The most enduring and promising business model is Amazon's private label. This model is fundamentally about creating your brand. You manufacture products in China or Turkey, brand them with your logo, and sell them on Amazon.
Of course, the essence of the Amazon private label business model being brand creation makes it quite challenging. For those with a minimum budget of $5-10,000 or manufacturers, I recommend the Amazon private label business model, where you will face higher advertising and promotion costs compared to other models due to building a brand from scratch. If you can create a successful brand in the end, you might have opportunities to attract investors or sell (exit) the brand.
Now, let me explain how you can implement the Amazon private label business model.
Stages of Amazon Private Label
Set Up Your Company
The first thing to do when starting to sell on Amazon is to establish your company. If you already have a company, that's fine, but you may choose to set up your company in the USA or the UK for some advantages.
It's beneficial to have your company both in Turkey and in the target market to secure your business. Initially, you can start with just your Turkish company, but as volumes grow, you will start to face customs issues in the country of sale and feel the need for a company on the buyer’s side.
If you want to take advantage of government export supports, there needs to be an organic connection between your Turkish company and your company in the USA or the UK.
If you want to set up a company in Turkey, America, or the UK, you can use Mükellef. Setting up a company is not as hard as it used to be; you can quickly do it online. Since there is a partnership between Mükellef and Rexven, you can take advantage of a discount when setting up your company using this link.
Decide In Which Country You Will Sell
Actually, if you don't have a company yet, it might be more beneficial to choose the country where you will sell before setting up your company. Having your company in the country where you will sell will provide advantages. But how will you choose the country?
The region with the most potential on Amazon is North America, followed by Europe. I recommend starting with these two regions. Most of our sales are also in America and Europe. The purchasing powers of these countries are high, which means high sales potential and profit margins.
There is more sales but also more competition in America compared to Europe. If you are considering sending products from Turkey, you can make more profitable sales in Europe with less cost as we are very close to Europe.
You should decide on the country where you will sell according to your product group. You can make a selection based on which country has more potential for the product group you plan to sell. Here, we usually decide based on sales potential and competitive conditions. I will explain how we make this decision in the product research and analysis section.
Open Your Amazon Account
Of course, one of the most important stages to start is to open your Amazon account. I advise you to proceed with great care here. If you make a mistake while opening the account and your account does not open, you cannot proceed to the sales stage. If your account is closed once, you cannot open another account in the name of that person or company.
Before opening your Amazon account, you need to have a bank account. Since we could not proceed with our bank account in Turkey, you can use virtual banks like Payoneer.
You must make sure that you enter your company and personal information correctly when opening an Amazon account. All information and addresses must match. Amazon will confirm you by making a video call during the account opening phase or within a few days.
Also, to confirm your address, Amazon will send a postal code to your address. Once you enter the code inside this post into your Amazon account and confirm your address, your account will be active.
If you haven't encountered any problems in these stages, you can move on to other stages. If there is a discrepancy in your information, Amazon will ask you for additional documents. Try to provide accurate information and be honest throughout all processes from account opening to the sales process on Amazon.
Since there are currently more than 10 million sellers on Amazon and new applications are received every day, Amazon is very careful in account opening processes. I recommend that you be equally careful.
When you start selling on Amazon, remember my story; I made a big mistake by investing all my capital in products without allocating a budget for advertising and reshipping.
My advice is to plan regardless of how large your budget is. For a simple plan, we currently use a third of our budget to buy products. Another third is allocated for advertising and launch expenses, and the remaining third is set aside for repurchasing products. Many people make mistakes here.
On Amazon, your earnings won't be deposited into your account immediately after a sale. Payments are made in bi-weekly periods. Also, if your account is new, Amazon might delay payouts until after the products have reached customers and no returns have been filed. In the best-case scenario, you'll receive your first payment after a month. However, when your products start selling, you need to order and ship more immediately to avoid stockouts.
Considering the preparation and shipping time, you will need to reorder products before you have received payment for those sold. If you cannot restock in time and run out of inventory, your advertising and launch efforts could be wasted. If you run out of stock, Amazon will push your rankings back, and you'll likely need to invest a similar budget again.
After planning your budget, you need to start researching products that fit your budget. If you are a manufacturer, you can proceed by analyzing the products you already produce.
The product research process is like the first button of a shirt. If you button it wrong, no matter how successful you are in other stages, achieving a successful and profitable sale overall will be difficult.
With more than a billion products and over ten million sellers on Amazon, we need to sell in areas with sales potential but where we can also compete. In my story, one of my mistakes was choosing highly competitive areas despite a limited budget. Don't make the same mistake; choose product groups with sales potential where you can compete.
There are so many products on Amazon that you can use software at this stage. You can conduct product research using software like Helium10, Jungle Scout, Keepa, and Emparazon.
With these tools, you can find the products you will sell through various filters. We usually do keyword research at this stage. We decide based on the search volumes of the keywords and the competition in those keywords. You can also find products by browsing within Amazon. The important thing here is to analyze these products or keywords.
It doesn't make sense to enter hundreds of product categories in the Amazon private label business model. It's more logical to enter a few products according to your budget. There are already sellers on Amazon making hundreds of thousands of dollars with just one product.
So, my advice to you is to find at least 20-25 product ideas and narrow them down to 4-5 based on the criteria I'll explain soon. After getting prices from your supplier, you can proceed with the products that will generate the most profit.
Try to analyze the product ideas you find based on the following criteria:
- Sales potential (How much does it sell on average per month? How much revenue does it generate?)
- How many competitors are there?
- Is Amazon among the competitors?
- Are there dominating brands like Nike or Adidas?
- What is the keyword volume?
- Is the product trend increasing or decreasing?
- How many reviews do competitors have?
- What is the profit margin?
- Are there gaps that you can fill? (You can read competitors' reviews to identify and improve the problematic areas of the product)
- Is there a possibility for bundling?
After analyzing according to these criteria, you need to get your supply price. If you are a manufacturer, you need to determine your cost. You should make the final decision based on profit margin and return on investment.