies to mitigate these risks.
Branding Difficulty: Because you will only sell your product, you may have trouble competing with the big brand names as customers might have trouble finding your product.