Amazon Wholesale vs Private Label – What Is Better for Sellers?
Many sellers who want to gain a foothold on Amazon are faced with the question of which strategy works best for them. Decisions have to be made not only in regard to the regular factors such as price, quality, or shipping costs, but also take into account the popular question: Amazon Wholesale vs Private Label – which one is better?
Today we will explain how this decision can affect your entire seller profile and who should choose which model and why. We will also explain which facts you need to take into consideration before making a decision.
But before we go into detail, let us first take a look at the difference of the goods when it comes to Private Label vs Wholesale.
What Is Amazon Private Label?
The difference between Private Label and Wholesale products has a lot to do with the seller. When it comes to private label, it means that you yourself have to establish a new brand. This means that you are responsible for expanding the brand and raising awareness. You also take responsibility for the products sold under this brand.
Nowadays, nobody has to build up his own factory in the backyard to sell a new product. You can much rather use online platforms like Alibaba or GlobalSources. There are many manufacturers, mostly from Asia, who sell their goods to sellers. You can choose and order the product you want to sell under your Private Label – let’s take toothbrushes for the example we will use throughout this article. You also have the option of ordering personalised packaging and the printing of your logo on the product. In this manner, you and other sellers can retail a toothbrush of their own brand.
What Is Amazon Wholesale?
For Amazon sellers, this question is an absolute essential piece of info. In contrast to Private Label products, already established brands can be used for Wholesale. For example, sellers can resell toothbrushes from Oral-B – a huge toothbrush company – on Amazon. The brand is already well-known and customers will specifically search for this brand when interested in an electric toothbrush. As a seller of Wholesale goods, the main challenge for you is not to establish your brand but rather to win the Buy Box.
Some differences are recognisable at first glance. A closer look, however, reveals many more differences that should be considered when choosing the appropriate strategy.
Amazon Wholesale vs Private Label: What’s the Difference?
To shed more light on this, we have to look at the following areas: Price, investment, Buy Box, legal responsibility and opportunities & risks. We will now discuss these in detail and in order to approach our goal of deciding whether Amazon Wholesale or Private Label is the right thing for you.
Your final selling price on Amazon is influenced by all the costs you incur until your product reaches the customer – including profit. The costs for selling on Amazon, shipping etc. – regardless if you use a Private Label or Wholesale – are similar to each other. However, there are drastic differences in the costs until you are ready to sell on Amazon:
Pricing for Private Label Sellers
In contrast to Wholesale, the purchase price of goods for your own Private Label is low because you purchase no-name products. However, there are other costs that sellers of Wholesale are not confronted with. We will discuss these in more detail in the section ‘Investments’.
Through your Private Label, you have created a new product (incl. new EAN). This means that you are the only seller and are not in competition with other sellers. Due to the missing price war, you are somewhat free in your pricing. But beware: You may be out of competition for the Buy Box, but you are in competition for the top hits in the result list, which allows buyers to compare your price with those of other brands or others using Amazon Private label. If you’re selling already and you’re looking to increase your sales, it might be worth your while to check out our Repricer, which does exactly that.
Pricing for Wholesalers
Since sellers of Wholesale buy products of an already established brand, the purchase price is much higher than the price of no-name products. Besides a margin for the brand owner, you pay for the research and development of the product, the marketing of the producer, etc. The high purchase price naturally has a negative effect on your profit, but also on the investments you have to make.
Your sales price is also significantly influenced by the prices of your competitors. As a seller of Wholesale, you sell the same product (with the same EAN) like many others. Amazon uses the EAN to determine whether a product is already listed or whether it is a new product. Since only one listing is allowed for identical products at a time, wholesalers are competing for the Buy Box and are thus in a direct price war with competitors. wholesalers are correspondingly inflexible in terms of pricing.
In order to expand an online business, some investments are required. For example, sellers have to procure the goods. Since sourcing varies according to strategy, this has an impact on the amount of investment required.
Investments for Private Label Sellers
Since you still have to build up a brand with your Private Label, your investments will be significantly higher than for Wholesale goods. For example, sellers should invest in a professionally designed label and take marketing measures to create brand awareness. Photos from websites like Alibaba often lack quality. Therefore, sellers should invest time and resources in creating high quality images of the product. Also, sellers need to have an EAN created for the product, which Amazon will use to determine whether the product is already listed or whether a new product page will be created.
Building a new brand is a task that takes time and effort. But if sellers are willing to take this time, the chances of establishing a strong brand image will increase immensely. In addition to the costs of building up and expanding the brand, sellers often have to deal with even larger purchase quantities and shipping costs from suppliers in other EU countries. Be sure to take this into account.
Investments for Wholesalers
The abovementioned investments do not have to be taken into consideration by wholesalers, as they rely on an already existing brand. They only have to buy and distribute the goods. A strong brand has already invested in development and expansion. In addition, many sellers of trade goods rely on products from the EU. These have a lower minimum purchase quantity on the one hand and on the other hand, do not have to be imported from Non-EU countries.
Amazon Wholesale vs Private Label: Winning the Buy Box
On Amazon, everything revolves around the Buy Box. But even here there are some differences depending on whether you sell a Private Label or Wholesale.
Amazon Wholesale vs Private Label: Buy Box for Private Label Sellers
Through Private Labels, sellers avoid competing for the Amazon Buy Box. That’s because Private Label sellers are the only supplier of the product to win the Buy Box as long as they are authorised to do so.
As a Private Label seller you won’t have any competition for the buy box, but that doesn’t mean that there will be no competition at all. While you may already have customers who specifically look for your brand, there are other “non-branded” consumers who still need convincing that you are the best choice among all the other options in the result list.
Amazon Wholesale vs Private Label: Buy Box for Wholesalers
As a Wholesaler, you are in a direct price war with your competitors, of which each one wants to get into the Amazon Buy Box. These sellers have to pull out all the stops to become number one for this product including the use of Fulfillment by Amazon (FBA), which is a must as if you want to increase the chances of getting into the Buy Box.
But one of the most important criteria for winning the Buy Box is probably the price. Since you are in competition with other wholesalers, it is essential to regularly review and adjust your price. Save time and resources by using a flexible repricer. It will automatically set the best price to win the Buy Box and beat the best price for the seller.
The question “Amazon Wholesale vs Private Label?” is one that also includes the legal liabilty of sellers. Owners of a trademark are bound by the Product Liability Act, which holds the manufacturer liable for the product. This can be the case in the event of an accident caused by this product. In terms of legal responsibility, it is therefore important to distinguish whether you are the manufacturer, importer or seller. The decision whether you are selling Private Labels or Wholesale also makes an impact here.
Responsibility of Private Label Sellers
The Question “Amazon Wholesale vs Private Label?” is often decided due to the legal responsibilities each role entails. As a seller of a Private Label, you sell your own product and therefore you are the one legally responsible for it. If one of your toothbrushes has a dangerous defect, you will not only suffer from a tarnished brand image but will also have to face the legal consequences.
If you purchase goods from non-EU countries, you become the importer and therefore responsible for these goods. Additionally, all products sold in the EU should be marked with the CE seal. The tests and test reports that may be required for this seal can be very expensive and it would be wise to check how much they will amount to in total so that you can adjust your price.
This is by far not the only EU customs regulation. As an importer, you are responsible for the customs-compliant import of the goods. Check out the customs webpages for more info, here is the British one for example. If you want to keep it simple, it is therefore advisable to primarily purchase goods from the EU since they were either manufactured here or already brought into the country by another importer.
Responsibility of Wholesalers
Once you let the whole Amazon Wholesale vs Private Label question play out, you can see that the responsibility of Wholesale sellers in regard to legal obligations is by far not as extensive as for Private Label sellers. They are not liable for the product itself, since the liability lies with the manufacturer (in our toothbrush example, this would be Oral-B). The obligations of the importer are also reduced to zero through sourcing, i.e. product procurement in the EU. The responsibility of this also lies with the manufacturer, as he/she imports the goods from the non-EU country. Accordingly, the conformity marking we mentioned before (CE) is also not something that you have to worry about if you are a Wholesale seller.
Opportunities and Risks
You can see, as shown in the previous sections, that both strategies have their advantages and disadvantages. Let’s take a final look at the opportunities and risks of each strategy and decide the question: Amazon Wholesale vs Private Label, which products should I sell?
Opportunities and Risks of Private Label Sellers
YOU are the brand and therefore get to influence the image of your product and much more. But you also bear more responsibility. As described above, you are liable for your brand and the products you sell. If your brand is not well received, this will affect your sales and therefore your profitability.
As the owner of the brand, Amazon also gives you the opportunity to customise the item description. This allows you to make your texts SEO-compliant and achieve a higher visibility. Once you have established your brand, you can think about expanding and, as part of a diversification strategy, add more goods to your product range in order to win new markets.
Last but not least, as the owner of a Private Label, you also have the opportunity to sell your brand itself.
Opportunities and Risks of Wholesalers
Especially for beginners on Amazon, juxtaposing Wholesale vs Private Label is an important starting point. If you are new to the online marketplace, it would make sense to first sell Wholesale in order to gain experience. Find out how Amazon works, what makes customers stick and see how you can fit best into the marketplace. This way, you can also learn how to make your store sustainable or how to communicate with customers – and all this at a lower business risk than with a Private Label on Amazon.
However, with Wholesale, you don’t have the opportunity to build your own brand to which you can later add more products to grow further.
If you want to sell Wholesale on Amazon that is already listed, you have to assign your product to the already existing product page and therefore have no influence on its design. With a bit of luck, you will be added to a well maintained, SEO-compliant site. However, it can also happen that the creator of the product page was not very skilled in the design and you have to live with the consequences.
Performance tracking is crucial for both business models
Whether you decide to sell Wholesale or Private Label products on Amazon, profitability is the key factor in both settings. It is therefore crucial to be aware of your business performance and to eliminate profit drainers as fast as possible. For this purpose, Amazon sellers have to deal with Amazon-related data analysis, which usually turns out to be very complex and time-consuming – as long as it is performed manually. Using a software-based solution instead is a by far more efficient option.
SellerLogic Business Analytics was developed specifically for Amazon sellers and provides a detailed overview of relevant product data in a profit dashboard – up to two years retrospectively and in near real-time. This allows you to track your performance on the account, marketplace, and/or product level. Once you have identified unprofitable products or specific profit-reducing costs, you can take steps to optimize your strategies to stop revenue leakage and to maintain a sustainable business on Amazon.
So, Amazon Wholesale vs Private Label? Who would win for you? Fact is, if you are an experienced Amazon seller and also happen to know a lot about branding and marketing, trying to sell as the owner of your Private Label might be the right way for you. You can use your skills to increase your visibility and sales on the online platform. If you are relatively new on Amazon, it might make more sense to sell Wholesale and gather a few impressions first. Let us not forget, however, that both options carry the same amount of risk. There is no right or wrong here and all we can give you in this article is what we have experienced ourselves or heard from clients. We are sure that you will find your own, most profitable, way. Good luck! If you want more tips on how to sell successfully on Amazon, click on this link to read the article.
Image credits in order of appearance: © alexmishchenko – stock.adobe.com / © radachynskyi – stock.adobe.com / screenshot @ Amazon / © AA+W – stock.adobe.com