Although there is a growing competition to sell on Amazon, many businessmen still regard it as a place very easy to make great money. Trust me, there is not such an easy opportunity to make great money anymore on Amazon.
It is commonly known that creating private labeling products is an effective strategy to avoid competition. Indeed, it is the most important segment. But I bet 90% of startups and small businessmen don’t have a clear understanding of it and even ignore it.
Today, I’ll tell you lots of factors you must not ignore before selecting private label products. Don’t miss it. (just 15 mins read)
1. What kind of products are suitable for private labeling？
So, what is the Amazon private label product? For big sellers like Anker, their private label products focus on disruptive innovation.
Take the iPhone charger in the following picture for an example, they make a complete improvement and great change based on its original appearance and performance.
For small-medium sellers, their private label products focus on small innovations. We can also call it Differentiated Product Selection. Unlike the iPhone charger’s upgrading way, the differentiated product is just to make some small adjustments in the product color, size, logo, or some other small components.
Clearly, today’s guide is mainly for Amazon small-medium sellers. So here is an important question, how much can you invest in your Amazon private label business at the start, $10,000, $50,000, or over $100,000?
The strategy for choosing products varies greatly from your start-up budget, and the products you try must be different for $10,000 and $100,000 budget. I will analyze the start-up cost for the Amazon business in section 3, you need to learn it carefully.
First, which private label products are the most suitable ones for small sellers? If you are a small seller or start-up on Amazon, because of lacking funds or experience, so you need to try some simple and secure products to lower business risks.
Consumers want the product to be “I need it”, not “I like it”
What is “need it”? For example, wrench, what you need to consider first is the tightness of its grips instead of its various color.
For such kinds of products, you needn’t prepare many SKUs, which can ease your storage pressure. Besides, if you set a suitable price for such products, your customers are more willing to place orders in your store.
What is “like it”? It means the customers’ demand for unique products. They want to buy a different product, so they will like those with unique style, color, appearance, size, and so on. But such products are inadvisable for small sellers. Here are two reasons,
First, you will have a large inventory pressure. Second, you can’t invest your limited fund in creating a best-selling SKU, such as investing in PPC ads. As we all know, it is more worthwhile for you to invest $10,000 in an ad group rather than spend them in 10 ad groups.
Product functions should be as simple as possible
Many sellers on Amazon will choose to differentiate their products from others by choosing multifunctional products or add an extra new function to the original type. Although it seems very reasonable, you need to invest more money and you can’t ensure the good performance for the improved one.
Hence, for small sellers, single functional products are more suitable as it is easier for you to control its quality, market the product and meet the needs of consumers.
Advertising competition is low
If you notice that the PPC of a product is low and competitors’ display ads are very small, generally, for such products, there won’t be fierce advertising competition. Accordingly, you won’t need to spend a lot of money on ads.
Avoid products with high return rates
- 3c products
The return rate of some women’s clothing products reaches 30%. And the return rate and the complaint rate of electronic products and 3C products are also very high, which is a great burden on after-sales service.
Secondly, which private label products are good for medium sellers?
Medium sellers can try some special products with higher requirements in some aspects like certificates to improve your competitiveness as you have a better ability of anti risks.
Enhance product differentiation
As a medium seller, you can try to make a relatively greater change on the existing products than small sellers to improve products’ performance and appearance. But you need to do enough research before you start to avoid deviating from customers’ interest points.
In addition, under such a circumstance, you need to spend more on your production process as you are required to make a new mold. You are also facing risks of the uncontrolled market.
Some big items
Big items are the kind that small sellers must avoid. For medium sellers, you can try large-scale and heavy products. But you need to make a detailed analysis about logistics to ensure a good profit.
2. Don't fall for 6 pitfalls when private labeling (Amazon sellers often fall into)
Good quality but with a higher price
Many sellers will have such a misunderstanding: a good quality product must be popular with customers. So they think a higher price is ok. But in customers’ opinion, they want to get a product of relatively good quality with less money.
So you need to think about the price and quality of the product from the perspective of customers.
Go for the perfect product but not MVP
Not all buyers will pay extra money for a “perfect” product. They just need a minimum viable product (MVP). Hence, don’t be obsessed with a perfect product solution, keeping the right quality is enough. You need to lower your cost and provide a more favorable price for customers.
Stop after building a hot selling product
It is impossible for a kind of product to stay on the hot-selling list forever because of the changing market. Your products may be easy to lose competitiveness in the market. So you must think of danger in times of safety and always be prepared for choosing more competitive new products or upgrading your products.
Ignore the issues of product patent
Imagine such circumstances: your products are accused of infringement the moment you upload them to your store or the moment you begin to make a profit.
The worst is that you are informed of removing your products from your store after you have already sent a large number of products to the overseas warehouse because of product patents. It will definitely break you down.
So before you upload the product, you need to prepare the following material: trademark application, brand registry. Besides, if you buy the existing products from suppliers, you need to confirm with them whether the products are original products or just imitation products. Or have they ever sold to other sellers on Amazon?
Don’t care about niche products
Many small sellers will make such a mistake: choose to sell the mainstream product just like big sellers.
Actually, I will advise you to try those products with a daily volume of 50-150 in the best-seller list. If you can get a good product rank on Amazon, and it brings you a steady profit of thousands of dollars even 10,000 dollars per month, which is worthwhile for small sellers.
All in from the start
You need to invest money in Amazon business gradually and gather experience rather than invest a lot of funds at the start just like gambling. Many clients of us have made a success on Amazon business, and all of them start their business with small items, then adjust and transfer to sell more complex products gradually.
3. How much will you invest to start an Amazon private label business?
Many sellers will ignore an important step when they start Amazon private business, that is, calculating the cost for Amazon private business.
Although it is just a rough estimation, it acts an important role during the process of choosing your product. Many sellers will be happy with their good monthly sales but unaware of the potential cost.
Now, let’s look at how much will you invest to start an Amazon private label business?
- The cost for the first inventory
- Shipping cost from China to Amazon warehouse
- The cost for product picture
- Logo and package design expenses
- Professional selling plan $39.99 /month
- Potential advertising costs (PPC)
- AmazonReferral Fees
- FBA fee
The cost for the first inventory
When you intend to prepare the first inventory, you can refer to your competitors’ monthly sales. Then you decide how many goods you need to stock according to your actual budget.
It is advisable for you not to stock a lot at first, which can help you lower risks. Then you can confirm your next replenishment time and quantity according to the actual sales condition.
Shipping cost from China to Amazon warehouse
When you intend to shipping from China to an Amazon warehouse, choose a suitable shipping method is important according to your actual situation. Here are 4 tips,
- Many Chinese freight forwarders promoted a solution that can deliver goods to Amazon’s warehouse in small quantities within a short time: SFUC & AFUC，you can ship small cargo to Amazon around 50-100kg，total shipping cost is about $2/kg.
- Choose Courier if the volume of your goods is below 500kg. Around $6-7 per kilogram for shipping from China to North America and West of Europe. Shipping time is about 5-7 days.
- If the volume is beyond 500 kg, you had better choose air shipping, which is 10-20% cheaper than express. The shipping time is around 3-5 days to the USA, 5-7 days to Latin America.
- If the volume is beyond 2 CBM, you had better choose sea shipping, which is the most economical way, about $100-200/CBM to the western USA; about$200-300/CBM to the Eastern USA; over $300/CBM to the Central USA; about $200-300/CBM to Western Europe; about $400/CBM to the Southern USA.
But one thing you need to pay attention to: the above is just sea freight, you should include the cost from the seaport to the Amazon warehouse in real cases.
The cost for product image shooting & logo and package design
You can hire a professional photographer to help you deal with the product images including shooting, PS, design. The cost varies from the product, but generally, the expense for a finished product image may be hundreds of dollars, which just accounts for a small proportion of the whole budget.
But many businessmen are not reluctant to spend money in this aspect, in fact, it is a wrong decision. Only products with exquisite images can urge customers to buy from your store.
Besides, you can design your product logo by yourself or you can try another convenient way: hire a freelancer on Upwork or other professional agencies to help you design.
At the beginning of your Amazon private business, the logo should be simple and clear to show the products’ specialty instead of just pursuing its beauty.
Potential Amazon advertising costs (PPC)
PPC stands for pay per click (just like Google ads CPC). It is a headache for many sellers to calculate the Amazon PPC cost in advance. But this is an important step for pricing your products. You can use some tools like Jungle Scout’s Keyword Scout tool to help you predict total PPC cost roughly.
Amazon Referral Fees & FBA fees
When you sell a product on Amazon, the platform will charge you certain fees like a referral fee, but the standard for the fees varies from different products. You can get detailed information in this post. (PS: pay attention to the marked four sections in the following picture)
4. Where to find private labeling product ideas? And how do you know if they're right for you?
4 common resources of private labeling product ideas,
- Amazon tools data
- Social media
- Other retail websites
Amazon & Amazon tools data
First, you can find private label product ideas from the bestseller list, the New releases list, Most Wished List on Amazon, which is the most common way. And then you can use some Amazon tools like Jungle Scout, AMZScout, AMZ Tracker to help you identify whether the product is good or not.
But there is a phenomenon, many sellers rely on the tools too much, which is an unwise decision. Tools can just provide you with data, but they can’t tell you why your competitors sell the products well. You need to do enough research about how your competitors sell the product by yourself and evaluate whether you will sell the product.
There are mainly 3 aspects you need to pay attention to when you evaluate the competitive product.
- Sales evaluation
- Product listing
- Store analysis
As Amazon won’t show sales data directly, you can predict the market capacity and sales of the product by multiplying the review quantity data by 100-130.
You can calculate the sales of the product with different ranks like 1-5, 10, 20, 50, 80, etc roughly. The result can be a reference for you to arrange the first inventory. Besides the method, you can also use some tools to predict the sales volume.
That means, if the prediction for monthly sales volume for the product ranking 100 is 10,000 orders, your inventory should be also around 10,000 to let your products get a relatively good rank like 120.
Product Listing & stores
Checking competitors’ product listings and store is a very useful step. Keywords, product selling points, product images, and product descriptions are the points that you need to pay attention to when you browse the competitors’ stores and product listings.
Take Anker for an example, its product listing is designed for catering to customers well. So you can learn from the good competitors when you lack ideas.
And when you browse other sellers’ stores, you need to pay attention to the following aspects: product layout; product quality; the store’s business situation (you can check which products in the store are sold well). You can judge whether the store runs well from the above 3 aspects.
In addition to using the Amazon platform for selecting products, you can get product ideas from other social media channels or other retail websites, especially for those medium-scale sellers that plan to widen their business. Here are 3 channels,
Pinterest & Instagram
These two platforms are alike a picture base. Users can upload the picture they like, and other online surfers can save or forward the pictures they like. For businessmen, you can find some novelty and trendy product ideas.
Users can share their product ideas and launch a fund-raising activity on Kickstarter. They can let their ideas into reality through the platform. As an Amazon private label businessman, you can get some novelty product ideas on the platform.
Google Trends is a free and commonly used online searching tool. When you take an interest in a kind of product, you can know the searching volume and growth trend of the product through the tool. All data are from Google searching, Google Shopping, YouTube, Google News, and Google Pictures. It can help you analyze the product’s development prospect and aim customers.
5. Find your reliable private label manufacturers/ suppliers
Searching for reliable private suppliers is a very important and necessary step for a successful business.
Enough stock is vital to a product listing ranking. Once the product is out of stock, it means that you will lose the rank and ad achievement for the product.
In addition, good quality is also very important for your store. It is well-known that bad-quality products will bring you bad reviews and decrease your product listing’s authority score. And you will have to spend more in running your store.
So to decrease the product cost, most sellers will choose to wholesale or customize products from China. It is easy for you to find suppliers on some China wholesale websites especially Alibaba.
The following is the regular process of finding Chinese suppliers
- Sample making
- Sample modification
- Sample confirmation
- Mass production
- Shipping to Amazon warehouse
Maybe someone will tell you that you can judge the supplier is reliable or not at the beginning, in fact, which is impossible. You need to identify whether the supplier is worthy of cooperating in the long-term run in the above process.
Here are some features good suppliers have: efficient communication; professional product knowledge; an active attitude to solving problems; patient service.
If you just want to focus on marketing without enough time in dealing with the product supply chain, cooperating with a China sourcing agent like us is an advisable way for you. 13.7% of our clients are Amazon sellers, and three of them have made a success in the Amazon business from a new start-up to a seller with annual sales of $500,000 to $900,000.
Although the sales are not as good as big sellers definitely, compared with small start-ups, they have made a success.
Located right in front of the Yiwu wholesale market, we have many direct factory resources to offer you a very competitive wholesale price. More importantly, we can help you handle the whole process from sample making, mass production, quality control to shipment arrangement to Amazon.
We absolutely a good partner for Amazon sellers.
6. Bonus – a real story of my friend
One of my friends watched a video about sharing how to use the gun cleaning kit on Facebook four years ago. He showed great interest in it, then he found that most users will choose to buy the tool from Walmart, Amazon, or some local retailers.
After enough researches, he found that there are few sellers of this product on Amazon and eBay, and it hasn’t been monopolized by big sellers yet. Then he decided to start an Amazon business selling this product. There definitely would be many regular steps like finding suitable suppliers, creating a product, marketing products, etc.
From the story, I want to tell you,
- Products are not only from data but also from your daily life
- A rigid-demand and small niche product is an easy winner.
Selecting the right product is indeed an important aspect you need to consider. Products determine your operation strategy, and a false product will let you lose from the start, which is precious experience from so many Amazon sellers.
So start from here, you are still in a fog when it comes to practice if you just read many guides without any practice. You will learn more and understand better about my today’s post after you step into the business. If you have any questions, feel free to leave a comment or email us.