Some Tips for Private Label Sellers on Amazon

By Cliff Ennico

October 6, 2015 7 min read

If you were selling new merchandise on eBay 5 or 10 years ago (as opposed to antiques and collectibles), chances are you are now selling that merchandise on Amazon.com.

Amazon has two programs targeting independent online retailers — Fulfillment by Amazon and Fulfillment by Merchant. An FBA seller ships merchandise to Amazon, which warehouses the merchandise, processes customer orders, charges a fee and remits the balance to the seller. An FBM merchant offers merchandise for sale on Amazon, but handles all inventory, warehousing and fulfillment itself.

The programs have proven immensely popular, especially with former eBay sellers who have rebelled en masse against changes to eBay's business model that have been perceived as anti-seller. Approximately 2 million people and small businesses sell merchandise on Amazon, accounting for roughly 50 percent of Amazon's total worldwide sales yearly. Roughly 300 of those sellers, and 20 companies providing products and services to help these sellers build their businesses, came to Seattle, Washington, last weekend to participate in the annual Sellers' Conference for Online Entrepreneurs, the country's oldest event for independent retailers selling on Amazon.com (www.scoe.biz).

I was privileged not only to attend this two-day event, but also to give three presentations on legal and tax issues affecting Amazon FBA and FBM sellers. Here are some of the new things I learned during the conference:

—When setting up your Amazon product page, make sure you spend time optimizing it for search engines because Amazon will not do that for you — there's only a 20 percent chance that Amazon buyers will look at the second page of search results, and a good product image can increase sales by 250 percent, according to online retail expert Lisa Suttora (www.lisasuttora.com), who added that you can "buy your way to page one" by participating in Amazon's Sponsored Products program.

—Are you looking for source inventory in China but are afraid you will end up doing business with a less-than-competent manufacturer or supplier? Shenzhen WinWin Technology Co., Ltd. (www.winwin-tech.com) not only speaks the language but also understands the landscape, working with clients to develop and design new products, source new products, create and produce new packaging and graphics, and ship directly to Amazon by air or water.

—As an importer of record from China or any other country, your business is responsible for complying with all U.S. laws relating to your products, and foreign laws also if you re-export there, according to former Amazon compliance executive Rachel Greer (www.cascadiapts.com), whose new firm offers product testing and inspection services required by the Food and Drug Administration and other federal government agencies in the U.S.

—Zoobilee.com, a leading account management service used by Amazon sellers who sell across multiple channels, announced during the show that users of its flagship product, TheArtofBooks (www.theartofbooks.com), can now automate multi-channel fulfillment services to keep track of their inventory and orders on Amazon, eBay, Etsy and other online platforms.

—Keep close track of product expiration dates to avoid being suspended by Amazon, according to Peter Kearns of FeedVisor (www.feedvisor.com) — for example, a bottle of vitamin supplements with a 300 count and recommended dosage of one tablet per day has technically expired if the expiration date is only 90 days in the future.

—To avoid having Amazon pulling your product pages or suspending your account, keep track of your customer feedback at least daily and address any issues promptly before Amazon does, according to Cynthia Stine, author of the book "Make Thousands on Amazon in 10 Hours a Week!" (www.onlinesalesstepbystep.com).

A growing number of Amazon sellers are offering private label merchandise on the site. In a private-label transaction, a reseller orders generic nonbranded product from a vendor (usually in China or overseas), and resells the product using the reseller's own trademarks, logo, packaging and other identifying features (if you have ever bought the CVS or Walgreen's version of an over-the-counter medication or vitamin product you have purchased a private-label product). While there is nothing illegal about private labeling as such, you now have all of the legal responsibilities and liabilities of a product manufacturer. Specifically, among other things, you must now:

—Make sure your product doesn't infringe anybody else's U.S. patent.

—Defend your trademark against copycats and knockoff merchandise.

—Make sure your product packaging, labeling and disclaimers all comply with U.S. government regulations (for example, must you have French and Spanish translations of any health warnings?).

—Test and inspect your product as the government requires.

—Provide and honor your own product warranties.

If you are private labeling merchandise you must — must — get products liability insurance in case your product injures someone, or worse. You can't rely on your manufacturer's insurance policy, because they probably don't carry this very expensive coverage.

If you are sticking your private label on trademarked products without the manufacturer's consent, that's not private labeling, that's trademark infringement, misuse of trade dress and possibly even theft. You will get sued. Don't do it.

Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com.

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