There are many ways to make a living on eCommerce sites like eBay or Amazon. Retail arbitrage, where sellers buy clearance or sale items and then sell at retail prices online, is perhaps the most common way. Another option, which more sellers are beginning to consider, is creating your own private label. This can be a tedious process with considerable upfront costs (anywhere between $50-$5,000), but awards individuals an opportunity to grow a lucrative brand and business.
It’s becoming more and more difficult for those performing retail arbitrage to turn a profit in an eCommerce world that’s becoming saturated, increased restrictions from purchase sources such as Target, and new Amazon brand restrictions. It’s time to start considering options that will transfer the control of your businesses from eCommerce marketplaces to where it should be-- in your hands.
So What’s the Deal with Private Labeling?
Like most businesses, there’s a lot of work in the beginning finding a sellable product, a trustworthy warehouse, and an appealing brand. However, after the initial investment, you can scale your participation depending on the type of income you desire from it.
If you want a passive supplemental income (maybe >$2,000 per month) then once you’re setup, you can take a huge step back. If later on, you find you want to add additional products to grow your brand and start making it your primary business, you also have the option to step up and start growing.
The great thing about private labeling is that you can scale it to be as large or as small as what best fits your life. I know the process can appear daunting, and without a little help it’s hard to figure out where to start. So, I’ve tried to make the process easier by providing you with all the tips you’ll need to get started below.
[For a more condensed version, download the Private Label Infographic here]
Step One: The Product
I think now is a good time to tell you something. When you start reading this, the process is going to seem exhaustive and impossible. The good news is that most of the heavy lifting is in the preparation. It’s the most important step, and one that will take up the majority of this how-to.
So, without further ado…
The first, and most obvious step: you need a product. The good news is, you don’t need a master’s degree in business, or be an eCommerce wizard to choose one successfully.
How do you go about picking one?
Fortunately, most online marketplaces do the work for you. The first thing you should do is check out the best sellers on eBay and Amazon and see what’s already selling well. Finding bestseller rankings on Amazon is easy, there are even companies that help do it for you, like Unicorn Smasher (yes, that’s their actual name and yes, it’s FREE).
Unfortunately, eBay can be a little trickier. You can subscribe to eBay Marketplace Research, which makes this process pretty seamless, or use a tool like MerchantWords to find trending products. Another (free) option would be to checkout eBay’s trending collections. There’s absolutely no shortage of softwares to choose from to perform research on keywords and bestsellers. An example of one would be Terapeak, which has great features like product sell through rates and even offers a free trial.
While sorting through all these products, you’ll want to look for a product that has a ranking of less than 1,000 and has less than 1,000 reviews to ensure the market isn’t already saturated. Next, check out your competition. How many other people are selling this product? Ideally, your competition should have average or (better yet) below average quality. If they have measly descriptions and only a few pictures that do a lackluster job of showing the product-- that’s good news for you.
You may have to compare what’s selling well on Amazon to some of the “hot” sellers on eBay to get the best picture of how a product is doing online. Mostly though, it involves doing a lot of research to find the right product that both speaks to you and your potential customers.
This process takes time. This can take anywhere between a few hours to a few weeks for you to find the right product. It’s better you spend the time on researching now, rather than losing passion or (more importantly) money on the wrong decision later.
Step Two: The Supplier
This step is usually met with the most objection. That’s because China is still the dominant player in contract manufacturing. So, if you’re a little reluctant to outsource to China, that’s totally understandable. But you’re going to have to work a lot harder to find a manufacturer in the United States that will be able to offer you products at a cost you can turn a profit on.
While I can admit the idea is scary, you’ll be hard-pressed to find a successful private label eBay seller that doesn’t outsource to China.
So where do you find one? Well, I’ll admit there are several websites that will do some of the manufacturer negotiations for you, like Trillion Source. However, we’re going to focus on making you as much money as possible. So, my suggestion is to start your search on Alibaba. Conduct some searches for your ideal product and scroll down to the product descriptions. If you see something that says custom accepted, customizable, branding, white labeling or (most likely) the term “OEM” (original equipment manufacturer) that means you can use them as a manufacturer for your private label product.
I recommend looking through their reviews to make sure they have experience and reputable. When you begin contacting manufacturers, keeping a mental note of their response rate as you communicate with them. They’re located across the world, so you can expect some delay in response, but just keep in mind that their response rate may only get slower once they already have your money. So, with anyone you conduct business with, pick someone you can trust.
Manufacturers may they charge you to print your logo on your product. Many either include it in the price or provide the service for free, but some will charge you some miniscule amount per item.
Ideally, you should look for a manufacturer that does not sell directly to customers. Using ones that only sell through third-party vendors (like you) means the market is likely less saturated with those products.
It would also be good to keep in mind that most manufacturers will not accept PayPal (this is normal). In addition, don’t be surprised if they accept PayPal for your first sample order, but refuse to use it later for your full orders. They may do this at first to show goodwill, but most greatly prefer (insist may be a better word) to use cashier’s checks or a money wire. So, in general, just be prepared to be disappointed when they refuse your PayPal payment.
Step Two and a Half: The Sample
Okay, so let’s get into specifics.
You have a great product and a manufacturer you can trust. Next, you need a sample. You’ll need to be as specific as possible. What may seem obvious to you, may not be as obvious to someone else, and the language barrier will only hinder communication further. When possible, send pictures, drawings, and written details about the specificities of your product. Once your product is shipped to you, there’s usually no returning it-- shipping is expensive and most manufacturers just won’t do it. So it’s best to get as many samples are as necessary so you aren’t stuck with thousands of useless product.
When you think you have every detail accounted for, you’ll need to order a sample so that you can make sure it’s meeting your expectations.
However, what you’ll find is that most manufacturers have a minimum you are required to order at a time. It’s time to drum up your negotiation skills (and get used to using them) because you don’t want to get stuck with a huge order that has your logo printed incorrectly or doesn’t meet your brand standards.
Manufacturers are usually willing to negotiate the quantity for your first order if they think you’ll return for more orders in the future. Tell them it’s a sample and show them you’re trustworthy and interested in working with them. While admittedly, it may be a little frustrating to buy fifty or a hundred of a product that you’re not sure you can use, the investment will be much less costly than purchasing 500 units of something with the incorrect logo. You can use this order as an opportunity to disperse your product to friends and family to get their opinions on your branding and the product itself.
Keep in mind that most of the quantities and prices you see are negotiable. You really don’t (and shouldn’t) have to settle for whatever cost they have listed on the website. Do a lot of research and make sure you’re starting off with a good product at a decent cost and then see where negotiations can get you from there. Keep in mind people negotiate these prices with them all the time.
Step Three: Shipping
Shipping basically comes down to two options: air cargo FOB or boat.
While having your products shipped by air means they’ll get to you a lot faster, as you probably expect, it’s going to cost you a lot more. However, don’t even plan on getting your inventory in less than a month if you decide to go by boat.
Delivery by air means it can be delivered directly to your home, warehouse, or FBA location. With that being said, the downside to boat delivery is that sometimes getting it out of the port it’s delivered to may require a bit of planning and logistics. You’ll need a freight forwarder for custom negotiations and fees.
Step Four: Your Brand
While your product is making its long trek across the sea (whether by air or boat) use this opportunity to create and curate your brand. Consider where you see your brand five years from now.
When picking your brand name, consider what other products you may begin including as you expand in the future. For instance, if your first product is a coffee mug featuring terrible celebrity mug shots, but you plan on expanding to all kitchenware, then you don’t to call your brand, “Mugshot Mugs”, because it wouldn’t be applicable to your other products.
Next, and perhaps the most fun, is picking a logo.
Try to keep it simple. Adding a bunch of colors and intricacies into the design will both cost you additional money for printing and likely not show up well when scaled to smaller sizes. There’s several websites available that artists offer their services to design the logo for you. I’d recommend checking out Fiverr as a start, however I’d recommend checking out several different websites and artists. Think about investing $50 on logos from several artists so you have several options to choose from.
When choosing your name, make sure it’s still actually available. Do some google searches or use a site like Namechck (yes, without the “e”). Choose a name that has as many social media and domains available as possible. If just one thing is taken (like Twitter, Facebook, or Instagram) then see about reaching out to purchase it from the individual. Ideally, however, you only want to use a name with an available domain, because in the long-run you should be thinking about growing your brand and business outside of eCommerce marketplaces and selling on your own website.
After spending all this time creating your brand and product, you should consider spending a few minutes to protect it. Look into what it takes to copyright your name and logo. Creating an LLC (limited liability company) may save you some headaches down the road.
Step Five: Create a Killer Listing
So you have the product, the manufacturer, and the brand. The only thing left to do is create a listing that’ll show all your customers why they should buy from you. This is where many sellers drop the ball (and you have the potential to pick it up).
You spent ten minutes reading this article and taking notes, and months creating your product. It’s ridiculous to slap it online and just expect it to sell itself.
Invest in a professional photographer or at least a lightbox to get quality pictures taken with your product. If it’s a lifestyle item, make sure at least one of the pictures in your listing includes someone using your product. Unprofessional pictures reflects on you as unprofessional. And why would someone want to trust a company that isn’t?
Include as much detail as possible in your listing. Keep it brief and bulleted for the beginning of the description then go into more detail of the products and features below. This allows people to easily scan the information they’ll need and then read further if they have additional questions.
A common thing people forget to include is the product measurements. Including this simple thing can reduce returns. It allows the customer the opportunity to set expectations according to your description so you don’t get return requests reading, “it looked so much bigger in the picture”.
For more information on listing optimization, check out this article we wrote, just for you.
So here’s a brief recap:
Look for a product with minimal competition, but is already selling well. Once you’ve researched the product, find a reliable and trustworthy manufacturer that offers OEM. Request an initial sample order from your manufacturer and negotiate the price and shipping. Create a brand, logo, and foundation that you can grow past your initial product and the umbrella of eBay and Amazon. Finally, create a killer listing that’ll introduce your baby to the world!
As you can see, creating your own private label is not a get rich quick scheme you can implement overnight and hope to become an instant success. Like most things worth doing, it takes time, planning, and sometimes a little luck. The most important things to remember is to be be patient, vigilant, and detail oriented.