How to Successfully Sell Private Label Products on Amazon and Ebay
This question was on my mind for a long time before I got started, and I've definitely asked myself this same question many times. "How can I be successful in selling a private label product online?"
This is sometimes that happens when you're just starting out. You feel like there is so much information out there but so little of it applies to your situation. Below are 20 Things that you should know when you step into the online ecommerce arena with private label products.
You probably know what Amazon is and how they allow people to list their products for sale to be bought by consumers. Most people know what Amazon FBA is but might still feel a bit confused about the logistics of actually being an FBA seller. As far as I've seen, there are two main groups of people who sell on Amazon: private label sellers and product brand sellers (or vendor central). It seems like most people I've talked to prefer one over the other. I've tried both, and I think that they both have their pros and cons.
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Private label works best if you're looking for consistency. This method is great for people who want to make sure that every product they send off has the same quality, design, etc… You can become an exclusive seller of a specific brand by either creating your own private label product or by building an exclusivity agreement with another company to sell their products under your own terms.
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Whichever route you choose, there are some things that you should consider before moving forward:
1) Brand awareness: If you don't already have a following on social media, then it will be difficult to get them to purchase from you without the help of Amazon.
2) Exclusivity: If you go the route of creating a private label product, do your own research and make sure that there isn't a similar product already out there on the market. You never want to compete with yourself. As far as exclusivity goes, I've seen anywhere from 1 year all the way up to 3 years for different companies. I suspect that this has more to do with how long it takes for them to recuperate their investment cost rather than any other factor. Thus, if you're willing to put in more of your time and effort into building a following then just going down your own path will result in better results in less time. We'll talk more about this later though.
3) Inventory: You'll need to make sure that you have the capital necessary to purchase all of your inventory upfronts. There are a lot of people who will tell you that you can use drop shipping as a way to save money on product costs but I've never been a fan of this method.
(Dropshipping in a Nutshell: For those of you who might not know, here's how it works: The company that you're buying from doesn't actually send or hold any inventory for you. They create an agreement with you, where they list out what their suppliers and manufacturers have available to ship now. You then list them on your sites and marketplaces. When they sell, you collect payment, ,and then purchase from your supplier for immediate shipment (of the product directly to the customer))
The problem with this method is that if a supplier runs out of inventory then you don't have any backup plans in place for replacement or refund. If a customer comes back and complains about their product not working, you're going to have a tough time trying to handle the situation because your supplier will not be willing to send you another unit without first receiving their money from the previous order. It's just not worth it unless you have a very tight direct relationship with one of these suppliers, sometimes it is better to use as a backup as opposed to using drop shipping as your main route.
With private label sellers, they'll actually hold all of the inventory until it's been paid off by the end consumer. They do charge interest on these items, but I've yet to run into a problem where my inventory wasn't replaced immediately.
So there's the main pro and con for this route: You'll need to purchase all of your inventory up front, but you won't have any problems if products go out of stock because it will be held in storage until you receive payment.
4) Your profit : If you're building a private label there is no way around the fact that their profit margin is going to be noticeably lower than what it would be with product brands. The reason for this has to do with how Amazon calculates their fees; they take into account an item's brand and model when figuring out what percentage they should charge as a transaction fee.
Basically, the more they think that your product might sell for then the higher their fees will be. To give an example of this, I'll use my call list case as it's one of my best selling products: When I first started selling these cases on Amazon, I was paying about $1.26 per unit to purchase them and they were netting me around $4-$5 every time someone purchased one. If we take my cost down to $1 and we look at what each sale brings in (my profit margin), then we see that my profit has dropped by almost 87% due to transaction fee calculations alone!
5) Experience: Although there is a big learning curve involved with creating private label products, they're a bit more straightforward in terms of how to sell them. As I mentioned earlier, the main thing that you have to be aware of is your inventory turnover rate because this will directly affect how much money you can make from private label sales.
When it comes to product brands, there really isn't anything for you to learn because most companies have their own system set up through an intermediary who is going to handle most of the transactions themselves. Additionally, you'll also need a bank account that's located in that country which can be a bit complicated if your company is not already established there.
6) Refunds: Product refunds are going to happen with pretty much every seller out there no matter what category they're trying to sell in, but it's a bit more scarce when you're trying to sell product brands. Because of this, one of the best ways that they can actually protect themselves is by making sure that their suppliers are also following the same rules as them; if you have a supplier who does not care about quality then your customers will likely be unsatisfied with their purchase and request a refund. This puts your entire company at risk because instead of holding all of the inventory until it's been paid off, it now has become necessary for you to return some or all of these items back to the original supplier so that they can send out replacements.
Even though product brands can sometimes offer better prices than private label products due to higher volume purchasing from suppliers, the overall risk of the refund process makes private label a much safer option in my opinion.
7) Legal: If you're considering selling product brands then it will be incredibly important for you to understand all of your legal obligations and how they can affect your business operations. For example, if you're dealing with products that are regulated by regulatory bodies such as the FDA (food & drug administration) then depending on how many units you've already sold, you may suffer steep penalties for not verifying that these items have been cleared before being displayed in your listings. This is something that I know several large companies have done before and ended up having their entire company shut down: They were in so deep with their next shipment of the product and had no way to cover the fines that were issued, so they were forced to close up shop.
Keep in mind that this last example is an extreme case of what can happen with product brands, but it's still something you should keep in the back of your mind as you make decisions on how to run your business!
8) Profit: I've already mentioned a few times throughout this article how most people are typically drawn to private label products because of their potentially higher profit margins but do you know why there's almost always a 'catch'? Because these particular sellers don't take into account things like shipping costs or any other fees that may be charged on top of the product itself; if someone does not factor these charges into their price then they're going to be in for a shock when they check out and see that they have actually lost money on their purchase.
9) Shipping: If you do decide to start selling product brands then it likely be necessary for you to get a separate merchant account that will allow you to offer your customers faster shipping options. If you're using Amazon for all of your listings then it might not be an issue, but this really becomes a problem if you have a ton of different products on different channels since each one will likely have different rates associated with it.
This is yet another reason why I think private label products are easier to deal with: They only require one FBA account so there's no need to pay more fees just because some of the items sell faster than others!
10) Product returns: Since many product brands were initially intended for resellers, these particular items generally tend to have slightly higher return rates due to them being displayed in lower price brackets on the marketplaces. While there's nothing wrong with this practice, it does mean that you should be prepared to deal with a greater amount of returns than if you were selling your own brand or private label products. The reason for this comes down to the fact that these items tend to come from overseas and many times the customer will not be paying shipping fees for their order!
11) Regulatory requirements: Depending on where your sourcing country lies within the world, you may have specific regulations which must be enforced before you can even begin listing any new products. This is especially true in countries like China and India (and also some others), where there are certain laws regarding what you can/cannot sell on the various marketplaces. So, if you do plan to sell product brands then it's important to check with your supplier first before making any moves so that you don't run into any issues later on that will put your seller account at risk!
12) International language markets: Of course, it's no secret that there are many people in the world today who speak other languages for example Arabic, Russian, Korean, etc. However, this doesn't mean that all marketplaces have fully translated versions available to everyone just yet! So if you're planning on selling internationally then be aware that some markets might not be accessible by your target audience simply because of the language barrier which means you will have to find another way around it (such as using AdWords PPC, for more info call Brian 954-716-0603).
13) Seller feedback: Most people are aware of the fact that marketplaces like Amazon encourage sellers to achieve a certain status before they will allow them to sell via their site. This is done in an effort to weed out all of the bad seeds who are not serious enough about making money online, but it also means that you must take great care when fulfilling any orders because you will be held responsible for anything that happens after the purchase has been made! On top of this, since these product brands come from resellers, many times these items have already been purchased multiple times before which means their history will be laid out in the open where anyone can see it!
This is something that you should definitely keep in mind before making any purchases and seriously think about whether or not this is a path you really want to go down.
14) Storage space: Unless your supplier sends them directly to Amazon FBA, then you're going to need someone or somewhere else where these items can get stored until they actually sell. It would be much better to use one of Amazon's fulfillment centers so that they receive the free storage benefits instead of having all of this stuff taking up room in your own house!
15) Inventory age: Being that these are second-hand items then they generally do not have the same conditions as new products where you can sell them immediately upon arrival. Instead, it's important to understand that these are used goods which means you should try to wait for at least a couple of weeks before you even think about selling any of them. Otherwise, don't be surprised if your customers start giving you bad reviews or opening up disputes with PayPal/Amazon because they feel like something is wrong with their purchase!
16) Quality inspection: While this may not apply to all marketplace sellers since some countries put pretty strict regulations on what you can/cannot sell online, there's no doubt that many product brands come from countries that do not have these same rules and regulations in place. As a result, this means that many of the products you get from China/India/Taiwan will often times be filled with manufacturing defects or other problems that would never pass quality inspection if they were to come out of your own country!
17) Reverse image search: One of the best ways to determine whether or not a product brand is authentic is by using reverse image search. This handy tool allows you to find all sorts of information about an item's past history, but it can also show you whether or not someone else has already tried selling it before you which is crucial when becoming a marketplace seller! A perfect example is those Acer laptop brands being sold on eBay right now. If you do a search for "Acer Laptop" on Google Images then you will find that there are quite literally hundreds of these same brands being sold by other eBay sellers who probably just copy/paste the item title!
18) Brand name disputes: It's no secret that when trying to sell certain brands of products on Amazon, they will automatically assume that it is your intellectual property and remove any listings with your product brand in the title (such as this Creative Sound Blaster Tactic3D Wrath Wireless Gaming Headset listing). This doesn't really apply to most marketplaces like eBay since they don't care about trademarks. But if you do plan on selling any big-name brands then I would definitely recommend looking into what their brand policy says and how to go about getting registered with them. If nothing else, it really makes you look like an established business so there's no need to worry!
19) Leave room for profit: If you're not going to include the total costs in your price especially once eBay and PayPal fees are added, then why bother selling in the first place? Seriously! If your goal is just to see how much something will sell for on eBay then just give yourself a $1-$2 cut off of what would be considered the final sale price. This way when people complain about their purchase when they get home or I guess maybe when they open up that package, then you can just tell them that was the best you could do and hope that doesn't come back to bite you!
20) PayPal holds: So this last tip is really geared towards anyone selling anything on eBay since I know a lot of people get a little nervous about selling items online and then transferring that money into their account. In February 2017, PayPal required all marketplace sellers to hold any payment sent until the item is marked as delivered. This way there is no risk for either party involved with buyers being able to claim they never received it even if it was dropped off at the door. Nevertheless, this obviously poses quite a few problems for many eBay sellers who are used to getting paid immediately upon shipment - something which most Amazon marketplace sellers are already accustomed to!
Thanks for reading. If I missed something you can email me at email@example.com
If you are looking for some professional marketplace help from a company with boots on the ground... reach out to us. Call Brian 954-716-0603