Summary: The importance of narrowing down your product pool
Before you start looking for any products to sell via Amazon FBA, you’ll have an important decision to make. Are you going to sell a product that’s already branded, or are you going to private label? Are you going to try to create a new manual coffee grinder brand that you can build upon into the future?
Selling brands means dealing in products that already have a brand identity, whereas private label products are those for which you can attach your own name and work towards building your own brand.
Selling branded products is one of the easiest ways to begin doing business through Amazon FBA, but it’s also one in which your long-term potential is more limited. One of the most common ways of selling branded products is through a technique that’s often called “retail arbitrage.”
In short, retail arbitrage means that you find branded items that are on a deeply discounted clearance sale price at a local retailer, and then resell those items at a higher price on Amazon.com. One of the upsides of this strategy is that it’s easy to get started, and you likely already have a good sense of what constitutes a “good deal” for a particular branded product. And it’s easy to check the current lowest price on Amazon.com to see if there’s the potential for profit.
Let’s look at a couple of the manual coffee grinders that are currently for sale at Amazon.com. You’ll notice, that the grinder on the left is not branded (and sells for the lowest price). The grinders on the right are privately branded (and sell for more): (see power point case study)
Branded products means there’s built-in consumer trust. People already know the brand you’re selling, and have already formed an opinion of whether or not it’s an item they’re interested in purchasing.
(Of course, if you’re going to be selling an existing brand, and there are already a number of other sellers of that same product on Amazon, then you might need to ask yourself again whether this is the right product for you.)
But some of those same factors can weigh against you as well. Let’s say that someone else finds a much better deal on those same items through a different wholesaler, and is using the same resale strategy. Since the products are identical, the primary (and perhaps only) factor that a potential buyer is going to use in making a purchase decision is price. If someone can offer the branded product at a lower price then they’re going to get the sale and you’re not.
Selling private label is a longer-term business, because it involves extra steps of knowing your prospects. When you set out trying to sell something that’s already branded, it’s easy to know who the customers are. Creating a private labeled product that will be a good seller requires you to do market research before you go too far down the path of selecting individual products.
The big upside is that private labeling gives you the opportunity to distinguish yourself from other sellers and build a larger business over time.