PRIVATE LABEL TIPS AND PRECAUTIONS
One rule you should have as a business person is, “Always assume that it’ll be more expensive than you think.” I find it wrong and misleading when so-called Amazon FBA Masters, underestimate the expenses that go into owning a Private Label business. There are those that claim that you can start a Private Label business with as little as $1,000. That, my friend, is setting you up for failure. Consider all possibilities when drawing up your FBA budget.
Budgeting the cost of manufacturing a product is simple enough. After all, you negotiate for products that have a minimum quantity and price range. Depending on your product, your unit price can range anywhere from $0.10 to hundreds of dollars (if acquiring private label electronic machines).
What matters instead are the hidden costs leading up to obtaining the product. Most often than not, you’ll need to get samples from the manufacturing company. Depending on the type of product you want to be manufactured, you could be dealing with $0 – >$100 in sample costs.
If you intend to launch your store with at least 5 Private Label products, you should anticipate hidden sample expenses ranging from $0 – $500, if not more.
In addition to hidden costs, what else could throw off your budget?
What would happen to your storage budget, if your store doesn’t make a sale for a while?
Budgeting Pitfalls
Well, for starters, your storage expenses and budget would invariably increase. Therefore, draw up a budget that will give you at least 1-6 months leeway. Should you have zero or low sales, your budget should be able to sustain you.
Should your product be returned by the customer, say faulty goods, etc. Amazon will charge you a return fee. Depending on the actual value of your product, it is vital that you track every return and dispute fraudulent ones ( http://www.fulltimefba.com/how-to-handle-fba-returns-minimize-loss/ ).
Manage your inventory well and be careful to budget for products given away via coupons, freebies, and other giveaways.
Limit the amount of money that you spend on FBA courses, software, plugins, search engine extensions, etc. These add up quite a bit, seeing as some FBA online courses are priced starting at $1,000. Sure, it helps to have step by step detailed guidance and mentorship. However, I would advise that you conduct thorough research on YouTube and Google. There’s tons of free FBA information out there! The more you research, you’ll discover the most critical FBA tools to purchase, e.g., Jungle Scout and Viral Launch.
Read: https://www.junglescout.com and https://viral-launch.com
If you approach your FBA Private Label budget with the necessary precaution, you will most certainly prosper ( https://blog.usejournal.com/how-much-money-do-you-really-need-to-start-an-amazon-fba-online-business-d273a29df3b9 )
Business Acumen
While entrepreneurship comes naturally to some, to others running a business might as well be nuclear physics. Not to worry, there are tons of free and paid resources both on and offline. Make good use of blogs and free YouTube tips.
Study, and you’ll slowly but surely transform into an FBA business mogul. Udemy.com offers affordable online FBA entrepreneurship courses priced at less than $20. Be sure to read the program descriptions and reviews and select a suitable FBA course ( www.udemy.com )
We are genuinely delighted to help you along, on your FBA journey!
Feel free to enquire from your church, library, and neighborhood community center as to any entrepreneurial training and resources that will further your FBA business agenda.
Making profits and product pricing
When determining the sales price, take into consideration: Amazons fees, return fees, product manufacturing, packaging costs, shipping, 3rd party inspectors (if needed), giveaways, running ads, defective unsellable products, scams, taxes, etc.
Here are some recommended pricing, tax, and plugin software that will help you price your products and run your store ( https://www.repricerexpress.com/12-great-amazon-tools-for-sellers/ )
Realistically calculate your profit margins. What percentage profit are you hoping to make? 10%, 20% or perhaps 50% , 70%, 100% profit margins? A 160% profit margin sounds great! However, does that margin help you compete favorably against similar products? Without attractive product pricing, you will not get sales. And also…
“Those that show you their amazing sales figures are not showing you their profit and loss statements. So only believe the videos and articles that reveal profits and losses, alongside amazing sales numbers.”
Private Label Manufacturing options:
USA vs. China
Seems pretty obvious right? Um, no.
Chinese manufacturers for affordable quality products, absolutely YES!
Chinese manufacturers for products that are organic, vegan, gluten-free, no MSG, no additives added, etc.
NO!
Try European manufacturers instead. Even better, “Made in the USA.”
Get my drift?
If you plan on dabbling in organic products, your sales will fare better if you manufacture your products in the USA, versus China. Sure it is more expensive to make products in the USA. However, the organic and vegan customer base will be more inclined to purchase a product manufactured in the USA.
With organic products, be they food or toiletries, I have found that USA customers prefer to see the, “Made in USA” label.
This preference has a lot to do with customer perception. USA shoppers trust the USA’s quality testing, compliance, and safe manufacturing track record. All connoisseurs of organic products, edible and inedible, look out for, “Made in the USA” labels.
Therefore when choosing a manufacturer, consider:
- The type of product e.g., organic breakfast cereal vs. generic smartwatch
- The customer e.g. bougie up-market vs. Suburban housewife
- The profit margins you want to achieve
These three work in tandem when considering your product and manufacturer of choice. In the instance you want to sell organic products, it is best that you obtain a manufacturer from the USA or Europe.
The Pros and Cons
Generally speaking, manufactured products from China and the USA have their pros and cons:
USA Pros:
Made in USA label (trusted), readily available for shipping to a nearby fulfillment warehouse, quality manufacturing, rigorously quality tested products
USA Cons:
Expensive manufacturing costs, less profits, reduced competitive pricing
China Pros:
Cost effective manufacturing, more profits, highly competitive pricing, streamlined hi-tech Private Label processes
China Cons:
Fraudulent manufacturers, long shipping schedules.
Shipping Private Label Products from China
Shipping FBA Private Label products from a United States manufacturer is simple enough.
Shipping from China is a whole ‘nother ball game.
Take into consideration these important points as you contemplate United States or China Private Label manufacturing.
Air courier, Air Freight or Ocean Freight:
Depending on your products weight, you’ll have to determine the most cost and time effective shipping plan. Leading up to the launch you may ship your items via ocean freight. However, post FBA launch, if your product gets amazing sales, you’ll have to urgently restock. This will require you to make new orders and have them mailed by air. Ocean freight can take 30-45 days, air courier takes 3-5 days and air freight is the most commonly used option for light items as it takes 10-15 days. Therefore consider your shipping logistics is a pertinent part of your FBA Private Label plan.
3rd Party Inspection
Hiring a 3rd party inspector is to be seriously considered. You have the option of having your items inspected in China or the USA. Most Private Label owners’ prefer conducting shipping inspections in China, to reduce on the practice of having damaged goods packaged as sellable. It wouldn’t make any sense to carry out product inspections in a USA port, upon arrival of the shipment.
While there’s a lot more to be considered, with these two main shipping concerns taken care of, the logistics of manufacturing and shipping from China become a breeze. Read this for more info on importing and this for tips on cutting costs.
The importance of excellent reviews and quality products
As an FBA seller, you are free from the sometimes thankless task of dealing with customers. You may be aware that some customers can be quite high maintenance. Thankfully, Amazon handles customer queries, returns, and refunds.
Amazon customers:
Write reviews and grade your products quality by alloting gold stars
Reviews can be good or bad. Be aware that Amazon takes customer reviews very seriously. It rewards stores that have good track records and penalizes stores for having poor and fake product reviews.
A 2013 consumer report stated that:
79% of consumers trust online reviews as much as personal recommendations
85% of consumers say that they read online reviews for local businesses
73% of consumers say positive customer reviews make them trust a company more ( https://www.wordstream.com/blog/ws/2014/04/10/amazon-reviews )
Plugins such as http://www.salesbacker.com/ follow up with customers to obtain reviews and recommendations. SalesBacker does not create fake reviews but instead communicates with consumers, to request real reviews.
You get both product reviews and seller feedback from SalesBacker. Best of all, it informs you of all the negative reviews made on your products page in real time, so that you can respond to, say, an irate customer, in good time ( www.salesbacker.com ). Please note, FBA handles all detailed inquiries about your product.
And finally
Pay attention to every poor review and star grade given so as to improve or change your product and or supplier.
Above all, provide good quality in-demand products with fantastic packaging. Don’t underestimate the power of creative packaging; you’ll be amazed at how emotional people get about packaging.
You are now well on your way to becoming an FBA expert!
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