Private Label vs Arbitrage, Ford vs Chevy, Mac vs PC, Democrats vs Republicans, cats vs dogs.
There are lots of either ors that can be polarizing. The fun part of any debate is that usually both sides have some advantages and merit.
In the world of Amazon selling, two camps exist. One is private label selling the other is called arbitrage.
I’m not sure why they can’t coexist, but it seems that people have strong preferences to one or the other.
Which one is the best? Let’s look into each and see.
Private label selling is where you find a manufacturer of a product and have the product branded with your logo and packaging, in essence creating your own product and brand to sell on Amazon under your company name and your own listing.
Arbitrage is buying a product in one market and reselling it in another market for a higher price. In Amazon Arbitrage, you would locally buy closeout items (usually national brands) at various places like Walmart or target or yard sales, etc and then send them to Amazon to resell under an existing listing.
Let’s go back to high school English class and compare and contrast…I remember saying to my English teacher. I’ll never use this. Guess she’s getting the last laugh.
BTW, don’t worry we’re not going to diagram sentences….
Lets dig a little deeper into each model.
The Arbitrage Model
The arbitrage model is actually pretty easy to start. All you really need is an Amazon account and an app for your phone that scans the UPC code of an item at the store to tell you what the item is selling for on Amazon.
A couple of hundred dollars to buy inventory and a way to ship the items to amazon. A UPS store, Fedex, etc.
The trick is to be able to find enough items that can be resold at a high enough margin on Amazon. Once you do find items, it’s off to the next walmart or other store to see if you can find more.
You repeat the process each day at different stores or events.
You then ship the items to amazon and share a listing with other similar items. When someone chooses your item to buy over the other sellers, Amazon will ship that item to your customer for you.
To be successful here, you will need to spend a lot of time searching for items. This is first and foremost a commitment of consistent time and effort.
When you find closeouts and buy them and want more, the item is probably not still available at the store where you purchased. Remember this is a one shot deal on most items.
You will need to constantly look for new products.
There are certainly people who are disciplined enough to do this and some do quite well.
You can certainly do this part time. However, if you’re working, I imagine the physical demands of working every evening after a day job would be difficult.
But if you’re parent of a small child or stay at home mom, you can certainly work around your schedule.
The arbitrage model is certainly understandable and relatable to most people.
Private Label Model
Most companies today don’t do their own manufacturing. As we have seen factory after factory move to China, we have seen more and more companies private label their own products.
I saw a statistic recently that said that over 80% of US companies now private label their products.
Private labeling has been around for thousands of years.
Private Labeling is simply having someone else who can be more efficient at manufacturing make your product and put your logo on the packaging and item. You then handle the sales.
In Amazon private label sales you identify a market on Amazon and then decide on a product to sell in that market.
You then go to a manufacturer who can be located anywhere but is usually in China. You take an item that they already make and have them put your logo on the item and packaging.
You buy your item in quantities of anywhere from a few pieces to the quantity you want and then have the item shipped to Amazon.
Initial inventory can be from a few hundred dollars and up.
Finding a product to having it listed in Amazon should take no longer than a month, although 2-3 weeks is possible.
You create your own Amazon listing and pricing. You sell the item under your own brand on that listing
All of the work here is virtual and you can do it from anywhere in the world.
If you have the ambition you can also sell your items through your own website or even to retail stores.
The beauty here is that you do work once to create and list your product and then when you make sales, you simply send an email to your manufacturer to reorder.
This model is passive short of the initial work and whatever marketing you choose to do.
Your upside is significant. Once you learn how to set up your first product you can scale up to as many items as you are willing to do, to the amount of income you would like make.
So which is better for you Private Label or Arbitrage?
Like all answers it depends on what you want and what best suits you.
If you want to get started quickly with quicker returns, don’t mind trading time for money and understand that scaling the business is really hard, then arbitrage is a fine choice.
This is like farming. You plant, harvest and continue to repeat, season after season.
If you want to build a business that may take a little longer to be profitable, maybe costs a touch more to get started, but is passive and has the ability to scale, then Private Labeling is for you.
This is like planting an orchard. You plant once and bear fruit over and over.
Regardless of your preference, I have tried to lay these out so you will have a better understanding and be able to intelligently compare and contrast both models.
What are your preferences and why? Post in the comments section below.
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Mark Scott Adams is a serial entrepreneur who has started, built and sold six businesses. He has sold millions of dollars of physical products on and offline over the last two decades. He is currently a speaker, author and successful Amazon Seller. To take his free amazon sellers training click here. To Get his free product checklist list click here