When to give up on a private label product - ASK JUNGLE SCOUT EP #4.1

Ask Jungle Scout is a weekly show where we answer YOUR top questions about selling on Amazon, FBA and the private label business!


This week's questions:

0:15 How many sales should you look for when trying to identify a niche in the UK instead of the US? Does 3000 sales within the first 10 results still apply?

2:30 How do you prevent seeing an inflated sales number in Jungle Scout?

4:30 Should you ever give up on a product, and if so, when ?

A Breakdown of the Five Top Options for Selling on Amazon

By The Selling Family

Does your head sometimes start to spin when you look at all of the different ways you can sell on Amazon? It’s great to have choices, but sometimes they can overwhelm us!

We typically say there is no right or wrong answer to the question about which model is “best.”

There are so many factors to consider, including your own experience, situation, tolerance for risk — and simply preference. We chose retail arbitrage because we like it and are good at it, but that’s not the model for everyone.

Today, we are going to help you sort through the choices by providing a definition of the most popular selling formats, then give you our recommendations for the best training programs and educational materials related to each.

By the time you’re finished reading this article, you should have a good understanding of what model is the best fit for you, as well as where you can go to learn more!

First, a rundown of the five models you’ll see the most. These include: Retail Arbitrage; Online Arbitrage; Wholesale; Private Label; and Drop-shipping.

Retail Arbitrage

Retail arbitrage is when you purchase a product at a retail establishment and then sell it at a higher price on Amazon. It’s essentially “flipping” merchandise, or what is often described as taking advantage of market inefficiencies.

For example, you might find an MP3 player on clearance at Walmart for $15 that it sells on Amazon for $35. After Amazon fees and its cut, you might make a profit of about $10.

Pros:

• This can be a really inexpensive way to get started selling on Amazon
• No minimum investment to start
• Easy model to understand

Cons:

• This can be the most time-consuming of the business models, as you have to physically find and restock inventory constantly
• Related to the above, this is not a passive source of income
• Mileage; you have to drive from location to location

Retail arbitrage is our specialty! It’s where we got started and originally found success — Jessica was able to replace her income in a few months and then bring Cliff home from his job in about a year’s time.

If you’d like to learn more about this model, check out our Amazon Boot Camp, where we take you step-by-step through the process of setting up your account through making your first sale, and teach you what you need to know to grow from there.

The course includes video modules, custom printable and checklists and a bonus section. More than 3,500 people have taken the course!

We also have an accompanying private Facebook seller group where you can ask questions and share your successes with thousands of other members.

Online Arbitrage

In online arbitrage, you do the same thing as with retail arbitrage, except that you do your sourcing online.

Instead of heading to Walmart, you might go to walmart.com. There are hundreds of websites available, from large chain stores whose names you recognize to a bunch you may never have heard of.

Pros:

• A true work-from-home model
• More sourcing opportunities available, as you don’t have to physically drive from one store to another
• Product is shipped to you, so you don’t have to lug it in your car — plus you usually receive boxes and packing materials that you can re-use when you ship your inventory to Amazon
• Source at any time, not just during store hours
• Good way to complement your retail arbitrage and add more product

Cons:

• This is a little more difficult to learn because there is so much product available and you can spend a lot of time looking in the wrong places
• It can be easy to buy too much
• Sometimes more difficult to tell whether the product on the retailer’s website matches the Amazon listing, so you can be more prone to error when purchasing

Over the last few years, we’ve added online sourcing as a major way to find inventory during the first three quarters of the year.

It allows us more flexibility to spend time with our young son, plus it complements the products we find when we do head to the store to do retail arbitrage. We can also buy in larger quantities.

We’ll teach you how to do the same in Online Arbitrage - ABCs of Online Sourcing.

Our video course is set up in four easy-to-follow modules.  Among other topics, we teach you how to find good stores to source from; the key differences between sourcing product online versus at a brick and mortar store; our favorite tools; and ways to determine how much competition you’ll have.

Wholesale

With wholesale, you typically buy direct from the manufacturer - or from a middleman - and buy in larger quantities in order to get a lower price than you would at a retail establishment.

Pros:

• Lower purchase price means higher profit
• When your purchase price is lower than other sellers, you have a better chance at winning the Buy Box because you can go lower on your sales price if needed
• Buying in larger quantities allows your business to be more passive. It takes less effort to sell 100 of the same item than it does to sell one of 100 different items.
• You can scale your business

Cons:

• Larger investment of capital
• Bigger risk than retail arbitrage because you are buying larger quantities. There is always a chance you get stuck with large amounts of a product you can’t sell.

If you’re interested in pursuing this model further, we recommend the Unstoppable Amazon Academy by Robyn Johnson.

Robyn is the author of The Unstoppable Entrepreneur and hosts The Unstoppable Entrepreneur podcast. She has sold more than a million dollars on Amazon.

This course includes basics for beginners, but is designed for sellers looking to grow their business to $50,000 a month or more.

Some of the lessons and modules include: scaling retail arbitrage; Wholesale sourcing at higher margins; Introduction to Amazon SEO; hiring and training virtual assistants; business basics; and an introduction to bundling.

The Unstoppable Amazon Academy, which is a subscription, offers a monthly or annual payment option.

Private Label

Private label refers to the practice of purchasing a product and then putting your own branding onto it. Many times, sellers will purchase product from China and then attach their own brand, logo and marketing to it.

Pros:

• Little to no competition because you are the brand owner
• More control over price

Cons:

• Riskier than retail arbitrage and wholesale because the product typically has no ranking or sales history to draw upon
• You typically must purchase in larger quantities

For training on this model, we suggest Proven Private Label (PPL), a primer on how to start your own Private Label product line. You can buy just a book or go for the mentoring program (which we recommend).

The program teaches you how to find the “golden gaps” on Amazon, which are products people are searching for but can’t find.

It shows you how to find products and market them, and walks you through each step, from brainstorming to having your own Private Label product you can resell on Amazon, eBay, or elsewhere.

The teaching includes 6 mentoring modules, 20 PDF lessons and a private Facebook group.

Topics include how to choose your product; contacting suppliers; creating a listing; brand name, logos and packaging; and advanced strategies.

Drop-shipping

When sellers drop-ship, they purchase from a retailer or wholesaler and then have the order sent to the customer. We recommend against this practice.

Pros:

• Sellers don’t handle the merchandise

Cons:

• Lack of quality control; seller doesn’t have the opportunity to inspect the product, nor to ensure that packing and shipping is handled in a way you would approve of

This is not an area we have used or explored, so we don’t recommend any particular training for it.

(SOURCE)

Compare Amazon Business Models

By Jordan Malik

Global retail ecommerce sales in 2016 grew 8.7% over 2015 to $1.9 trillion, according to ecommerce solution provider PFS (source). Amazon sellers like you and I make up a huge part of that growth.

But when it comes to sourcing products to sell on Amazon, there are quite a few different business models and avenues. 

Arbitrage, Retail or Private Label?

I have found 4 business models to be viable: Retail Arbitrage (RA), Online Arbitrage (OA), Wholesale (or Retail Distribution), and Private Label.

I'll lay out the pros and cons of each below.

Disclaimer: I own a large private label business. But I have many Amazon sellers in my network and I know a lot of people who have become really successful entrepreneurs using every one of these methods along the way. So, with my own personal bias aside, I'm still writing objectively.

Here we go:

Retail Arbitrage

Retail arbitrage means to physically buy products, usually at a highly discounted rate (e.g., in a store clearance aisle) and sell them on Amazon.

Why retail arbitrage works:

• It’s a great way to dip a toe in the water as an Amazon seller, as it requires less early investment
• You can hand-pick your items, some of which might be able to bring in huge profit margins
• When you find really good deals or clearance, you can be really competitive, even against Amazon themselves
• You can accumulate in-store rewards, points and cashback deals
• If you’re smart, this model lends itself well to seasonality, for example, selling in the Toys and Games category in Q4

Cons:

• You need to physically be there in person to get the best deals, and having a car is pretty imperative too
• Certain products and brand names can not be sold on Amazon without approval
• As an overall strategy, it’s most difficult to scale quickly because of the manual labor involved, esp. in seeking out the deals

Online Arbitrage

This is the online version of the above. That means we can wear sweatpants all day, right? Pros:

• No costs for driving and potentially less time consuming as you can source from the comfort of your home
• You can still accumulate those points and cashbacks
• You can build your online sourcing skills (which will be useful if you ever transition into any of the following two business models)
• You can buy in bulk and get it all shipped to you

Potential roadblocks:

• Shipping can be a pain point -- especially when things get delayed
• You are still tied to a specific location, waiting for deliveries
• As with retail arbitrage, it is more difficult to grow considerably

Wholesale / Retail Distributor

Some sellers decide to take the above models one step further and become wholesale distributors. This can bring some new positive aspects to the table, such as:

• Buying direct from the manufacturer means you can buy large quantities at discount
• You will need to be an approved reseller (see 'cons' below), which means it would be less likely to get hit with counterfeit claims or run into issues with Amazon
• Utilize purchase orders and save large upfront investments
• You can get in early on liquidation deals
• This model is great for utilizing Amazon FBA (no need to remove any price tags or stickers, you can get your inventory shipped direct to Amazon’s warehouse)

And the difficulties with this model:

• You need to find products that are not being sold by Amazon
• It can be difficult to get a foot in the door with becoming an approved reseller - you need to get good at negotiations and exercising your buying and selling power
• You can face competition with other resellers who are also competing for the buy box on Amazon. Ed. note: Good manufacturers/brands will enforce their MAP (Minimum Advertised Price) so your competing authorized resellers won't price-gouge. And even though there are non-authorized resellers who are sourcing the product via arbitrage, those tend to run out of stock quickly.

Private Labeling

Being a private label seller doesn’t mean you’re an inventor, or a product designer. It means you are finding products that already exist with sufficient demand, and then sourcing them from a manufacturer and selling them under your own brand label. Ed. Note: I also recommend you identify faults with an existing product - look at the Amazon customer 1- and 2-star reviews for it - and tweak the manufacturing to improve it and/or bundle the item or add value to it, to differentiate yourself from other competing products on Amazon.

Here are the positives of private label:

• Profit margins are generally higher (purchasing directly from the factory) and you can ship your products directly to Amazon’s fulfillment center (FBA)
• You have more control – you source the product, put your brand on it, create the listing and manage your marketing
• Selling private label on Amazon, as opposed to through your own ecommerce store, gives you access to a huge marketplace full of consumers who are ready to purchase
• You are not competing for the buy box on Amazon, as you would be as a reseller of a known brand
• You can do this from anywhere in the world, and if you are really entrepreneurial you can sell in different international marketplaces

And the difficulties:

• Initial investment is usually a bit higher
• It takes a longer time to get your product and brand name out there, and you have to create your own listing and photography
• You still need to invest an amount of your time and efforts to get good results. For example, you will need to become savvy when it comes to sourcing, building relationships with suppliers and manufacturers, and learn all about importing.

Which model is for you?

There’s no one size fits all, it entirely depends on what you want to get out of your business.

For example, at Jungle Scout we hear lots of inspiring stories from our clients. From parents who want a steady income stream so they can stay at home with their children, to people who want to quit their corporate jobs, to entrepreneurs who want to invest and scale up fast.

I know at the start of this post I said “what are the pros and cons of each”, but realistically, the “cons” are just things that you need to learn how to do, spend a bit of time on or investment on. This is just part and parcel of being in business, and I don’t know about you but I love the challenge 

Can you transition from arbitrage to private label?

Sure you can. In fact, a lot of arbitrage sellers who want to take their businesses further and scale faster do this. The good news is, you’re already pretty savvy as an Amazon seller by this point if you are running an arbitrage business. This immediately puts you in good stead, over coming into private label without any Amazon experience.

Here’s my top tips for breaking into private label in 2017:

1. Find the riches in the niches – Product research is so important. In fact, it’s important for sellers that fall into all four of these business models. But as a private label seller, your business relies on strong research to make solid purchasing decisions and ensure your investments are going to be profitable.
2. Verify demand before you move forward – No private label product research is complete without verifying demand for a product idea you are chasing. You can get accurate and up-to-date estimated sales volumes with Jungle Scout. Plus, you can also verify demand for free by using our Estimator tool.
3. Add value – A great way to find products that will earn you a lot of revenue is to find products where you can add value. Look out for products that are unique (usually the products you’ve never even thought of are the clear winners), where you can add value. Try bundling, increasing the pack size, improving the quality or adding a new feature. Top tip? Check the competitor’s Amazon reviews to find their customers pain points and ensure you resolve those issues with your product launch.
4. Get some Marketing acumen – Amazon is a fast growing and ever-changing marketplace and us sellers have to keep up and adapt our strategies accordingly. This is so important for private label sellers. For example, you will need to ensure you understand the basics of Amazon SEO and listing optimization and you will need to consider running Amazon pay per click campaigns. You can also split test your listings to increase conversions and send out automated email campaigns to your private label customers.
5. Get Started – Our mantra at Jungle Scout: "Taking action is better than not taking action." So long as you have done your research and have the drive and ambition to move yourself forwards, the only next step is to get started with that new product.

Final Words

All four Amazon sourcing models discussed hold potential and each has it’s own place within the industry. I hope that this article has given you a few things to think about, whether you are just considering becoming a seller, or if you already are one and thinking about trying out a different method of making money.

Have you made the jump to private label? I’d love to hear your experiences in the comments.

(SOURCE)

How To FInd Private Label Products to Sell on Amazon FBA

The most revolutionary thing about private labeling on Amazon is there's a certain sequence of actually launching your product and there's some amazing tools and publicly available data that no other company, no other e-commerce company, gives you [00:01:30] to actually read the marketplace and understand what's already selling well and then be able to go deeper and understand what people really want and how you can jump into any market, really, and be able to compete day one of your sales.

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How to start a Private Label Business on Amazon using home and kitchen products!

The Amazon Sourcing Strategy That Really Works

By Andrew Tjernlund

The private labeling hype machine has been running hot for a couple of years now.

Just find a product that’s already selling well on Amazon. Then source a generic version from China. Slap a logo on it, and sell it using Amazon FBA. Boom! Riches are yours. Now just rinse and repeat.

But there’s something rotten in this private labeling utopia. Hordes of new sellers seeking their fortunes have descended, and they aren’t getting the easy success all the training courses promised them. Why not?

Well, finding a “perfect product” that will sell like hot cakes is hard. Really hard. Driven by all those online courses and schemes, competition from other sellers has become fierce. On the other side of the equation, buyers are starting to cry foul. Even these fly-by-night “brand names” bring certain expectations of quality and support, and many of them are just not living up to it.

So here’s the Amazon product sourcing strategy that I use. It doesn’t depend on importing, you don’t need to find perfect products, and I’ve made it hard to compete against. For me, it’s been hugely successful.

Why Private Labeling is Flawed
There’s a whole host of issues that make private labeling very difficult to do. In many cases, the business is certain to fail before it even gets off the ground.

Private labeling is about finding a “perfect product” – getting a home-run off-one shot. That’s more luck than skill. Good businesses aren’t based on gambling. When people go looking for the perfect product, they are going into an area where they already have competition – sometimes very stiff competition. There’s already an established player with months, if not years, of sales history that Amazon is going to reward in their search engine algorithm. You have to overcome that somehow.

Often it’s clear that a private labeler is selling a “me too” product, and at lower price points the difference in price can be very insignificant. If you sell for $22.95 and the established brand sells for $24.95, you are 8% cheaper. But realistically it’s just two bucks – not much of a competitive advantage. There’s often nowhere to go other than lowering the price further and further, cutting deep into your profit margin.

Private labeling almost always depends on buying from overseas factories. To do that affordably you need logistical scale and forward planning, so you can ship by sea rather than by air. Most sellers aren’t large or sophisticated enough to do that, so they have a lot of additional logistics costs.

You may also have quality issues because you haven’t been able to see the product beyond one sample. When things go badly they can go really badly, and you get unusable products with no recourse.

If you do manage to get established in private labeling, you can find other suppliers and sell wholesale. But you will have other issues getting the larger quantities you need, and handling much longer lead times. You’re damned if you do, and damned if you don’t – unless you can ride a perfect fine line where everything goes just right.

Focus on Suppliers and Build a Broad Catalog
I believe that you have to sell a large catalog of products to get enough revenue to make your business grow. The easiest way to grow a catalog with minimal use of capital is by using domestic suppliers. When you focus on suppliers in your own country, you avoid a lot of scaling and logistics issues you have with buying from China or elsewhere overseas.

Very few people even look at the opportunities out there for legitimate manufacturers or brand owners locally. You can easily talk and meet with them, make lower order quantities, have less risk and so on – pretty much the antithesis of buying from overseas.

When you go the private labeling route, and try to get your “perfect product” made, manufacturers might set a minimum order quantity of 3,000, or a minimum spend of $10,000. That’s a serious investment. Could you do better by spending the same amount of money on a range of products?

Often domestic suppliers have some products with a good sales history on Amazon, but a lot of other lines that haven’t proven themselves yet. Rather than buying 3,000 of one unit, you could spend your $10,000 with this company and buy many different SKUs in their catalog.

That allows you to grow inexpensively, but you’ve also varied your product offering and diminished the risk by spreading out your inventory. If the orange version of an item isn’t successful, you have only a few items to liquidate before moving on and putting more money towards the red and yellow versions that sell better.

Suppliers appreciate that you want to carry more of their catalog, and not just the bestsellers. One reason is that they can point customers to a retailer that carries their entire line, rather than sending them to shop around multiple places, or have them buy the main product from them but accessories from a competitor. Manufacturers truly appreciate it, and I have dealt with many who will vouch for that.

Manufacturers don’t need help selling their bestsellers, they need help selling their less established products. That’s where you can really add value. If you’re willing to take those on, and not just cherry-pick, they might be slow-moving products – but you’re still making money on every sale. You just buy more of the best-selling items and fewer of the worse-selling items. When you take on an entire product line there are benefits for you, and there are benefits for your relationship with that supplier moving forward.

Local suppliers can also offer technical support and warranty services. It’s important to become a good customer of theirs. If you become a good customer, they’re more likely to work with you on those kinds of issues. They won’t want to upset you if you’re going from $5,000 a year, to $50,000 a year, to $500,000 a year with them. You will gain a lot of stature, and they will want to be in your good graces. Once you’ve reached that kind of level, you’ll be surprised at all the extra value that’s unlocked besides just better pricing. There’s a whole new relationship once you get to be one of their top ten customers.

Finding Suppliers
The vast majority of sellers search on Amazon to find products first, and a supplier later. I do the opposite. I try to find a good supplier for products that I think might sell – because I know a specific space or industry, or I have a hobby so I understand the products and can scan through quickly.

Once I find a really good supplier, I try to figure out how to sell their products on Amazon. By taking this approach, I already know the strengths and weaknesses of the supplier and can find products they sell that are underexposed on Amazon. That’s where the best opportunities are. That’s where you’re not immediately running into instant established competition on Amazon. You have the opportunity to get in on the ground floor on what could be a quickly blossoming product.

What to look for
Let’s say you’re really into camping. You know what products you use. You know what brands you like, and you know what you would like to use but it’s more expensive, or more difficult to get hold of, or you just happen to use another brand. If you go to foreign suppliers, you can scan through lots of items that you know are generic versions of really established brands. You will also know which products are junk, not useful or not applicable to your part of the world.

If you’re looking domestically, look for companies that you can eventually become a big fish to. They should be established and have some distribution, so people in your interest group can relate to their products, but the company shouldn’t be huge. They should be established brands, but that’s “brand” with a lower-case B. They aren’t household names, and are only likely to be well known within a very, very small category. They’re not generic products either – there should be some meaning behind the brand name.

As an indication of size, the supplier might have one sales rep for one half of the country, and another sales rep for the other half of the country who you have to deal through. But they will work directly for the manufacturer – you don’t have to go through a distributor or wholesaler. Or you might talk directly with the owner or someone else high in the chain of command.

Also consider:

If you’re planning to dropship, they should have a really good dropship program already in place.
If you’re planning to use FBA, make sure you can get to really low pricing relatively quickly – if you’re willing to hold stock and put a few thousand dollars behind it.
It’s a big help that these brands are already established. There might already be reviews, and there might be clear sales, but maybe no one is using FBA. That’s one of the more obvious opportunities where you can say, “Wow, these items are big ticket items. They have 25 reviews and still no one’s using FBA, I can immediately scoot to the top as long as the pricing is reasonable,” and take over the vast majority of those sales.

How to approach them
If you go to the number one brand in any industry, and say you want to become a distributor, they’ll just blow you off and send you to someone else. Who are you? You’re Joe Shmoe working in his garage.

But for some of these smaller brands, if you’re willing to come out and talk to them, learn about the product and have confidence in it, and place a $4,000 stocking order, they’re not going to blow you off – they’re going to roll out the red carpet for you! They’ll be happy to give you the best price right away.

That might be a company that only sells two, five or ten million dollars a year. Their salesman is not going to turn up his nose at a few thousand dollars stocking order. If you’re able to sell more and more, buying say $250,000 of products a year from a company with sales of five million, you’ll be one of their top customers. You will be one of the first they tell about new products or discontinued products, and all of the other things you can get a market advantage from.

Try to focus on products that you have expertise in, even if it’s limited expertise. When you contact them initially make it clear that you understand their market, the quality differences between them and their competitor, and how neat their brand new product is. They will appreciate that, and know that they’re going to have fewer customer service calls if the person they’re selling to understands their product.

Once you have an established product, you can look at other companies in that industry. If you can say, “Hey, I’m a seller of brand A and brand B, and I want to carry your brand as well,” then you will have a lot of legitimacy. They’ll see that you already have customers for these products and they will want to be where their competitors are. It won’t feel like a guess for them – they’ll just want to jump on it.

Once you have one or two brands, even if it’s a private label brand that you own, you can show them that you already sell related products, and present them with the opportunity for you to sell theirs as well. It adds confidence that they’re not wasting their time with you. Private labeling can actually be helpful in getting to that point – to get a track record.

At some point someone will take a chance on you. It may not be the perfect brand, but if you put $2,000 in front of them they will start selling to you. It’s not as difficult to get that first brand as you might think. People overestimate the difficulty and the awkwardness of selling a brand that is legitimate and established. If you want to get into private label first, and then find domestic suppliers that can add to your line, that’s a good approach. But private labeling should not be the be-all and end-all.

Sell the whole product range
You might find that a supplier has a wide catalog, and a few of their items are on Amazon but many are not. That’s a situation where you can stock, and use FBA, for a few of their best selling products that are already on Amazon. Then do fulfilled by merchant (FBM) for their other listings and be the only seller on those items.

If a couple of those new-to-Amazon products become a hit, you’ll gain momentum with that supplier and become a bigger and bigger customer to them. You might be able to gain a logistics advantage, make bigger orders, and get special deals – so your cost per unit drops. If you don’t offer their whole product range, you wouldn’t find the potential top sellers that are not already on Amazon.

Brands that have some successful products, but not the full line on Amazon, can be a big opportunity. The products already selling will be your meat and potatoes, but the dessert will be all those other products you have access to that other sellers have ignored.

You might be able to have a dropship arrangement for the slow sellers. The supplier may have a small processing fee or percentage on top for dropship sales. Make sure you factor that into your selling price. For the vast majority of my dropships and FBM products, I make a much larger margin than my FBA items, because there’s little or no price competition. Sometimes I’m not only the sole seller of that product on Amazon, I’m also the only person selling it on the internet.

Selling the Products
The vast majority of my listings are not beautiful. They don’t have great pictures. They don’t have great bullet points. Some of them have terrible bullet points that are very generic – because I’ve used the same text for the entire line.

Private label sellers put a lot of effort into getting their listings perfect, so they can rank well against all their competitors. But when you have an established brand that you put on Amazon, there will already be people searching for that brand. As long as you have the best price for that item, they’re going to buy it regardless – because they’ve already decided that’s what they want to buy. They’re going to Amazon to buy, not to shop.

That’s the big difference with Amazon that people often don’t understand. A lot of times people who use Amazon have already made their decision. They just want to go to one place where they know they’re going to get a fair deal and quick delivery. When you work with established brands, you can spend more of your time sourcing and working with the supplier and less time prettying up the listings and images. It’s not a private label brand where you need to artificially create value – the value in the brand already exists.

Potential buyers just need to know that they are getting the correct item. If there’s any kind of technical information, make sure you include it because people use that to check it’s the right product. Images are the same – they’re important to show which product it is rather than to sell it to someone who’s just browsing. Making it clear exactly which model you are selling is 98% of the job. Other tweaks might bring some incremental sales, but most of it depends on the existing brand value – you’re essentially riding on the tail of it.

Developing the Supplier Relationship
As you develop the relationship with the brand you can go for exclusivity. I’m the exclusive Amazon dealer for many brands. I’m also the person that sells their brand exclusively to Amazon. Once you have a few of those, that’s again when you can reach out to other brands and say, “Listen, I’m the exclusive distributor on Amazon for these related brands. I think there’s some opportunity you’re missing. I can simplify everything so you don’t have to learn this whole sales channel if you can give me some kind of exclusivity or better pricing.”

There are plenty of opportunities for that, because there are a lot of brands out there where Amazon is not their main focus – whether it should be or not is a different story! If they can have someone who acts as their Amazon agent, they’re happy not to worry about that channel and gain exposure without the infrastructure and skills needed to learn it.

Once you know an industry a little bit and you find suppliers that aren’t on Amazon (or just barely on Amazon) you can sometimes hit it out of the park. One thing I do is go on Upwork.com, search for “Amazon” and find people looking for someone to manage their Amazon account. I’ll say to them, “Hey, rather than using this guy for $5 an hour on Upwork, I’ll buy and stock your items. I’m really good at Amazon, and I do this for a bunch of other brands. You don’t have to manage me, it’s just money in your pocket.”

That’s a very compelling pitch for brands who don’t really want to handle selling on Amazon themselves. It might sound intimidating, but it’s just an email. You send it and then move on. Not everybody will be interested. I sell a brand of bottled water exclusively on Amazon. Why am I their only seller? Because I asked!

If you can find a supplier that nicely fits with what you’re trying to do, and will support your needs, that’s when you can create a really excellent, mutually beneficial system. The nuts and bolts of how you manage the business, rather than making an Amazon listing prettier, is what makes it grow.

Management and Optimization
Once you have established your business it comes down to inventory and capital management. You will have a limited amount of capital that you are going to want to expand and use, either with a brand you already sell or outside to new brands. You don’t want a lot of dead inventory, and you have to be smart about the items that you stock and the items that you dropship.

Replenishment
You need to manage your inventory with specialist software. Early on you can probably use some of the replenishment reports directly in Seller Central, but they’re not very complex and don’t break down the data that well. I don’t have any financial interest in these guys but I use RestockPro from eComEngine – they also make FeedbackFive.

RestockPro is a software program that allows you to set replenishment alerts specific to your needs – based on sales in the last year, two days, seven days, 30 days and so on, and also set different order thresholds and lead times for different suppliers. Then you can filter by supplier and say, “I should place an order with this company soon, but I need to spend $10,000 to get the price point I want. Do I wait another week or do I add a few other products to round out the order?” You can really be smart about how you’re managing your dollars, to get the best combination of price point and capital investment.

Focus on buying
Once you have your suppliers on board, the business becomes much less about selling on Amazon and more about buying from your suppliers. Amazon brings the customers, and the existing brand name gets interest in your products, so there’s not a whole lot you can do to sell better – all you can do is buy better. It becomes a totally back-end focused business, and there’s much more certainty in that because you have a direct relationship with your suppliers (unlike your customers) and can work with them to solve your pain points.

It’s a systematized business, not something where you’re speculating on random products and buying 500 units to take a chance on. That’s not a systematic approach – that’s just trying your luck. With my approach you can just calculate the price you need to buy at, then very predictably say, “I’m going to make $40,000 from this line if I just keep buying this quantity every two months for the next six months.”

Pricing
Pricing is not straightforward on Amazon. I highly encourage people to use a repricing program. The one I use, Feedvisor, is expensive but I believe it’s the best option if you are at a certain scale. It is about algorithmic pricing versus just having the lowest price.

Repricing is a huge deal when you’re selling against multiple other sellers. It isn’t always a race to the bottom. If I’m the only Prime seller or have a better seller rating, Feedvisor actually prices many of my items higher than I would normally sell them at. You just have to trust the algorithm to figure it out. There are some items I can sell for $18 more than the next guy and still get the Buy Box 90% of the time.

I don’t have competition for many of my goods so I don’t use Feedvisor on those. Instead I have a standard mark-up and some specific adjustments. I make it worth my time if I’m going to sell a low ticket item that only sells every once in a while.

For most of the products that I dropship I have no competition. The customers that buy those products are either determined to buy from Amazon, or the product isn’t available anywhere else on the internet. In those two situations you have a lot of pricing power. I’m not really interested in monitoring prices across the whole internet, and I’ll sell fewer to people who shop from other websites. Amazon is focusing more and more on keeping customers loyal, so it’s those buyers that won’t go elsewhere that I focus on.

Cash flow
If sales are good and you want to make a transition from say, dropshipping to stocking, you have to keep track of capital, inventory and price structure. Ask yourself three questions:

If you are willing to buy a larger quantity, will your supplier give you a better price?
What payment terms can they offer you?
What does that mean for your margins?
If you have limited cash, say only $10,000 to start with, and you’re dealing with some higher ticket items, you’ve got to be very mindful of what is realistic. If you see some really awesome opportunities, you may have to find extra cash to make those happen.

But you don’t want to get in a situation where you’ve invested all your money into slow-moving inventory, and your bestselling products sell out and you can’t replenish them. When you’re going through a growth spurt, you are almost certainly going to be cash-poor, because everything’s going faster than you realize. That’s when you’ve got to be extra diligent with counting the pennies.

Feedback
It’s a lot easier for people to understand that a product failure is not your fault as a seller, when you’re selling an established brand. With private labeling, if you sell XYZ products and your business name is XYZ, then they’re going to associate that failure in the product with you as a seller.

The brands I sell tend not to have many quality problems. An established brand that’s been around for 30 years hasn’t stayed in business that long by ripping people off, they’ve stayed in business by offering good products. Selling brands can even help balance out the quality issues you often get selling private label products.

In Closing

I started this post by talking about the shortcomings of private labeling. But private labeling isn’t fundamentally flawed, it’s just not used strategically. You can actually approach private labeling with the same supplier-driven thinking as you can for branded products. Instead of looking for a single perfect product, look for a supplier of generic products who has a whole product line that you can grow into. There are a lot of opportunities for that.

I’ve focused here on working with domestic suppliers, as it’s a source that is often overlooked. But the scale and experience you gain from working with domestic suppliers translates directly to working with overseas suppliers. Scale is particularly important when you’re ordering from overseas, so you can order container quantities rather than small packages. There’s nothing intrinsically wrong about working with foreign companies, but choose them for their overall product line, not just a single product.

You can also use private labeling very well alongside branded products. When a particular brand model sells well, we’ll often go out and private label a similar product. Why would we compete with ourselves? From selling the branded version, we can see where a private label product would fill a gap in the product line-up. Then when someone searches for that category of product, instead of having four listings in the top ten, we might control eight out of ten. We even have situations where all of the top ten search results are our listings. Unless they go to page two, we’re going to make a sale!

Any questions? Fire away in the comments below.

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