Private-label vs. Wholesale vs. Arbitrage

• Private-label involves purchasing goods manufactured by one company, to be branded and sold by another.
• Wholesale involves purchasing products in bulk from manufacturers at wholesale price and selling them on Amazon.
• Arbitrage involves purchasing products from brick-and-mortar stores or other online marketplaces at a discount and reselling them on Amazon for a profit.

Personally speaking, I have only managed brands, including my own, that sell private-label products. These brands have been around for more than 5 years and generating 7 figures annually.

With private-label, you don’t have to reinvent the wheel and start a new product, which means no proof of demand yet and you will have to spend a lot of time testing the design. Simply take an existing product, make improvements to differentiate from the competition and brand it as your own.

With the first product I launched on Amazon, I combined 2 different products from 2 suppliers and sold it as one. There is already demand for both products when sold separately so when I combined both, I get to target customers of both products. Did it work? I’d say yes but the results are not conclusive yet. Stick around to get updates.

Private-label is also more of a long-term game because of the brand building and product portfolio expansion that you will have to do. If you are serious about selling on Amazon, I would highly recommend private-label mainly because you have more control in terms of margins, product customizations, and scaling the business.

With retail or online arbitrage and wholesale, winning the buy box is not always guaranteed because there could be other sellers selling the same product. And to win the buy box, there is often a price war and the lowest price always wins which means profitability is also not guaranteed.

Wholesale is a good option if you are able to get exclusivity from the supplier to minimize competition. However, with exclusivity comes minimum order amount which can be risky and costly if the product doesn’t sell well. Also, managing wholesale prices is another story because suppliers can increase prices on short notice.

If you are not sure yet if selling on Amazon is for you and you want to test the waters, arbitrage or wholesale would be best because it doesn’t require as much capital and time investment as private-label. Once you’re comfortable navigating the ins and outs of Amazon, then you can start with private-label and build your own brand.

I didn’t go into detail about these Amazon business models because there are already tons of information available online. Do your research and do it well.