4 Amazon Business Models Explained (Private Label, Dropshipping, Online/Retail Arbitrage, Wholesale)

If you’ve been curious about how to start making money on Amazon but feel overwhelmed by all the options, you’re not alone.

In my recent YouTube video, I had an in-depth conversation with Alok Bharti (an internet marketer) where we explored the four main Amazon business models: private label, dropshipping, online and retail arbitrage, plus wholesale.

We broke down how each model works, the benefits and challenges, and shared practical tips for getting started.

Whether you want to create your own branded products, resell discounted items, or buy wholesale in bulk, this discussion covers what you need to know to pick the right path for your Amazon business.

Oh, and it's just a part of my full interview with Alok, which I highly recommend watching for even more insider insights.

-: Watch My Full Interview With Alok :-

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What Are the Main Amazon Business Models

Vova: Let me quickly walk you through the main Amazon business models.

There’s dropshipping on Amazon, wholesale, online arbitrage, retail arbitrage, and sometimes mixes of these.

You really need to choose the right model that fits you.

I can give a quick overview of each if you want.

Sounds good?

Alok: Great!

How Does the Private Label Model Work on Amazon?

Vova: So, first up is a private label.

This is where we create our own products.

For example, take this chair here — the brand is Surya Gold.

That’s probably an Indian brand.

It’s a private label, meaning they make their own chairs and sell them under their own logo and branding.

They might even package it in a unique way to stand out.

Private label sellers often work with factories in different countries to create their products.

You don’t always have to design the chair from scratch — sometimes you find an existing product you like, put your label on it, and then sell it in markets where there’s demand.

The key is presenting the product well, making sure it’s high quality and appealing.

That’s one way to do it.

Alok: It’s pretty similar to white labeling.

You basically get a product, put your own label on it, package it your way, and then sell it on Amazon.

Vova: Yeah, I think that sounds about right.

How Private Label Differs from White Label

Vova: Honestly, I’m not completely sure what the exact difference is between white labeling and private labeling, but from what I understand, white labeling is somewhat similar to private labeling - you put your brand on something that’s already made.

So maybe they’re pretty much the same thing, or very close. You can read more about white labeling in Wikipedia.

What Is Retail Arbitrage and How Do Sellers Make Money With It

Vova: But then there’s retail arbitrage, which is a different Amazon business model altogether.

Basically, you still use Amazon as your selling platform, but the way you source products is different.

And I should mention, in all these models, we use Amazon’s platform not just to sell, but often to handle the shipping through their FBA program — that stands for Fulfilled by Amazon.

You can sell on Amazon and choose to ship products yourself, which is one option.

But if you want a more hands-off approach, you can use Amazon’s FBA service.

What that means is you send your products to Amazon’s warehouses, and when someone orders from you, Amazon takes care of packing and shipping the product for you.

That’s a huge convenience.

So, whether it’s private label or retail arbitrage, many sellers use FBA.

Now, specifically for retail arbitrage, you physically go to retail stores — say you live in the United States, so you shop in US stores because you have to be in the country where the Amazon marketplace you’re selling on is located.

For example, if you’re selling on amazon.com, you need to be in the United States.

You go to stores looking for items on sale, clearance, or with coupon codes that reduce the price.

Then, you scan the products using different apps that show you the current prices on Amazon, helping you figure out if you can make a profit.

Let’s say you find a Nike shoe marked down to $10.

You scan it, and the same exact shoe in new condition might be selling for much more on Amazon.

If the numbers work out, you buy the shoe from the store and then resell it on Amazon for a profit.

It’s a smart way to capitalize on price differences between retail stores and Amazon’s online marketplace.

For example, if a product sells for $100 on Amazon but you find it on clearance at a store for just $10, that’s a big opportunity.

What you can do is take that product, put the proper Amazon labels on it, and then offer it for sale on Amazon.

Shipping Options: Do It Yourself vs. Amazon FBA

Vova: You have two options when it comes to shipping.

One, you can handle the shipping yourself after the sale happens on Amazon — that means you physically pack and send the product to the customer.

Or two, you can send your products to Amazon’s warehouses, and through their FBA program, they will handle shipping the product directly to the customer for you.

Of course, you need to carefully calculate your costs and profits with either method to make sure it’s worth it.

With retail arbitrage, you go to a physical store, scan a lot of products, and check their prices on Amazon.

It takes time because you need to scan many items to find profitable ones.

I haven’t done retail arbitrage myself since I’m not physically in the United States, but I know friends who have.

If you live in Italy and want to sell on Amazon Italy, you’d do the same thing there — visit local stores, scan products, and send profitable items to Amazon for sale.

Read Here If You Want To Know More About Retail Arbitrage: How to Make Profit on Amazon with Retail Arbitrage

How Is Online Arbitrage Different From Retail Arbitrage?

Vova: There’s a similar model called online arbitrage, where instead of going to physical stores, you find deals on websites having clearance sales.

You buy the product online, ship it to your place, label it for Amazon, and then send it to Amazon’s warehouse.

From there, Amazon ships it to customers.

So if you find a Nike shoe for $10 on Walmart’s website and it sells for $100 on Amazon — which isn’t always common but sometimes happens — that’s a great deal.

Alok: If you’re lucky, you might find something like that.

Vova: Yeah, exactly. That really does happen.

You might buy those shoes on Walmart’s website, ship them to your house first, and then definitely put Amazon labels on them if you plan to send them to Amazon’s warehouse.

If you’re shipping directly to a customer yourself, there are other labels involved, but honestly, I’m not exactly sure how all of that works because we’ve always used Amazon’s services.

We just ship the products to Amazon, and then Amazon handles shipping to the customer.

That’s basically what online arbitrage is all about.

Alok: So, when you say you ship it to Amazon, the product stays in Amazon’s warehouse, right?

Then, once someone places an order, it’s sent directly from Amazon’s warehouse — not from your own warehouse?

Vova: Let’s say you find a potentially profitable product using software designed for scanning and analyzing products.

Most people rely on software for this because you have to carefully crunch the numbers to see if it’s worth it.

So, before you buy a product and send it to Amazon, you want to make sure it fits your specific business model and that you’ll make a profit.

For example, in online arbitrage, you might find a pair of shoes for $10 on Walmart’s website, while the same shoes are selling for $100 on Amazon.

You then calculate how much it will cost to ship those shoes from Walmart to your house or to a prep center.

What Is a Prep Center and How Does It Help?

Vova: A prep center is a service that receives your products, prepares them by labeling or packaging if needed, and sends them to Amazon on your behalf.

You pay for those services, of course.

Once your product arrives at Amazon’s warehouse, it shows up on the product listing page — for example, a Nike shoe listing.

You will see your offer alongside other sellers’ offers on that page.

If customers decide to buy your product, you make a sale.

But you’re not the only seller in this case.

That’s one big difference between private label and arbitrage.

With a private label, you create your own unique product, so you don’t have competitors selling the exact same item on your listing.

In arbitrage, though, when you look at a product page for something like Nike shoes, there might be 50 different sellers offering the same shoes at different prices.

Some sellers might have scored their shoes at a $50 discount, others maybe got them for $70 off.

Thanks to these price differences, sellers often lower their prices to stay competitive.

Amazon uses a system called the Buy Box, which usually awards the sale to the seller with the lowest price combined with the fastest delivery option.

So, most of the time, the Buy Box goes to whoever offers the best deal.

This kind of competition happens with retail arbitrage and online arbitrage.

What Is Wholesale on Amazon and When Does It Make Sense to Use It

Vova: With private label or wholesale, the approach is a bit different.

For wholesale, you might buy large quantities of Nike shoes at a really low price directly from a wholesaler.

Then you sell them on the same Nike product page on Amazon.

So wholesale is somewhat similar to online arbitrage, but wholesale usually involves buying in bigger amounts and requires more upfront investment to get cheaper prices and shipping.

This model works for branded items like Nike shoes.

Retail arbitrage and wholesale both involve buying products in bulk or in smaller quantities at low prices and reselling them, but wholesale is about larger orders and better prices.

Learn More Here: Which Amazon FBA Selling Model Gives You the Biggest Profit?

How Does Dropshipping Work on Amazon and What Are the Rules

Vova: Next up is dropshipping, which is one of the other business models.

For all these Amazon business models, you first need to find the right products that fit each approach.

Let’s talk about dropshipping now.

I’ll keep using Nike shoes as an example since I’m wearing them, but keep in mind it’s not always that simple.

Sometimes, you actually need permission from Amazon or even from Nike itself to sell branded products like Nike shoes.

But for this example, let’s just say there are no restrictions and you can sell Nike shoes freely.

With dropshipping, here’s how it works: you list a product on Amazon, say Nike shoes priced at $100.

But instead of having the shoes in your inventory or warehouse, you find the same product on Walmart’s website for $10.

When someone buys those shoes from your Amazon listing for $100, you then buy the shoes from Walmart for $10 and have Walmart ship them directly to the customer.

So you never handle the product physically; it goes straight from Walmart to the customer.

Really cool, no?

But remember, Amazon has specific dropshipping policies that sellers must follow.

Read Here: Amazon Dropshipping Policies

For instance, you can’t just ship products with Walmart’s stickers or packing slips directly to Amazon customers — that’s against their rules.

You need to make sure the packaging and shipping meet Amazon’s standards, which might mean working with a third party or using special services.

Honestly, I’ve mainly worked with the private label, so my dropshipping experience is more from what I know about the rules and how the model works generally.

The key point with dropshipping is that you don’t keep inventory or ship items yourself.

You rely on another retailer or supplier to fulfill orders directly to your customers.

It’s a low-investment model since you don’t buy products upfront, but you have to be very careful about Amazon’s policies and customer service to avoid issues.

Don’t Miss This Out: How To Start Selling On Amazon On Budget And Make Money Fast

Why Do Sellers Choose Different Amazon Business Models

Vova: So to recap, the main Amazon business models are dropshipping, online arbitrage, retail arbitrage, wholesale, and private label.

Dropshipping means you sell products you don’t physically have — you source them from somewhere else and have them shipped directly to customers.

Online arbitrage involves buying discounted products online and reselling them on Amazon.

Retail arbitrage is similar but done in physical stores.

Wholesale means buying large quantities directly from suppliers or manufacturers to sell on Amazon.

Private label means you create your own unique product, brand it, and sell it exclusively.

Each model has its own pros and cons, and you have to find the one that fits your skills, budget, and goals.

But these four cover the main ways people make money selling on Amazon.

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Conclusion

In this conversation, we covered the key Amazon business models — private label, dropshipping, retail and online arbitrage, and wholesale — and highlighted the important differences among them.

Each model offers unique opportunities and requires different levels of investment, effort, and risk.

Whether you want full control by creating your own branded product or prefer sourcing existing items to resell, the choice depends on your goals, resources, and market.

Remember, success on Amazon starts with selecting the right approach and understanding the logistics behind it, like how Fulfilled by Amazon (FBA) can ease shipping.

I encourage you to reflect on which model fits your skills and budget best, and to dive deeper into the full interview with Alok for more practical advice.

Your journey to building a profitable Amazon business begins with informed decisions.

I also highly recommend you visit the Amazon seller software section on our website, there you'll find the best tools for the different business models, with the best deals for them as well!