"Build" Guide - how to Build your Private Label Business
Want to start selling on Amazon? Where to start?
The standard answer for a few years has been – by plunging straight into private label.
As that’s how I started myself – and eventually succeeded, until recently I taught that myself.
I’m no longer convinced
But after 18 months of mentoring people trying to start selling on amazon, and a year of masterminds mostly focussed on those, I’ve seen the struggles up close. I’ve seen inside too many businesses and too many minds. It’s a hard way to start.
All business has challenges starting. That’s a given. You need a tough mindset. I just happen to think that in late 2017, the old model just isn’t cutting for those who are trying to start selling on Amazon now.
Are you still focussed on Private Label?
Yes I am. I believe private label on Amazon is still a big opportunity. I have many friends making loads more money than me to back that up. It’s not theory.
So I believe that Private label – and even better, developing unique products -works on Amazon.
However, when it comes to how to start selling on Amazon, that’s a different kettle of fish.
I think the irony is that by prematurely plunging into private label, many sellers actually miss out on properly executed private label. How can that be true?
It’s simple really. They blow their budget on the first budget. They bust their confidence in the business model, and indeed in themselves. And then they quit too early – and miss out on $10s or even hundreds of thousands of dollars of revenue per month
I’m not talking about what the overall goal is – rather, it’s about how we GET there!
Also I’m increasingly happy with whatever WORKS rather than being puritanical about business models.
As I’ve talked over the past two years to many Amazon experts, it’s clear from the sharper people (especially the master himself, Will Tjernlund ) that there are several models that can work. And you don’t have to start with private label.
Focus is good and learning a particular set of skills- but so is PROGRESSION:
from simple to advanced; from low-risk to higher risk; from quick wins to projects that take months to come to fruition.
There is a natural progression in terms of risk in the various business models available to ecommerce sellers in general, and ways to start selling on Amazon in particular.
It’s like my old job of piano teaching.
Sure, I can teach little Johnny to seem like an accomplished pianist by teaching him or her three specific pieces and about 10 scales. You get a certificate, you look good, the parents are happy.
Trouble is, he doesn’t know his way round a piano, he can’t read the music, he can’t play by ear, he doesn’t understand what he’s playing or why…in short, he’s not becoming any kind of real musician. Or any kind of real pianist.
He’s aping the real thing. But he’s basically little more than a trained monkey.
Put him in any situation that demands real understanding of music, or real control of a piano, and he is finished.
My experience with Amazon sellers who try to learn how to start selling on Amazon with Private label is remarkably similar.
Indeed, it mirrors my own journey as an Amazon seller myself. And it also mirrors my journey as a piano student/musician to a frighteningly similar degree too.
That’s not surprising. There are a lot of vested interests in trying to “pre-package” business building skills and mindset. Same as there were in pretending you can become a pianist, with 20 minutes’ practice a day and three pieces at a time, with some bullshit “grades” scale.
(By the way, I have 7 years’ higher education in classical music, I’m engaged to a pianist – so this is not the ranting of an amateur. On the contrary. It’s the ranting of an ex-professional).
Both things, I’m afraid, while much better than doing nothing in terms of progressing, are basically based on a totally false premise. The false premise being that you can learn the piano by aping much better pianists’ external results – or by aping the actions of advanced Amazon sellers.
Instead, what I’ve seen overwhelmingly is that all of us entrepreneurs need to develop the right mindset and skills. And those come from experience.
The truth is that there is no substitute for learning overall business strategies and tactics. Nor is a substitute for learning by experience.
You need to learn to understand what you see in the data; to READ the data. You need to learn the landscape of a marketplace. Everyone has to learn how the mechanics of production, freight and amazon work. You need to get familiar with Amazon’s internal processes.
All this takes time and practice. It doesn’t need however to be a painful, high-risk, uncertain gain experience, like that of the big private label approach.
Practice makes you better. Planning for months, selling nothing, then sending half your life savings across the world suddenly…well, that is NOT such a great way to practise becoming a better online seller. Nor to start selling on Amazon specifically.
Am I saying private label is dead then? Is it true that nobody should start a private label business on Amazon? Is private label only for the rich or the super-experienced online maverick?
No, no and no.
That is NOT what I’m saying. I want to be super clear. I think the opportunities to make a ton of cash and have the satisfaction of becoming a real entrepreneur (and mastering a tricky but addictive craft) are very real with private label. And even better with original tweaks to a product.
But both models take serious investment of money, time and energy into each product line.
That is fine, even very important at the right point in your development as an Amazon seller, or as an entrepreneur.
But you don’t have to START learning to mountain climb by training in a gym for 3 months, studying maps and theory incredibly hard, then attempting the Himalayas as your first set of mountains.
Sure it’s been done – I read about exactly that in the news a while ago.
There’s a clue here. It’s news – because it’s the exception to the rule!
You don’t have to START selling on Amazon by scaling a private label mountain either.
Again, yes there are exceptions. Again, we read about them and the buzz goes around. Because it is NEWS. Because -I’m sad to say, after trying this way for so long with newcomers – it’s unusual to succeed that way.
So is this a reason to be depressed and quit?
Maybe – if you are the sort of person who quits easily. In which case, please don’t attempt to become an entrepreneur.
Most people shouldn’t scale the Himalayas and most people probably shouldn’t be entrepreneurs either. And that is absolutely fine.
Most people don’t have the mindset, stamina or sheer hunger of an entrepreneur, and there is nothing wrong with that. I’m not a rugby player – despite being forced to play it (very badly) at school. Yes, I admire good players – but I don’t feel a failure because it doesn’t suit me (my sports teachers at school had a go of course…)
Most people who are a right for a profession build skill, fitness and experience one hill, one mountain at a time. If they get on well, they move to the next natural level.
Business is no different – and Amazon is no different to business. Just because Amazon has built the world’s most amazing traffic and conversion machine shouldn’t blind us to the fact that normal business rules still apply.
The economics and business principles are the usual:
Supply and demand. Risk-reward ratios. Opportunity cost.
The mindset and skills needed are the usual ones too:
The skills of assessing the supply and demand balance in a market; assessing risk vs reward; weighing up opportunity cost (if you go for one opportunity, you tie up the money and time that could go into another);
The mindset of a blend of vision and opportunism; pragmatism with some theory and imagination; discipline with flair and improvisation……and so on…
I personally think anyone wants to have a serious crack at building a business and becoming an entrepreneur has never had such opportunity at their feet. And if you want to go for it, I think you should go for it.
There is no reason for anyone to exclude themselves from becoming an entrepreneur.
But wait – isn’t that against everything I’ve been saying in this post?
I want you to have the maximum chance of success, not to exclude you from the club.
What I am saying is that starting an Amazon business with private label does not maximise your chances of succeeding.
Instead, what you should do is read my next post and consider a much lower-risk way to learn your craft as an Amazon seller!
(Now there’s a cliff-hanger…!)
Thanks for reading.
(By the way – well done for reading to the end. Now there’s a hint that you have some stamina. You’ve passed the first test, oh Jedi. If you’re British, Click here – I think you may have what it takes to join the real business builders.)
(Sorry, I couldn’t resist putting a little teaser at the end too! I’ve got to have fun too, you know…)
It’s just a matter of contacting the brand when you find an ugly looking Amazon listing. It takes 60 seconds to do a Google search to find their contact information and send off an offer. It doesn’t make sense when people say that they’ve been eyeballing a company for two months and can’t decide whether or not to pull the trigger. Just contact them and move on. If there is something that you need to do that is causing you anxiety, just pull the trigger and do it.
Vendor Express is for everyone, anyone can sign up. Vendor Central is invite only. They are basically the same. Instead of sending inventory to Amazon and waiting for it to sell, Amazon will place purchase orders with you. As soon as they place the order and you ship it to them, it’s already sold. For some companies, especially bigger companies, it works better with their cash flow. This way their inventory only leaves their warehouse after they’ve been paid rather than sending off $40,000 worth of inventory and waiting three months to get the money.
Plus, once you’re in Vendor Central, it says your product is shipped and sold by Amazon. You get invited to Amazon marketing services that allows you to put videos in your listing. It allows you to make your listing an A+ listing where you get images in your description.
Some companies have negotiated it down to 30 days, but for the most part Amazon pays you every 60 days. Some of these old-school U.S. vendors still have 60 and 90 day payment terms. So if you can get one of these vendors, you can grow on vendor central forever. You can buy $100,000 worth of product from the distributor, sell it to Amazon for $130,000, then you don’t have to pay the vendor until you get paid from Amazon.
This works well for bigger, established companies that can have unpaid accounts. But if you’re small, not getting paid for 60 days can kill you.
Unlike Seller Central, you can’t edit your images and description whenever you want to. If it’s, something like 90 days old, you have to email them and ask them for permission to edit the listing. It’s annoying that you have to contact them to do stuff, but the plus side is that when you contact them, they are willing to do a lot more. If you’re on Vendor Central, then you’re seen as more of an established company rather than some random seller on Seller Central. They trust you more and that you’re trying to do what’s best for the company rather than trying to find loopholes.
They’ll combine duplicate listings, it’s easier to take down people that are selling bogus stuff. There was one company that had a cheap product for people to retail arbitrage. It had about 30 listings for the same product from all these different sellers. Will went to Amazon, had them combine all of them into one listing. It’s now the #1 listing in its category. It had 3,000+ reviews from all the different listings. Then they went and gated that listing, kicked off all the other sellers, and the company he’s working for is making a lot of money from this product, whereas before, they weren’t making anything.
You can make parent-child a lot easier on Vendor Central, if you have a high ranking product already. Or under one SKU, you can bundle together multiple ASINs. If you’re selling a fishing rod, and the parent-child, comes with different fishing lines. Those are two different ASINs, and they’ll actually combine those in Vendor Central. Whereas on Seller Central, you would be sitting there trying to do giveaways. Or I can take it seriously, wipe out the competition, add all the bestsellers to the number one listing, and really take this thing to the next level.
The one or two unit orders are just going to happen. Especially, if you have a small catalog with only one or two SKUs. If you have 1000 SKUs, then one or two units of each product isn’t that big of a deal. The main issue is price control because you don’t know what Amazon is going to sell at. With a lot of these brands, they want to know they their products are selling at the right price because they don’t want to screw over their brick-and-mortar stores. Whereas Amazon will sell it at whatever price they want, even below cost.
Another big issue Will had with a client, was that there was a hot seller in that category, and then they have Amazon basics, and they had the third best one, and Amazon quit placing purchase orders. They had someone in Vendor Central, and they had their AmazonBasics, they didn’t need another. Now that one listing, they also had on Seller Central. If Amazon doesn’t order it, then it’s not in stock. If it’s not in stock, then it can’t be prime. Then they can’t run PPC. Since it didn’t sell, Amazon wouldn’t order it. It was a vicious circle. To fix it, they had to kick-start it on Seller Central, generate some sales to remind Amazon that it actually does sell.
The best thing is to sign up immediately. Amazon wants a lot of SKUs, they don’t really care about the price. So if you have a catalog of SKUs, like 100, then Amazon will get a lot more excited than if you had just one.
Minimum number of suppliers. Good luck having 50 SKUs, from 50 different suppliers. However, if you have one supplier that has 50 SKUs, then they add 50 more. Will’s brother added a supplier with 10,000 SKUs. He put then on Vendor Central and Amazon order one of each. He sold 10,000 units that day.
Adam has been an entrepreneur for over 20 years.
Adam got started right out of high school. He knew he didn’t want a boss and was captivated by the idea of entrepreneurship. He has had several businesses but not focuses solely on Amazon. He has had online and offline businesses including a flight simulator business, hair salon, and a finance company. He has a very diverse background, to say the least. Selling on Amazon FBA came more recently.
Adam got into selling on Amazon FBA part-time while he was running an animation business. He sold that business last year and moved away from service businesses in order to start a product business with Amazon. Part of the allure of products is that it gets away from the “selling your time” type job where you make more money the longer you work. With products, once you do the hard work and develop the product, you can sell it all over the world and get paid over and over.
His animation business was growing and financially successful but he had a lot of people and a lot of moving parts. With products, it so leveraged and you can get away from that.
As a business guy, Adam found Amazon very impressive. It’s a phenomenal company. In terms of their growth and numbers you know they are doing it right. He really loved that you didn’t have to build a website, that you didn’t have to find the customers because they were already there and that they handle fulfillment and shipping. FBA just changed the rules of product distribution. It was appealing to sell into the biggest markets in the world from wherever you were. To get more of Adam’s thoughts on the Amazon opportunity, CLICK HERE
It definitely isn’t according to Adam. He did an experiment this year. He started with 6 products that launched in February or March to test what it would be like for a newcomer. They are currently around a million dollar a year products at this point. So it isn’t too late. There is a lot of opportunity to those with the necessary education.
It’s interesting because right now his European business is doing about 70% of his US business. What’s truly amazing is that his cost-per-customer (CPC) in Europe is about ⅓ of what it is in the US. Also, Europeans give more feedback than Americans. He has automated emails that go out and he gets about twice as many emails from UK residents than the US.
Adam is in .com and then Spain, Italy, Germany, France, and the UK.
The US is always appealing because it’s so big but because it’s so big means there is a lot more competition. Also, America is home many of the Amazon course gurus that have pumped out a lot of courses to those wanting to start an Amazon business. The challenge is that there are a lot of sellers that have been educated on the same strategy at the same time. So America is still a great opportunity if you have the right education and the right lens. You can’t beat the US market because it’s so big and broad.
However, if you live in the UK and feel more comfortable working there, Adam would recommend starting in the UK. It’s a fantastic market, much easier to access, much easier to rank, and a much more appreciative group of consumers. However, if you don’t live in the US or the UK Adam recommends starting in the US because it’s much easier to get started. The regulations for foreign sellers are a lot tougher in the UK and it’s a lot easier to get your account set up in the US.
Another issue is that not everyone is registered for VAT and many people won’t until Amazon requires it because it will add 20% to your prices and put those that register at a disadvantage.
One of the biggest promoters put out a course telling people to sell items for under $40 with high Best Seller Ranking. When they first launched they recommend being in the top 100 of any category. Once they began selling this idea they realized they needed to expand because they had 5000 people looking to be a top 100 in about 15 categories.
One of their flaws was the emphasis on BSR because it doesn’t really matter. That only measure who sells the most. But in business, it doesn’t matter how much you sell, rather how much margin you make. That’s the difference between turnover and leftover. Adam is looking for higher margin, less contested spaces. People don’t realize how massive Amazon is. Over 2 million sellers with hundreds of millions of products. There are a lot of unsophisticated sellers that have two images with ten reviews and are on page one. There are a lot of small sellers that looked for cheap products with high turnover where anyone can get into it. What Adam looks for is something that is difficult for people to compete and isn’t as obvious.
Adam cover a lot of this in his course at reliable.education. His first product was $160 retail. But it was costing him $40 a unit. So there was an $80 margin which gave him options someone selling a $12 product just doesn’t have. He could spend more on advertising. Even if he spent $20 per sale he was still making $60. He was completely out of the top sellers and in his subcategory there was around 45,000 and he was nowhere near the top. He still came in and started making $15,000 a month in sales and $8,000 profit.
The first thing people need to think about is that whenever you look at a market for anything, you need to think about it from a consumer’s point of view. Why will a consumer notice you? And why would a consumer buy from you and not someone else? It can’t be something they need to read about. Don’t expect them to read your copy and find some feature. Think of Amazon like Tinder. People put in a few details about what they are looking for, then go through the pictures and start dismissing them. You need to have good photographs, but you also need something good in the photograph. So try to get something that is visually different. Some key detail or feature that will grab the buyer’s attention.
For example, if you look up desktop calculators on Amazon, they are all black or grey except for one that is green. Now if you look at car covers, they are all black or grey or blue. But if someone came with a car cover that had a cool saying, or was bright pink, it’s going to stand out. The question is, how can you innovate, visually, at the core design level. It’s not about the best title or description, anyone can do that. The big thing is to think like a customer. Just follow Jeff Bezos advice, “Be in business for the customer.” In the end, the best products are going to win.
To get more advice or free training from Adam, just go to reliable.education
Mannan Shah, the senior account manager – 6 years’ experience as Trader/dealer
What 3-5 factors are most important to consider to help predict future relationships between currencies?
The main determination for currency movement is the key interest rate for that particular country. For the US, if the Federal Reserve says there will be a major hike in interest rate by December 2016, it will struggle against other currencies. The expectation of the interest rate is the main factor.
The second thing is economic outlook and future growth expectation in that particular country. The US regularly release a jobs report that will give you insight into where the economy is heading. Manufacturing, retail sales, and inflation can weight a lot on the currency movement.
The third thing is political balance and uncertainty in that particular country. The GBP has dropped 28% since Brexit. Even though the UK is still currently within the EU, the uncertainty of the situation has had an effect. In the next couple days, the US election will play a major role in the deciding the USD movement as well.
What particular 2-3 factors are you looking at to help you predict the Pound to USD relationship over the next two months (Nov/Dec 2016)?
The biggest factor will be the election. Donald Trump is causing major volatility in the stock market. Depending on how the elections turnout 8 November, we could see a lot of volatility. In Mannan’s opinion, if Donald Trump gets elected, we could see the sterling spike to upwards of £1.30 per dollar overnight because Trump himself, is unpredictable.
Another factor that could affect it would be that in December 2016, the Fed plans to raise interest rates. According the Mannan, the election will determine what the Fed will do in December.
The euro and the dollar relationship is quite important for UK sellers since they often sell in Euro to the rest of the Eurozone but buy their products in dollars from Chinese suppliers. What’s your prediction on the future of the Euro vs. the dollar?
The euro and the dollar have been trading in a tight range for about a year and a half. It has been trading between €1.08 and €1.14 range. Going forward, he doesn’t see that changing much. The main expectation is on the US side now; looking into 2017 and seeing what the Fed does. Recently, the euro dipped to €1.08 but has bounced back to €1.11. If the Fed decides to raise rates in 2017, we could see the euro drop to €1.05 and possible €1.03 for every dollar.
The euro will remain much more stable against the dollar than the sterling because of Brexit. Brexit will continue to drag the value down for another year or two if not more, as everyone waits to see what deals the UK makes with other countries once they are out of the EU in 2019 or whenever that happens.
When you have speculation in the news all the time, that reflects in the currency markets with volatility so the rates keep shifting. Is that correct?
Yeah. Generally, the way the currency market moves, it looks for what is coming next rather that what has already happened. What is usually on Bloomberg or other news sources is what has already happened. So the big article will be that the Fed says this, but the market has already moved based on expectation. If the outcome isn’t what the market expected and there is a big shock, then the market moves dramatically. Much like what we had when the Brexit vote came in. Just before the results were announced, it was believed that the people would vote to remain in the EU, but 4 hours later the market dropped 1100 points.
To sum that up, if something is expected, that has already been priced into the market. It’s the unexpected events that causes weird volatility. For example, if the markets expect the UK to leave the EU with almost no rights to access it, such as no passports for the city of London, and so forth, then that will already be priced into the currency exchange. But if May comes out of the meeting and actually, the EU will be generous to Britain, and they have done something special, you could see the pound suddenly get much stronger.
Exactly, as long as the expected happens, you won’t see much movement. For example, in the US election, Clinton is expected to win. If Trump comes out as the winner, that would be a shock to the market and you might see the S&P drop 5-7%.
What can we, as small businesses, do to help mitigate those risks in a practical sort of way over the next couple months? Taking into account the US elections, Federal interest rates, and the UK politics surrounding Brexit.
Take advantage of forward contracts to lock in currents exchange rates and avoid any uncertainty. If your feel that your margins are good enough, you can make sure that, regardless of what happens, you will have that same rate. Then you can work your pricing on the product.
Can you share your best practices?
The first thing you should do is get yourself set up with a free e-tailer collection account. This will help avoid expensive conversion costs.
When you are buying stock from your suppliers, don’t use banks for supplier payments, use Currencies Direct. This will save you money on currency exchange, which lowers your cost and improves your margin. Not only do banks tend to hit you with extra charges, they sometimes take three or four days to send currency whereas currency exchange specialists will generally send it within 24-48 hours.
Take advantage of your account manager. They can help you set up forward contracts if needed, as well as contact you if there is a notable movement in exchange rates and you can set up notifications so that you are always up to date with what’s going on.
Get Adam’s Latest thoughts HERE
So, the first thing is to have a great product, what’s the next thing?
The next thing is to have great photography. Not good photos, not the best you can do, but great photography.
The best that you can possibly get. If you look at AirBnB for example, one of the decisions they made early on was to send professional photographers to the homes to take photos. In the beginning, people weren’t booking because the photos weren’t good enough. As soon as they started offering that to the AirBnB hosts, their business took off.
Another flaw in the course gurus is that they sold Amazon short. They said you can come in with $1000 and be making $30,000 a month in six months and that’s just not true. What Adam tells people is that is you can start with $5,000 and in the first year you can rotate that money at 30% margin in a year, that’s a win.
CLICK HERE for more details on Adam’s approach to Amazon on his “Reliable Education” site.
Warren Buffett is the greatest investor in the world and one of the richest men in the world. If you look at his record he is trading at 20% a year. If you’re doing it at 30% then you’re doing better than Warren Buffett. As you get better you’ll be able to rotate that twice in a year then you’re doing 60%.
If you sit down with a compounding calculator and do the math on if you start with $5,000 or $10,000 you can see that you have an amazing vehicle at your disposal.
However, a lot of these “gurus” are telling people they’re failures if you’re not making $20,000 or $30,000 a month in your first year.
You mentioned that you started with 6 products and turned that into a million dollars a year, so I would assume that you put substantial capital into that.
In fact, it’s at $1,000,000 a year “run rate”, ie, it now turns over about $83,000 a month.
Adam figures that he started that business with about $60,000. This was a different company. He has a completely different brand that he’s been running for about three years and he started that one with $20,000. At this point, he hasn’t taken any money from it. Except for a $20,000 loan from Amazon that he accepted just to see what it was about, he has been compounding that initial capital. Right now he has hundreds of thousands of dollars in inventory paid for in distribution center around the world.
The only other person I’ve talked to about compounding your money is Will Tjernlund. If you took that $60,000 and after a year turned it into $80,000 a month that clearly is a tremendous success. How on earth did you manage that?
Adam is experienced at this point, with his numerous business adventures, and experience comes from activity and time and anybody can learn to do that if you stick with it (learn more from Adam here at Reliable Education)
The difference, according to Adam, is that Will farms a product. He’ll throw 20 or 30 products out there and two or three will be a hit. He clears the rest out and starts over.
Adam wanted to build a brand with a small number of products. He currently has six products with an average cost of $8 and retails for $40 with one about $129. Adam’s strategy is to build his brand around a few products and get them to page one and keep them there. Last time he checked, Will had around 1700 SKUs. He didn’t want to think about what that was like, to wake up and have to monitor 1700 SKUs.
How do you find potential products?
To be successful, it’s about paying attention to the details and being objective. If you look at AirBnB and everything that makes it successful, then reverse engineer that and unpack it to find every component, that kinda what you have to do with Amazon. For example, AirBnB hired pro photographers to go every single place listed on the site!
Too many sellers go in with the wrong mentality. They go in think they need to make this product in this price range and that’s all wrong because you’re building a product around your limitations and needs rather than the wants and the desires of the customer.
Adam as two or three products that are on page one for the biggest term they’re on. Now, the top couple spots are taken up by his products and he sells them two in a box while his competitors sell it four or six to a box. His product is $40, the next person is $20, and everyone else is cheaper than that. He is at least twice as much as his competitors and is selling half as many.
For more details, CLICK HERE
This almost mirrors Kevin King in regards to the ideas behind the photos and going against conventional wisdom. How did you find these products in the first place?
Some people will misunderstand what he is saying, and you can find out more in his course at reliable.education. They think they just need to charge more. However, you must have a clear reason that a customer will give you more money. It’s more than headlines or you saying it’s better.
Many of these products are bought as a gift. The person is intending to gift the item to someone. Like with a ring from Tiffany’s, you paying for the box as much as you are the ring. So every aspect needs to be thought about. Don’t get on Fiverr and pay someone $15 for a logo. His philosophy is pay once for the best.
Write amazing briefs for everything from accounts to designers. Articulate exactly what you expect from them. If you hire a designer, the work is only going to be as good as the brief you give them. If you spend a little extra on the packaging, you can really impress your customers and all this goes to building a brand.
Sellers make the wrong assumption that no one has money and are looking for the cheapest product and that’s just incorrect. Now, this doesn’t apply to all products, not all products need to go to the extent, but at least make sure your logo is top notch.
(To get more training from Adam, go to reliable.education )
Which of these areas is your biggest block to progress? Let me know at http://amazingfba.com/fb !