Before starting an Amazon FBA business you’ll need to think about what kind of products you’re going to sell.
There’s branded products, such as ‘Microsoft’, ‘Nike’, ‘Chanel’. But those are often kept in-house, or sold by select retailers. You’re unlikely to ever stock those types of items. You are however very likely to build your own brand by sourcing either of the following:
- Private label products: existing “white label” items eligible for custom branding.
- Custom made products: a non-existent product that you’ll design, create and brand.
In this article I compare private label and custom made products to help you decide what’s best for your FBA business.
Private Label Products
A private label product is manufactured by a third-party and sold under your own brand name.
Have you ever browsed Amazon and found several almost-identical products listed under different brand names? Those are private label products sold by two competitors.
In fact, many Amazon FBA Sellers buy from the same factory. And if you head over to Alibaba.com, you can probably find the exact product supplier within seconds.
- Little or no design skill required: private label products do not require that you provide artwork or intricate design files; the product already exists. This means you don’t need to have the relevant Adobe/ CAD skills.
- Easy to source: you’ll have no difficulty finding a specific private label product from Alibaba (or similar site). Once you’ve received a product sample, and provided your branding to the manufacturer, you’re basically ready to order.
- Tried & tested: when you buy an existing product, you’ll already have a very clear idea of how popular it is, what the quality is like, and what customers like about it. You’re not shooting in the dark.
- Customisable: a lot of factories offer the option to customise private label products. This means that you have the ability to differentiate your version from another FBA sellers.
- Certified: many private label products are already certified to meet the required regulations. This means that you’ll leverage an already completed certification process, which can be very expensive (think electronics safety). You need to sell an identical product to that which has already been certified.
- Fierce competition: many products are already saturated with established sellers, with margins that’ll be incredibly difficult to compete with. This is by far the biggest downside to sourcing private label products.
- Lack of USP: you have to think: why would a customer choose your product over your competitors’ near-identical version? You’ll need to stand out, or offer something extra, in order to attract customers.
- Easy to copy: even if you discover a private label product with low competition, there’s a very strong chance that someone else will find your supplier and start competing against you. This doesn’t make for a very robust FBA business.
- Supplier conflict of interest: if another seller agrees to buy huge quantities of your private label product, then they may have to leverage to ask the factory to meet their terms. For example, they could request that the factory does not sell to others at the same price.
Custom Made Products
Custom made products are original, designed by you, sold under your own brand name, and manufactured by factories of your choice.
You may not immediately be able to tell which Amazon products are custom made. However, if the product is unique, no competing version exists under another brand name, and can’t be found on Alibaba.com, then it’s possible the product was a seller’s own creation.
Importantly, a custom made product doesn’t have to be complex. It could just be different to other, similar products within the same niche.
- Strong USP: you have the ability to create your own USP. You can identify a weakness in the market, and develop a product that fills the void.
- Harder to copy: a competitor cannot simply find your supplier from Alibaba and source your product. They’ll need to create a similar product design/specification, and find a factory that’ll be willing to produce it. If you hold a patent or copyright for your design, then that’s yet another layer to get through. Most copycats will not go to so much effort.
- Highly customisable: if you’re developing your own product, it goes without saying that you can tweak and improve it. You’re not tied to any particular specification.
- Less competition: the main advantage of creating a custom made product is that there’s far less competition. If you produce the right product, you’ll become the go-to seller without much difficulty.
- Freedom: you’re not tied to one factory as you would be on a private label product. So if you encounter any difficulties with your supplier, you can simply move on and find somewhere else will meet your specification.
- Design skills required: you’ll need to provide suppliers with artwork (e.g. an Abode Illustrator file) and a detailed specification for your product. If you don’t have the skills to do this yourself, then you may need to employ someone who does; it ultimately depends on the complexity of your product.
- Harder to source: building a custom product requires reaching out to various factories for a supplier that can meet your specification. Not every company you contact will be willing to work with you — many will be put off by the additional time required to build a prototype and modify your design.
- No market feedback: only once you put your custom product out there will you know whether Amazon customers like it or not. Up until then, you’ll have to assess the product yourself. It’s recommended that you purchase several samples and thoroughly test them out.
- Certification may be required: some goods need to be certified; and your custom made product will probably not hold those certificates from the outset. Obtaining certifications can be an expensive and inconvenient process.
Private Label Or Custom Made — What’s Best?
Personally I believe that putting in additional work during the design/prototyping phase and creating a customised product will give you a greater chance of success on the FBA program.
Private Labelling Is Not As Easy As It Seems
There’s a misconception that anyone can source a product from Alibaba, slap their logo on it and start earning a fortune from the FBA program.
Successful private label brands are the ones that you, as the consumer, believe is the “owner” of a product. They’re the brands that generate enough sales to gain exclusivity over a product, and enough power to drown out competition.
But it takes time, persistence, skill, and a lot of money to achieve that level of dominance with a popular private label product.
Can You Compete? — Things To Consider
Nowadays there’s so much competition on FBA that you can’t simply expect to re-brand an existing product and achieve immediate success. Consider the following:
- Based on your price quotations, can you realistically compete with other sellers of your product?
- Do you have the brand identify to better your competitors?
- Are you able to differentiate your product from your competitors?
- Will your marketing campaign be stronger than those used by your competitors? Can you afford to do it?
Protecting Your Turf
Even if you find a relatively untapped private label product — what’s to stop a competitor from sourcing that same item and poaching sales from under your feet?
I’ve experienced it. Competitors stepping in, (presumably) sourcing the same products, creating a brand almost identical to mine — essentially piggybacking off of all of my hard work. It’s at that point I started to appreciate the importance of protecting my brand and differentiating my products from anything else on the market.
To learn more about how I adapted my Amazon FBA business, check out my post Criticise Your Business To Identify Improvements (SWOT Analysis).
Sourcing Custom Products — My Preference
Nowadays the majority of products I release onto Amazon are custom designs. They’re harder to copy, have less competition, and offer some form of USP.
Granted, creating a custom product is more work and effort. But anything worth having is worth fighting for, right?
Here’s how I approach creating custom products for the FBA program:
- Start at similar products: I contact factories offering similar items (which aren’t necessarily in the same niche), or items that were made using the same skillset required. I enquire about customising them to suit a new purpose. This cuts out a lot of design steps and simplifies communication with factories.
- Avoid complex products: I try to develop simple items. Many of the best FBA business ideas aren’t the most intricate. I aim to make my products difficult to break, and hard to make a valid complaint about.
- Collaborate: I’ve teamed up with a designer in order to model new product ideas, and streamline the process of sourcing them. We split profits so that we’re both motivated to make our products to the highest standard. Our setup saves time, cuts out design expenditure, and generally gives us an advantage over others trying to compete in our field.
If you’d like to learn more about sourcing items for your FBA business, check out my posts:
5 thoughts on “Private Label Vs Custom Made Products — Amazon FBA”
Depending on what product and budget you are working with, private label can be great in terms of short term gain and revenue. You spend a fairly small amount to make a product your “own” and then mark it up. A good example of someone doing this the right way is the owner of those Raycon ear buds. They are $25 Chinese ear buds marked up and branded with his own name. It is a smart business move.
Great information. I have been on the fence with how to approach my online business idea. I have a great product range in my mind but to get it all custom manufactured would be a HUGE upfront cost. So I am thinking I’ll need to sacrifice some originality – the private label is a better route for me right now.
I agree with your point of view, your article has given me a lot of help and benefited me a lot. Thanks. Hope you continue to write such excellent articles.
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