What is Private Label? (RA vs OA vs PL)
Are you ready to learn a new language?
Hey bootstrappers, my name is Megan and this is The Bootstrap Boutique where beginners build businesses.
Have you ever noticed how whenever you start a new hobby or go to work at a new company, it is literally like you have to learn a new language to understand what people are talking about? And that has absolutely been the case for me as I’ve been going down the journey of building a private label company on Amazon.
How to Shop on Amazon
What I have learned that I definitely never paid attention to when I was a shopper on Amazon is that there are three different ways that you can purchase products there on the website.
So the first is just buying from Amazon, which I never had paid attention to and thought that was the only way for a really long time. So what that means is that Amazon is going out there using their purchasing power to buy products from a company, from a manufacturer, from a distributor, from a wholesaler or whomever and are selling them to you.
But have you ever bought something from Amazon and then you didn’t get the Prime shipping that you are used to, or it came in a box that didn’t say Amazon on it? That was probably merchant fulfilled, which means that a certain company, again a wholesaler, a distributer, or a product manufacturer is just uploading their catalog of products to Amazon and selling them through to you. However, nothing is in the Amazon warehouse, its actually still with that company and when they get the Amazon orders then they ship them out to you. So that’s merchant fulfilled.
Finally there is Fulfillment By Amazon, or FBA you’ll see it referred to a lot in the private label community. So Fulfillment By Amazon is where you have somebody that is purchasing a good, a product, putting a private label on it, and sending it actually to the Amazon warehouse and Amazon acts as first your storefront but also your fulfillment center. So everything that is Fulfillment by Amazon actually sits in an Amazon warehouse. So the benefit to that for a customer is that it is eligible for Prime shipping, so you can get it in two days or quicker now that there is that Amazon Now service. And that’s what I’m focusing on and within that I’m focusing on Private Label.
So I’ll quickly go over the two other ways you can sell Fulfillment By Amazon and then we’ll talk about what is really the meat of this conversation, What is Private Labeling?
How to Sell on Amazon
People can sell Fulfillment By Amazon in one of three ways.
The first being Retail Arbitrage, the second being Online Arbitrage and the third being private label. So you’ll see those shortened or abbreviated a lot of times as RA, OA and PL.
Remember, I told you we were learning a new language?
Retail and Online Arbitrage
Arbitrage sounds like a really big, fancy name, but all that means is taking advantage of price discrepancies between two different markets. Wait, that could still be a little confusing. So let’s say you want to buy a curling iron. Walmart is selling a curling iron for twenty dollars and Amazon is selling a curling iron for twenty dollars. Right, so in that case there is no discrepancy between prices. Say Walmart buts that on sale for half off, so now you have a Walmart curling iron selling for ten dollars and the exact same thing selling on Amazon for twenty. So someone involved in arbitrage would take advantage of that price discrepancy. They would purchase the ten dollar curling iron at Walmart and then turn around and sell it at Amazon for twenty. That gives a profit of ten dollars. Now you’re probably thinking, “Ok, ten dollars, that’s nice but you can’t make a living off it.” And you’re right. So usually people in the arbitrage space do not purchase a curling iron, they purchase all the curling irons they can get to from all the different Walmarts that they can drive to in a day.
So retail arbitrage is usually referred to that way, its purchasing something at a local brick and mortar store that you could actually go get your hands on the item and then selling them, that could be at Amazon, it could be eBay, I’m sure there’s some other online markets out there, that are similar, you know, Craigslist. But you get the idea.
Online arbitrage is really the same thing, its just that the buy and the sell happens online.
What is Private Label?
Alright, but what is Private Labeling, or you may have heard it called white label before?
And if you never knew what that meant, its really just referring to buying some kind of generic product typically, putting a label on it, attaching it to a brand that you have, and then selling it under that brand name. Many private label sellers, especially on Amazon, are just purchasing purely generic products, putting a label on it, and then turning around and selling it under you know whatever their label or their brand is on Amazon.
Up until recently, people have been very successful at doing that, however the market does appear to be becoming more saturated and with that it means that you’re going to have to put a little more effort into actually improving on products that’s already there. It’s really not suggested to create something new because you actually don’t know it there’s a market for that, but you can generally take something that’s existing, give it a little tweak, a little improvement and then sell it fairly successfully on Amazon.
Ok so that’s it, I hope that explained it for you, if not, if you still have questions, leave them in the comments below I will be happy to answer anything else that you have as far as “What is a Private Label?” Or if you have questions about the arbitrage space, retail versus online and how you get started in that. It’s not my specialty but I have researched a little bit about it so I’ll tell you what I know.
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