Ten Steps to Launch a Private Label Product via Amazon FBA
Private labelling is getting a huge amount of attention at the moment, and for good reason. Ordinary folk like you and me can gain access to the huge number of suppliers across the globe, take their existing products, stick a label on them, and sell them as our own. It’s even possible to make modifications to your specification or create entirely new products, although this last option is certainly a more costly and technically demanding option.
Established organisations have been working with manufacturers in China, India and beyond for years to create products for them. What’s changed recently is that it’s now much easier to get in touch with these factories through sites like Global sources or Alibaba. Coupled with the incredible power of Amazon’s marketplace, it’s possible to ship directly from the manufacture and into Amazon’s warehouse using their FBA offering. Once there, you can start selling and hopefully making some nice juicy profit.
This sounds dead easy, right? Well as with all things, the devil is in the detail and there’s certainly a lot of detail to get to grips with as a beginner. I’m going to cover off some of the key stages involved in going from nothing, to actually having something for sale in Amazon.
Step One: Find a Product
It’s seems kinda obvious that you need something to sell, but this is a really critical step to get right. There’s a lot of systems, techniques and tools available that dig into this topic, and I’ll happily share my approach in another post, but at a high level, you need to find something that’s in demand, selling well but that isn’t hugely competitive.
A good measure of the competition in a particular category is to look at the number of reviews each product has in the top ten items on page one. If they’re in the hundreds, or even thousands, you’ll have a hard time ranking against them. If you don’t rank highly, you’re unlikely to get much in the way of organic traffic, which means you’ll need to buy more paid positions in the search results to get people to know about your new product.
Impossible, no, but certainly much harder and a tough place to start when you’re trying to get your first product off the ground.
Step Two: Deep-dive Research
So, you have a candidate product, or ideally a bunch of them, now it’s time to get into the details of whether they could stack up financially. It’s worth separating out these two steps otherwise the initial idea finding takes ages. I found it easier to find a whole list of options, refine them using some high-level metrics like review count, expected demand, selling price and then only those that pass, warrant the more thorough deep-dive.
For me, this stage is all about the key metrics and trying to get a model that I can tweak as I get real estimates from the respective suppliers. I’m looking to get rough shipping costs, import duties, VAT rates, expected unit costs, etc..
Basically, I want to see if this thing can make money. A key number here is margin and ROI. If margin is too thin, be careful, as competition increases in your category you’ll have limited room to move before you’re losing money. Equally if ROI is too low, you may find yourself doing a lot of work, for little return. I’m currently targeting a margin north of 25% at least and an ROI of 100% minimum.
Step Three: Find a Supplier
This is an exciting step, but also a scary one for a lot of people, but it needn’t be. The majority of companies on sites like Alibaba are looking for business, and keen to build new relationships with prospective partners. If you treat them with respect, engage them in a professional manner and are clear and specific in what you’re asking for, you should be fine.
This is not just about price, you’re also trying to figure out if they’re responsive, have good English skills and operate in an professional manner. Do remember, this is a two-way street, the suppliers are also trying to get a measure of you and your company, so put your best foot forward.
There’s a huge number of options out there, so if your first batch of contacts doesn’t seem quite the right fit, don’t worry, just politely wrap up the dialogue and reach out to a new set of suppliers.
Do beware, there are a lot of middle men on these sites and dealing with these guys can drive costs up. Ideally you want to be dealing with a manufacturer directly or a trading company that has a specialism in your chosen area. I try to avoid trading companies that sell everything from hot tubs to handkerchiefs.
Step Four: First Contact
When using Alibaba I normally build a list of favourites as I scan the listings. Once I’ve got a decent amount 10 - 20 prospective suppliers listed, I’ll move them into an appropriately named folder. I then use their messaging platform to send all of them the same request at once. This make the initial communications much easier and also helps you organise the responses.
Something I’ve learnt is to be specific. The more descriptions, images or diagrams you can use the better. Include dimensions, materials, colours and key specifications. This is not a final product specification, that will come later, but you’re trying to quickly filter out who can produce the product you’re interested in at the price point you can afford.
During this stage, I strongly advise that you try to move your communications out of Alibaba and into either email or even better Skype. I’ve found it much easier to co-ordinate follow-ups. I also have a spreadsheet that tracks where I’m at with each individual, otherwise it’s very easy to forget who’s who, where they work and what’s been previously discussed.
Step Five: Samples
This is your chance to get your hands on some merchandise, another exciting step! Again, the key here is specificity. Don’t be afraid to ask questions, re-confirm details and ultimately before parting with any cash, make a final statement of the expected sample contents. Try to think about the bits of the samples that will make or break your value proposition and make sure the sample covers them. Many manufacturers won’t want to produce highly customised, bespoke items as it’s just not cost effective, but it’s OK to ask, just be reasonable.
Something that may come as a bit of a shock is the sample cost. Depending on the value of the item in question, you can expect to pay $100 - $150 dollars for low value items. This may seem like a lot of money, but remember, you’re potentially asking for some one-off customisations, time preparing the sample and express shipping to your location. It’s also a good way for manufactures to filter out people who aren’t serious.
I wouldn’t bother haggling over the cost here, although don’t be afraid to ask for a break down if you’re concerned. In a recent exchange, I asked for a couple of customisations that had been assumed to be required to be removed and shaved $30 off the price.
Step Six: Product Specifications
The samples are in, you’ve refined what you want from your product, now is the time to get the final quotes from the suppliers. This is where the detailed specification is required to describe each and every detail of the product you want making. This will form part of the contract between you and your supplier, and help guide the inspection team as to what they’re looking for during inspection.
You don’t want war and peace, be concise, but also thorough and accurate. With this in hand, re-submit this to your shortlisted suppliers and ask for the final quotes.
Step Seven: Negotiation
For a first order and a first time, I wouldn’t get to hung up on negotiation at this stage. You want a competitive price, sure, but both side need to be making money. If you view the relationship as a long-term thing, there will be plenty of time for negotiating the price down and increasing those margins.
One useful trick is to ask for a quote for different order quantities, depending on your budget. You might as for a quote at 1000, 2000 and 3000 units. You might then be able to see if they could do 1500 for the 1000 price.
Push too hard here and you’re likely to start seeing quality issues, so don’t worry about leaving some money on the table, particularly for round one.
Step Eight: Place the Order
Make sure that the payment terms offer you protection in case something goes wrong. DO NOT pay 100% up front. A typical split of 50/50 or better yet 30/70, with 30% being paid upfront and 70% on successful completion of a quality inspection and release from the supplier is worth aiming for.
In terms of payment, if you can use Trade Assurance via Alibaba, great, if not, wire is fine. Just check the bank details you’re sending money to and make sure that they tally with your previous correspondence. Avoid Western Union, this is akin to leaving a pile of money in the street and hoping the right guy picks it up, it offers no protection and should be viewed as a warning sign if this is the only option offered by the supplier.
On the topic of getting inspections, my view is that this is not something to skip. Even on repeat orders, you never know what might have gone wrong and finding out by customers leaving bad reviews is definitely too late.
So now the factory is working on creating the next number one product in your chosen category, now you need to get things like barcodes, listing, logos and packaging sorted, ready to share with the supplier. This may seem like another massive hurdle, but with sites like Fiverr or 99designs.co.uk, it’s easy to get access to great design talent to make this step a breeze.
If you’re selling via Amazon as your main channel, it makes sense to optimise your packaging to meet the FBA packaging requirements, check them out for more details.
You’ll also be wanting to find someone to help with your shipping. You can do this yourself, but it can be a very complicated process so it’s best to find someone to help you. If you’re shipping over 200KG – 250KG, then using a freight forwarder makes sense. Someone like FreightOS or Flexport can help get the costs and timelines for this. FreightOS even have an Amazon FBA option, specifically gear to dealing with Amazon.
Step Ten: Sell, Sell, Sell
Hopefully by now your beautifully designed and packaged product has landed in Amazon’s warehouses. The listing is complete and optimised for the hot keywords for your category and you’re ready to launch.
There’s a tonne of stuff to be done here to make sure the listing is well priced, properly filled out and adorned with awesome product photography. Your aim is get your product on the first page, using whatever means you can, PPC, external ads, blogging. Definitely one to cover in more details in another post.
So, there you go, ten steps to creating your first private label product and selling it through Amazon. Clearly there’s a load of detail sitting behind each of these, but we’ll get to them in time.
When I first started looking into this, it seemed overwhelming. There’s so much to do and learn, it seemed almost impossible. The trick is to take it step by step. A lot of the process can be run sequentially, especially for your first product, allowing you to figure out each step as you need to.
So, get researching, find the next killer product and just make a start!