There are many ways to sell on Amazon: dropshipping, reselling, and Private Label – to name a few, but which one should you choose? Well, it turns out the best way to grow a long term and consistent business on Amazon is to build one as a private label brand (emphasis on the brand). Let’s find out why!
New research from Marketplace Pulse shows that building long-term sustainable brands – and building businesses around those brands – is a safer long term business model than other short-term alternatives like drop-shipping and reselling.
Simply put, reselling on Amazon is dying. But before we dive into why you should care – let’s make sure we know what it means exactly to be a reseller on Amazon:
- Resellers are large entities representing hundreds of pre-existing brands.
- Resellers typically have access to hundreds or thousands of different brands thanks to relationships with distributors and manufacturers they have built over the years.
- Some resellers rely exclusively on dropshipping too, a practice which allows a retailer to fulfill customer orders from the distributor warehouse instead of their own.
- Resellers share of the top sellers has been decreasing by two percentage points a year – down from 26% in 2018, 29% in 2017, and 31% in 2016 (show graph from the article as overlay).
- As the Amazon marketplace has developed – and Amazon’s customer needs have changed – many of the reseller businesses have faced the same challenges: low margins, ever-increasing competition, brands selling directly to Amazon, changing and increasing fees, and others.
- You may recall another contributing factor is something we reported on last week (that customers on Amazon are less brand focused, and more needs focused).
- To compound this, resellers have little to differentiate with; outside of building deep relationships with vendors, allowing for lower product costs (enabling prices other resellers couldn’t match), and exclusive deals, which would limit competition on Amazon.
Okay, so why should you care that reseller businesses are steadily declining 2 points per year? The best place to start is to always ask yourself: “what does Amazon want?” Amazon is customer-needs focused to their very core – so they are going to reward/punish whatever sellers are doing that directly benefit their customers. Resellers typically do not benefit Amazon’s customer needs. PL sellers on the other hand offer: a more boutique shopping experience, more personal customer service, an enhanced shopping experience, reliable logistics, etc.
Be sure to comment below with your thoughts Private Labels vs. Reselling on Amazon. Thanks for joining us for this week’s #ZonTRENDS!