Starting Your Own Amazon FBA or Shopify Private Label Business – U.S. Guide

📄 About the Writer

Dickson Wasake has more than 20 years of experience, including with global accounting firms PwC, Baker Tilly, and Deloitte, and various roles such as a fractional CFO and advisor for clients. He is an ex-audit partner (Baker Tilly CI). Dickson is a UK CPA (FCCA)and a US CPA (IL), with experience working with clients of various sizes, ranging from start-ups to a $1.3 trillion listed company. He has travelled to 30+ countries, including Sub-Saharan Africa, the Bahamas, the UK, and Canada. He lives in IL, USA. Connect with him on LinkedIn or view his detailed resume/CV.

🔍 Introduction: Own the Brand, Not the Factory

I have had detailed insight into this sector through my experience with a client who brought me on as a CFO for her e- commerce brand for women’s fashion.  The idea was brilliant and her Shopify store was doing c. $500k in sales per month!

There was just one problem, the business while high volume, had a high advertising spend (Meta, TikTok, Insta, Klaviyo etc) and she needed working capital for her inventory and so she ended up being heavily indebted, due to taking on high interest MCA loans. Because she wasn’t watching her margins, she was losing virtually all her profit to these costs and by the time I came on board, she was in a death spiral.

This business is therefore one to watch the numbers very closely and you likely want to bring a CPA on early. But what the business itself, how does it work?

Let's assume that you've designed your own label for a set of reusable glass water bottles. A manufacturer abroad handles production (with any import duties or tariffs factored into your pricing). You focus on marketing, customer service, and branding. Each week, your Shopify dashboard shows steady sales—and margin.

This is private labeling: selling under your brand while outsourcing manufacturing.

●       Over 60% of Amazon’s top sellers use private label models (Marketplace Pulse)

●       Popular in niches like health, home goods, personal care, kitchen, and pets

●       Private labelers can earn 20–35% net profit margins depending on pricing and operations. Wholesale has lower margins, usually 10%-20%, but provides faster entry and lower risk.(Dollanprepcentre)

💡 What We Think About This Business

Ideal for detail-oriented marketers, product designers, or e-commerce operators who want brand control without manufacturing headaches.

“In e-commerce, true power lies in brand ownership—not just selling a product.”

⚖ SWOT Analysis (Critical matters in the E-Commerce sector)

Category	What It Means	Examples
Strengths	Brand ownership, scalable sales	Higher margins vs. drop shipping
Weaknesses	Supply chain vulnerability	Delays, quality issues, or geopolitical factors.
Opportunities	Niche product gaps, Amazon SEO	Branded packaging, bundling
Threats	Supplier issues, Amazon bans	Copycats, high return rates

🧠 Key Things to Know Before You Start

✅ Requirements:

●       Product research (Tools like Helium10, Jungle Scout)

●       Verified manufacturer (via Alibaba, IndiaMart, Thomasnet)

●       E-commerce platform (Amazon FBA, Shopify, Walmart)

●       Logistics partner (3PL, freight forwarder, customs)

📜 Compliance & Legal Requirements in the U.S. Private Label Sector

Before launching, ensure your product and operations meet relevant federal, state, and platform regulations. Missing these can lead to fines, product removals, or account suspensions.

• Product Safety:

  • CPSC standards for toys, electronics, and household goods.

  • FDA rules for food, supplements, and cosmetics.

  • FCC compliance for electronics with wireless components.

• Import Compliance:

  • Correct HS codes for customs classification.

  • Applicable CBP duties and tariffs (including Section 301 tariffs on certain Chinese goods).

  • Proper country-of-origin labelling.

• Sales Tax Nexus:

  • Register in states where you meet economic nexus thresholds (Wayfair decision).

  • Use tools like TaxJar or Avalara for automation.

• Environmental & Packaging Rules:

  • Extended Producer Responsibility (EPR) in California, Oregon, and Washington.

  • Compostable/biodegradable packaging claims must meet FTC Green Guides.

Funding options.

I mentioned to you the cautionary tale of my client using MCA funding. High-interest Merchant Cash Advances (MCAs) can quickly kill profitability so when starting funding is a key consideration. Consider these alternatives:

·        E-commerce Platform Loans:

o   Shopify Capital or Amazon Lending offer quick approvals tied to sales history.

·        Inventory Financing:

o   Kickfurther or Payability help fund large purchase orders without giving up equity.

·        SBA Microloans:

o   For U.S. founders, the Small Business Administration offers loans up to $50,000 at competitive rates.

These options preserve your working capital and keep growth sustainable.

 

⚠ Risks to Manage (Risk Management in the E- Commerce Private Labelling Business):

Risk	Control
Inventory delays	Order buffer + air shipping option
Supplier dispute	Use trade assurance or contracts
Product liability	Proper labelling
Account shutdown or Platform dependency risk	Diversify platforms (Amazon + Shopify or have your own site if necessary)

🔐 Internal Controls (Systems to Put in Place in the E-Commerce Private Labelling Business)

Risk	Control
Product defects	Quality Control (QC) inspection before shipping
Missed returns or complaints	CRM tool + Amazon feedback manager
Inaccurate Cost of Goods Sold (COGS)	Maintain inventory and landed cost tracking sheet
Overspend on ads	Set max daily budget and monitor Return on Ad Spend (ROAS)

💡 Typical Investor Concern: Margin Focus

Qn: “Am I making money or just moving inventory?”

Revenue means nothing if you lose money every order. E-commerce gets dangerous when returns rise or ad costs spike. Track unit-level profit (per SKU), your Client Acquisition Cost (CAC), and Long Term Value ( LTV). A product that’s popular but unprofitable is a liability. Smart founders build dashboards, test price points, and understand margins deeply. It’s not the most fun thing to do — but it’s survival.

🛠 What the First Few Months Look Like

Month 1–3:

●       Research product opportunities with high demand and low competition

●       Vet 3–5 manufacturers and request samples

●       Build branding, packaging, and Amazon or Shopify store

●       Order minimum inventory and launch with ads + influencer seeding

Typical Week:

●       Monitor pay-per-click (PPC) campaigns and adjust bids

●       Handle customer reviews and support

●       Check inventory levels and restock timelines

●       Test pricing, bundling, or cross-selling offers

📈  Future Outlook (What’s ahead in the E-Commerce Private Labelling Sector)

●       Demand for eco-friendly, wellness, and niche products keeps growing

●       DTC (direct to consumer) brands are being acquired for millions (Thrasio model)

●       Customers now expect fast shipping + strong brand storytelling

🧠 Advanced Thinking Tips

Insights:

●       Harvard Business Review: Brands with consistent product + packaging experience enjoy higher customer retention

●       McKinsey: Supply chain resilience is the top challenge for small private labelers

●       Forbes: Niche positioning + storytelling drive most new private label growth

Strategic Moves:

●       Launch 1 hero product first, then expand into bundles or accessories

●       License IP (patterns, art) for product differentiation

●       Build an email list for off-Amazon/Shopify control

Exit strategy:

Thinking About the End Game, that is selling your brand right at the start is a smart move. Private label brands can be attractive acquisition targets for aggregators, strategic buyers, and even competitors. Consider the following:

• Typical Valuation: 2.5×–4× Seller’s Discretionary Earnings (SDE), depending on brand strength.

• Value Boosters:

  • Strong review profile and low return rates.

  • SKU diversity with no single product making up over 60% of revenue.

  • Email list and repeat purchase rate.

  • Clear supply chain documentation and SOPs.

• Exit Preparation Tips:

  • Maintain clean financials from day one.

  • Keep detailed supplier agreements.

  • Reduce owner dependence by systemizing operations.

Managing Platform Dependency Risk:

Relying heavily on a single platform like Amazon FBA or Shopify Ads can be dangerous:

• Amazon Algorithm Changes: Search rank shifts can tank visibility overnight.

• Ad Cost Inflation: Rising CPC on Meta, TikTok, and Amazon Ads can crush margins.

• Fad Risk: Trend-based products can die before inventory sells out.

• Direct-from-Manufacturer Competition: Overseas sellers can undercut prices while matching your product quality.

Mitigation: Build multi-channel sales (Amazon + Shopify + Walmart), develop an owned audience via email/SMS, and avoid single-product dependency. My client had managed this well in her e- commerce brand.

Bonus Insight: Buying Instead of Building

Good brands are sold with product rankings, reviews, and supplier relationships. Look at SKU-level profitability, return rates, and ad performance. Flippa or Empire Flippers are best.Inachee Can Help: We can analyze SKU margins, refund risk, and working capital cycles.

Business Model, ROI and Profitability for the E- Commerce Private Labelling Business

💰 Start-Up Cost Breakdown (Detailed)

Item	Est. Cost	Notes	Source
Inventory (MOQ)	$2,500	300–500 units (includes estimated import duties/tariffs)	Alibaba, suppliers
Branding + packaging	$800	Logo, labels, inserts	Canva, 99designs
Amazon/Shopify setup	$500	Store, domain, tools	Shopify, Amazon Seller
Ads + launch campaigns	$1,500	PPC, influencer micro-deals	Amazon Ads, Meta
Legal Set up	$450	Legal Zoom
Miscellaneous	575	10% estimate

Startup Estimate: ~$6,325

💸 Operating Costs & ROI (Annual Estimate)

Assumptions:

●       Monthly revenue = $8,000 × 12 = $97,000. Based on 1 core product each on Amazon and Shopify and selling 300-350 units per month at a unit price of $25-30. Higher sales on Amazon but lower cost per unit, compared to Shopify.

●       Cost of Goods Sold (COGS) = ~$35,280 (35% - 40% of revenue and also spoilage).

Expense Breakdown (Annual):

Item	Cost	Notes
Ads + promos	$9,600	Ongoing growth
3PL + shipping	$28,800	3rd Party Logistics (3PL), Warehousing, last-mile
Admin + tools	$3,588	Shopify, email, tracking
Bookkeeping	$9,600	Bookkeeping services. Critical owing to State Sales Taxes (Nexus)
Miscellaneous	$2,579	5%

Net Profit = ~6,553/year

Return On Investment (ROI) = $6,553 ÷ $5,830 = ~104% ROI

📊 3-Year View (High Level)

●       Year 1: Launch 1 core product, establish Amazon FBA presence, and refine PPC (Pay-Per-Click) campaigns for consistent sales. Track weekly sales and ad performance closely as rapid scaling without proof of profitability can lead to costly overstocking or cash flow crunches.

●       Year 2: Expand to 2–3 SKUs, optimize listings, and build brand recognition through email marketing and social proof + setting up your own website.

●       Year 3: Scale to 4–5 SKUs, introduce premium variations or bundles, and explore direct-to-consumer sales via your own website.

Future Revenue Expansion:

●       Wholesale or B2B supply deals

●       Licensing your brand or designs

●       Subscription boxes or product-of-the-month clubs

●       Influencer collaborations and co-branded products

●       Value-add services (e.g., care kits, product personalization)

🧰 Recommended Software Stack

●       Helium10, Jungle Scout (product research)

●       Shopify or Amazon Seller Central (platforms)

●       Canva, Klaviyo (branding + email)

●       QuickBooks, Airtable (accounting + inventory)

🌍 Global Outlook: Private Labeling Beyond the U.S.

Private labeling isn’t just booming in the U.S.—it’s part of a larger global shift toward brand ownership without manufacturing burdens.

In China and Southeast Asia, platforms like Alibaba and Shopee are fueling an explosion of micro-entrepreneurs who launch private label brands directly from factories to smartphones (McKinsey). What used to require storefronts and warehouses now takes just a supplier, a product idea, and digital marketing savvy.

In Europe, brand-conscious consumers in countries like Germany, France, and the UK are increasingly turning to niche DTC (direct-to-consumer) products. Think cruelty-free skincare, eco-packaging, and functional foods. Local sellers often start on Amazon EU or Etsy before building standalone websites (TT Consultants).

In Africa, while manufacturing is less mature, local entrepreneurs are sourcing from Asia and selling under their own labels via platforms like Jumia, Instagram, and WhatsApp (Cariboudigital). Private labeling here often starts lean—with strong personal branding and hyper-local trust.

In Latin America, sellers are creatively navigating import costs and supply chain hiccups. Brazilian and Mexican entrepreneurs are forming co-ops to bulk order products and resell under shared private label brands (NIQ). The common thread? Community-led logistics and a hunger for quality alternatives to legacy brands.

Global Lessons:

●       🌐 Cross-border sourcing is easier than ever – Platforms like Alibaba and IndiaMart are leveling the playing field for global founders.

●       📦 Brand > Product – Customers care more about experience, packaging, and story than who made the item.

●       📲 Digital fluency wins – Founders who can leverage ads, SEO, and CRM tools scale faster—regardless of location.

🧾 Conclusion: Is the Private Label Sector Worth It?

Private labeling isn’t a passive business. You’re not just putting a logo on a box—you’re managing supply chains, customer expectations, and competitive pricing. You’ll need to invest in product research, learn ad platforms, and think like a brand strategist.

But for those who can execute, the reward-to-risk ratio is attractive. The margins are higher than dropshipping. The control is greater than reselling. And the potential for scale—by expanding SKUs or channels—is very real.

I mentioned to you the customer who I took on as CFO. I worked hard with her to identify a potential buyer for her brand, because she did have the subscribers (she was wise enough to own her own email list of thousands of subscribers), but in her case, her financial numbers were not attractive enough as she was heavily leveraged (a lot of MCA debt).

I would therefore recommend you work with your CPA/CFO early on to ensure you are doing cash flow forecasting as this is extremely critical in this sector.

🔚 Inachee Index Score: 77/100 – Tier B (Strong)

Strong for product-led founders who can manage branding, supply chain, understand numbers or care enough about them and are great at marketing.

What Is the Inachee Index?

The Inachee Index scores sectors using 8 weighted dimensions: ROI potential, startup accessibility, ease of entry, scalability, compliance, market resilience, future relevance, and execution simplicity. Each sector receives a score out of 100 and is assigned a tier (A–D).

How does this sector rank against all others in the US? Check out the US ranking list. 

Want a more detailed financial model or forecast for this sector? Ask us about financial modelling.

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Disclaimer: While we have taken steps to research this information as well as based on our experience, you should not solely rely on the information given here to base your investment decisions. You should seek business advice from a professional knowledgeable of your specific circumstances. (e.g of your specific location and capital structure). The author (or Inachee) shall therefore not be held responsible for any loss you may incur when acting on this information.