So you want to sell on Amazon but are unsure which is better: Amazon FBA wholesale vs private label?

Both have unique pros and cons, which can make it difficult to decide which is best for your business.

In this article, we’ll compare and contrast each Amazon business model so that you can decide which is right for you. Let’s get started!

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What is Amazon FBA wholesale?

In its simplest form, wholesale is a business model that involves buying branded goods in bulk and reselling them at a profit.

Amazon sellers take advantage of this business model by buying in-demand products, sending them to an Amazon fulfillment center, and creating a listing inside Amazon Seller Central.

wholesale visual

If you’re new to wholesale, you can learn how to use Helium 10 and similar research tools to pinpoint proven demand.

Then, reach out to manufacturers and attempt to open a wholesale account so that you can sell their products on Amazon.

Pros of Amazon wholesale

Amazon wholesale is a popular business model for good reason. Let’s take a look at its top five strengths.

1. No listing creation

There’s usually no need to create an Amazon listing because there will already be one.

This means you can simply list your number of units for sale on this same listing and benefit from the existing traffic it is already getting to make immediate sales.

It also means you don’t need to create images, write copy, or start without reviews.

2. Less time-intensive

You don’t have to go through the process of:

  • Extensive product research
  • Finding manufacturers
  • Negotiating prices
  • Requesting improvements
  • Designing packaging
  • Carrying out quality control checks
  • Taking photographs

…and a hundred other things you need to do when launching a private label brand.

This saves you a lot of time upfront.

3. Quick ROI

Due to the shorter lead times associated with sourcing ready-made products locally, you’ll be able to list products and sell through them much faster than private label products.

With a private label business, you’d usually need products manufactured overseas and shipped by sea, which can mean you won’t be able to extract your first profits for several months.

4. No advertising

Private label selling requires a Amazon PPC to market your product to a new audience.

There is an existing customer base with wholesale products, and the Amazon listing already has traffic.

So you can spend that time (and money) growing your sourcing list to increase revenue.

5. Smaller budget

While established brands may still command a relatively high MOQ (minimum order quantity), smaller brands can be much more open to small initial orders.

Add to this, you won’t need to:

  • Ship overseas
  • Pay for a photo shoot and listing creation
  • Register a trademark
  • Fund a product launch

…like private label sellers do and you can see how you can get started on a much smaller budget.

Cons of Amazon wholesale

Like anything, a wholesale business has its downsides. So, let’s review the top five challenges when selling wholesale.

1. Minimal assets

An Amazon wholesale business is very much a cash-flow play.

It’s almost entirely centered around selling products that make sense now, with little thought given to building a brand that can become a valuable asset.

This makes it difficult for a wholesale business to realize an attractive sale price—at least in comparison to the quickly increasing multiples being paid for private label brands.

2. Buy box share

Amazon owns the product listings on its platform, which means you have little control over how many sellers can make their inventory for sale on any given listing’s buy box.

If you’ve been able to establish a contract with a supplier and are selling wholesale, it’s highly likely someone else can, too.

3. Margin compression

More sellers trying to sell wholesale products means more competition.

As a result, some wholesale sellers will reduce their prices to far lower than ideal levels and eat away at the profit you had hoped to make.

4. Building partnerships

You will need to be a master networker, continually reaching out and building relationships with new wholesale accounts.

For the above reasons, successful wholesale products can become far less successful over time.

This means you need to constantly add new products and suppliers to the pipeline, which can become tiring.

5. Required licences

To sell products wholesale, you may be required to get a wholesale license – sometimes called a tax-exempt form, resale certificate, business license, or something else, depending on your location.

What is Amazon FBA private label?

The Amazon private label business model is a method of selling on Amazon that involves creating your own brand, sourcing from manufacturers who will customize products to your unique specifications, and shipping them to Amazon to be sold.

private label visual

Pros of Amazon private label

Private label is a highly popular business model for several reasons, so let’s look at the top five.

1. Asset building

A successful private label brand is very attractive to Amazon aggregators, private equity investors, and private buyers.

In recent times, we’ve seen the sale multiples for brand owners grow substantially, and the ability to build towards a life-changing exit is perhaps the greatest opportunity in selling private label products.

2. Full control

As the brand owner, you have complete control over the direction of your business.

You control the branding elements, the supply chain, the sales price, and much more.

You have the ability to chart the course of your private label business without the negative input of competitors.

3. Buy box ownership

As an existing brand, you can enroll in Amazon Brand Registry to gain protection over the buy box of your Amazon listings.

This means you can prevent so-called “hijackers” from selling on your listing and profiting from the traffic you have worked hard to generate.

4. Product portfolio expansion

If you want to grow your business as a private label seller, you can easily add complementary products to an existing line.

As you own your off-Amazon audiences, you can grow your profitability over time with synergistic product offerings to the same customer archetype, further strengthening the long-term position of your established brand.

5. Higher margins

If you work hard to create high-quality, differentiated branded products, you can protect your profit margins and make more money.

As the only seller on your listing, you won’t be forced down on price by other sellers of the same product and can protect your profitability.

Cons of Amazon private label

The private label model is our exclusive focus inside Brand Builder University, but that doesn’t mean it’s perfect.

Like most business models, there are some challenges, and here are the main five.

1. More setup

Whereas the Amazon wholesale model is relatively straightforward to launch, private labeling involves creating branded products with a logo, packaging, instructions, and sometimes more.

You’ll also want to consider creating a website on a platform like Shopify and will need to invest in building your brand reputation over time.

2. Advertising

Often, private label sellers find developing the skillset of advertising on an online marketplace a learning curve.

Time and money are required to test campaigns and learn the process to drive traffic to a new listing, whereas an existing product already has traffic without the need to advertise.

3. Time intensive

If you’re considering whether to sell on Amazon wholesale or private label, time is one key factor.

With private label, you will need to:

  • Research and source products
  • Create listings
  • Build an audience
  • Learn to advertise
  • Run launches
  • Optimize listings

…and many more tasks that aren’t required when selling on Amazon wholesale vs private label.

4. Long lead times

Most private label sellers will source a branded product from a third-party manufacturer overseas.

This usually involves a 2-4 week lead time and 2-6 weeks shipping time (depending on the mode of transport).

This can create delays in getting started and make managing cash flow more difficult.

5. Patience required

Launching a private label product certainly takes patience.

It can be 3-6 months after launching under your brand name before you start seeing a profit.

Private label sellers need to be willing to see the long-term goal of building a valuable brand asset and have the patience to push through the initial period.

Amazon FBA Wholesale vs Private Label: Which is best?

The answer really lies in both your circumstances and your goals.

If you have a small starting budget and little time, then starting with the wholesale business model may be the best option for you.

If you want to build a brand that becomes an asset but lack the time and capital to do so, starting with wholesale vs. private label can be a great way to learn the ropes and build up more capital.

But if you can invest time and capital ($3-$5,000 ideally) to grow a significant-sized business that could fund your retirement in the next 3-5 years, then private labeling would be the clear and obvious winner.

If you’d like to learn more about private label selling models, read our in-depth article on selling on Amazon for beginners.

Or if video is more your kind of thing, check out this free one-hour Amazon training.

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Ben Donovan

WRITTEN BY

Ben Donovan
Ben is the founder of Brand Builder University and has a passion for helping normal everyday people create financial freedom by building successful eCommerce businesses. He lives in Manchester, UK with his wife and 2 children and loves to play sport and watch continual re-runs of The Office (US version, obviously).

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