By Julie Čolan
Hi there! Hopefully you're reading this post after reading parts 1 & 2 of my blog going through the different business models that can be adopted by FBAers (or just wider e-commerce) and the logical progress across these different models.
As a quick re-cap, in part 1 I spoke about retail arbitrage (RA) and online arbitrage (OA) and then about "distribution" in part 2.
In this third and final part, I want to outline the "private labelling" (PL) approach. The models I have outlined in the previous approach all revolve around selling other peoples' brands, although the models do become more sophisticated and scale-able with each step. With private labelling, we are moving on from being the salesman (or woman) to being the actual brand owner. Private Labelling essentially means to commission a manufacturer to produce a product and place your branding upon that product.
Usually these products already exist and are already made by the manufacturer and sold to other PLers - the only real difference will be in the branding. One of the best examples to use to think about this is the breakfast cereals you see in the supermarket - there will be various brands of "different" cereals (let's say dried corn produced into a "flake" shape..) with different branding that denotes the supposed value of such (e.g. premium brand / normal brand / value brand). In many cases, these products are made with the same ingredients, in the same process and even by the same manufacturer! If there is any tangible difference in the actual products they are marginal - the only significant difference is the branding on the packaging.
So, to be open on this front, I am quite early in my own journey of private labelling and so can't really claim to be the authority on this model, certainly in comparison to those outlines in the earlier process. However, I have invested in significant education / mentoring on this approach and it is my intention to blog openly on my PL journey in coming weeks and months so that you guys get the benefit of learning with me.
The rewards on offer from building a brand with PL are likely to be higher than the other business models but you are now not leveraging the value of a developed brand (albeit somebody else's) and so there is a bigger investment in time and money to build you're own brand. So how do you start on this journey?
Product Selection
So the first thing you need to work out is just what product it is that you want to have manufactured and branded. There are many different approaches to product selection (it may be through personal interest / analysis of products on Amazon / through "trending" sites etc).
Researching products for selection is the key process in the entire private labelling model. First of all the research needs to cover what demand there is for a type of product and what competition exists (there are some good tools out there such as Jungle Scout and Terapeak to help streamline this process - I will try and cover these more specifically another day). If you're happy that demand is strong and competition not too fierce, then it's time to see how (and at what cost) you can source such a product.
Sourcing
So you've found a nice niche in, let's say, musical dog leads but can you find a manufacturer who will private label these products at a price that will deliver a good profit (after all shipping / FBA fees etc)?
I think the default position of many FBAers is to hit Alibaba.com immediately to look for Chinese manufacturers of the chosen product. This isn't necessarily a bad tactic but just bear in mind that there may be other sources that could provide as good as, if not better, alternative - in essence, don't put all your eggs in one basket. If you do think you are going to have to import from the Far East then Alibaba is not the only show in town (see HKTDC / Global Sources for a starter). There may also be a domestic option (manufacturing has quite died in the Western world just yet!!). As the saying goes - Google is your friend - and a simple search for "private label dog lead manufacturers" may throw out some interesting options (always "go deep" on these searches as their may be hidden gems on page 7 or 8 of the search).
If you're in the US of A, you can also look at Thomasnet.com which is a truly awesome directory of US based manufacturers.
Don't be afraid to have a bit of a scatter-gun approach at this stage. Lots of quotes from different suppliers is what you want - choice is good. Obviously cost is going to be your key driver but also spend some time looking at the supplier - how long have they been established? Is the product you're looking to source a "core" offering of their business (e.g. their main business is to sell pet supplies rather than bungee rope - in the case of dog leads!).
Once you've narrowed your search to 2 / 3 potential suppliers it's time to ask for samples (a decent supplier will give the samples for free but you will have to pick up the shipping). Try and get a handful of samples for each product if possible and test the samples and test them well. Are they consistent, durable, do they look good, and (fairly importantly) will they sell?!
Once you've chosen a favourite you're ready to take that important and exciting step of ordering the product.
Branding
This is a huge topic and not one that I'm going to be able to do justice to in this blog (even if I had the expertise!) BUT the basics are:
-Pick a good name that suits the product (e.g. "Canine Karaoke" - okay maybe not that one!) - do a few Google searches on that name to make sure you're not using someone's existing brand name.
-Design a logo based on that brand name - use Fiverr or 99Designs or the like to get a good graphics designer to put this together at minimal cost.
That's it to start with. Don't go overboard on branding at the outset - you could even just produce stickers that you (or a prep centre) can attach to generic packaging at first although most suppliers seem to already base their price on applying some branding to products / packaging so it's worth discussing with the manufacturer.
Marketing
Another huge topic and one that I will put together a more comprehensive blog for. This is, at the early stages at least, around building up the Best Seller Rank (BSR) on Amazon for that product. The key to this initially?
Reviews and reviews and reviews and reviews....
As soon as your product hits the listing (and maybe even before) you need to be focused on getting people to review the product. Be careful here, there was a trend a few years ago for people to purchase quantities of reviews through Fiverr but this practice was hot (and hot hard) by the bods at Amazon - just don't try it. You can provide coupons for people to buy products at discounted prices in exchange for honest reviews and you can use sales follow-up e-mails to request reviews. Until you've hit 5 - 10 (number depends on the competition to a degree) reviews for your new product then I would suggest that this is your absolute focus.
Once you have a number of reviews and one or two organic sales then just focus on trying to build some sales volume. Sponsored links (pay per click) is the recommended mechanism for this and can be a great way to create a bridge from the early momentum of review gathering to (hopefully) a more sustained organic sales volume.
As seems to be a habit, I think I've tried to cover off too wide of a topic for one blog but hopefully this is a really helpful overview as to what the constituent parts of private labelling consist. I'll have another look through this series of blogs and pull out a list of topics that I think deserve a more dedicated review and look to put together a series of new blogs accordingly. Let me know if there's any topic that you guys think would be particularly useful for a more in-depth view....
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