Do you have a business on Amazon? Maybe you’ve been pretty successful, bringing in six figures of profit for the last five years. It turns out that there is an entire market geared towards Amazon businesses of this size, because in the right hands, these businesses can generate lucrative returns.
Fulfilled by Amazon
Fulfilled by Amazon, or FBA businesses, are businesses that store their product at Amazon warehouses and use the Amazon infrastructure to sell, distribute and ship the goods to consumers. Many of the FBA success stories happen as a result of an innovative product idea and a broad market trend that shifts things in a new direction. One example of this is the rise of private label brands and what can happen when they are done right.
Private label brands, or private labeling, is a business model that is centered around building a brand on Amazon. After a great deal of market research, they contact manufacturers to supply their products, which they then sell under their “private label.” There are infinitely many possibilities for goods that can be private labeled. Anything from shoelaces, laundry drying racks, to medical grade cannabis can be produced and sold in this way. Suppose you are a manufacturer of high grade cannabis products. Maybe you are very good at making THC and CBD oils in large quantities, but are not interested in the branding side of the business. One way around this would be to offer your products to private labelers. The idea is that many different purchasers would buy your product and sell it under their own unique brand name. Over time, the unsuccessful brands will fail, while the successful ones will keep coming back for more.
The thirst for returns
Generally speaking, investors want consistent returns on their dollar. They look for ways of collecting a consistent income stream that will be predictable and robust in the long run. Private label brands provide an excellent opportunity for this. If you have created a brand that is fulfilled by Amazon, and you have a relationship with a bulk manufacturer that is going well, you may have an opportunity to sell your business. These kind of acquisitions happen for two reasons; either the buyer believes that your product will remain in demand for a long time and wants the cashflow it generates, or they believe that they can use certain aspects of the business in some kind of new enterprise.
Regardless of which category your business may belong to, sellers love the financial and personal freedom that these deals bring them. Once they sell their business, they are left with a large chunk of money, and an even larger canvas of free time, to peruse other things. Maybe you’ve always wanted to go into microbrewing, but have never had the capital to do so. One way to get there would be to dream up a private label brand that works. Even the tallest tree in the forest began with just one seed. If you want to know more about selling your Amazon business, read Smoothly Sell Your Amazon Business with These Exit Strategies written by Sourcing Monster founder, Tomer David.