"Build" Guide - how to Build your Private Label Business
Brad’s very first day at Amazon, he was working next to a guy named Tor. When asked what he was working on, Tor responded that he was working on the GCID program. It stands for the Global Catalog Identification system. This means that people can have a brand, and put their own brand on Amazon and have these account numbers linked to their brand. Brad says that this was the start of the whole brand revolution that has happened over the past three years. People have discovered that private labeling is much better than competing by the box. Instead of people competing over the same item using the pricing algorithm, many have moved to private label and own the ASIN. Now they get all the sales.
This year, with all the fraud stuff going on, Amazon is figuring out brand protection and brand control, and those are big things coming from inside Amazon; trying to get more brand control and brand protection. Big brands, like Sony, was the originally intended beneficiary. These companies have a lot of products with fraudulent listings. Then they realized they could extend it for a lot of people.
Amazon has gotten more into brand gating, and brand content because of these sellers. This is likely going to be the beginning of a program that sellers love. Amazon will get that feedback and keep building more and more around your brand. This also builds consumer trust.
That’s a big issue. That’s a major differentiator between them and eBay. eBay feels more like the wild west whereas Amazon was more in control with actual brands. So consumer trust is one of, if not the, biggest thing on Bezos’ mind.
When things like that come out, all the big heads come together and institute new programs to solve whatever problem. Amazon is trying to solve the fraud issue with brand gate and brand control.
It’s not so much about where Amazon is heading, but rather the minds of the brand owners needs to be going in. You have a lot of these large brands that really understand brand management because they have been doing it for 50 or 100 years. Amazon has enabled these new sellers and they are powerful and effective at building their brand.
The idea, for the last couple years, is that these people have gotten a certain part of the brand going and now they have to determine where to go from here. Over the next couple years, you’ll see more sophistication in the brands. Who the brand is, who identifies with it, what’s the target audience.
It comes down to what do you mean by compete. If you think about what the Chinese are good at that those in the UK aren’t. They have manufacturing there with some very competitive costs. There are other manufacturers in the world that have better prices, but they’re harder to reach because you can’t look them up on Alibaba.
The bigger question is, if these manufacturers can cut out the middlemen and sell direct to consumer, where does that leave these middlemen that are trying to create a brand? That’s what the majority of these sellers are.
Many of these manufactures don’t have the acumen to be that middleman. They’re not very good at it. The middleman is very valuable. They are doing the work to build a brand and they’re doing the research on what’s going to be a big seller. There is a place for sellers. Remember, just because these manufacturers can make the products cheap, middlemen are still needed to figure out what products need to be marketed.
There is some worry about counterfeit. If a seller does all the research and comes up with a brand idea, and what if someone else takes the idea and sell their own. Brad spoke with some attorneys when he was in Hong Kong. They said that you can actually set rules and regulations of your products with the manufacturer. That way they can’t take your product and sell it to someone else. You can work within the Chinese system and shut down other manufacturers if they copy what you’re doing.
Just remember what they can do, what your can do, where the value lies, and how your brand can gain consumer trust. How often is a Chinese manufacturer gathering emails, and sending emails to their customers. That’s a very western idea and way of thinking.
You can email Brad at [email protected], or use the contact form on their website, productlabs.net. If you would like to use his video service, please go to amzproductvideo.com.
Buying wholesale from a brand owner is still viable for sure; someone which owns one brand. As far as a wholesaler, that distributes several brands, it depends. They have to make their profit too, and there might not be enough margin to go around. They are also likely to be selling to other Amazon sellers which would cut into your sales.
If you go to Back Country, they would carry the Black Diamond brand, as well as many others. Will wouldn’t buy from them but rather buy directly from Black Diamond.
One of the big reasons Will got into Vendor Central is that he hates launching products. It’s much easier to start with a product that already has 10,000 reviews. His philosophy is not to do something that’s hard just because it’s hard. So many people are worried about building a brand and launching products from scratch. It’s a lot easy to just make money first. Then, when you want a challenge, build your brand.
One recent product launch Will and his team did, was they got ping pong accessories from China. Got them in, slapped labels on them, no real packaging to them. They sent them into Amazon. There was four different types that they bundled in two and four packs. They’ve sold about 357 units in a month in a half and they just got their first review.
They spent $1000 on PPC to make $4000 so their A-cost is about 25% which is about break-even but gets them some traffic. It’s selling about seven units a day at $6 or $7 and he did nothing more than throw it up on Amazon. It’s all because he picked the right niche with the right keywords. He knew he could compete only on price.
If you are trying to go after a product that has 1500 reviews, then you will need 1500 reviews just to compete. What’s your strategy for getting 1500 reviews? If you do 1500 giveaways, that’s not sustainable. If someone wants to sell dog leashes because they love dogs, what can you do with that? You can’t put your love of dogs in the title. You can’t work with that. However, if you want to sell leashes because you see a gap in the market of seeing-eye dog leashes. They’re all 20ft long which makes no sense if the person is blind. It needs to be 4ft long. Great! You found a gap in the market. You found a specific keyword. There is a way to differentiate yourself and add value. Also, you didn’t need to do some crazy manufacturing. Just make a shorter leash.
No. No one really has that app on their phone. A lot of people will go out of their way to avoid shopping at Wal-Mart. Just Google “people of Wal-Mart”. There is a negative stigma. Much like eBay. Will they take a portion of the market? Yeah, but they won’t be a major competitor. People like the simple Amazon experience. Plus, if you’re going to buy something from walmart.com, why not just drive down the road and get it right now? The only real benefit Will sees from walmart.com is that if your product does well on their website, they might try to sell it in the stores and then you’ll be able to sell it in all the big-box stores.
Will was recently talking with a hedge-fund manager that owns a part of eBay who said that eBay looks good compared to other retailers. Who are the competitors? Macy’s who’s closing thousands of stores. Sears who is closing thousands of stores. Of course their going to look good in comparison when the competition is about to go bankrupt. They may grow 3.5% year after year, but the S&P average was 18%. 3% isn’t that cool. The numbers of people that get online in America grows at 3%. So eBay is growing at the rate of the internet and slower than GDP.
You will want to find a product in a category that Amazon isn’t sourcing and selling already. Then they will want to get their hands on it. Plus, if you have sales history on top of that, Amazon will love it. If you find that Amazon isn’t selling in climbing ropes, but they are selling 9 of the 10 dog leashes, then they’re not too excited to get anymore dog leases. Buying wholesale is a good way to start this.
It really depends on a lot of factors. It depends on how much cash flow you have, what kind of distributor you have, what the competition is like. Let’s say you have one Chinese supplier that you buy iPhone cases from. They’re the only ones that are waterproof and you buy 10,000 at a time and you have $100,000 in the bank. From they, maybe you build momentum in Seller Central, then move it to Vendor Central so they see the momentum. In Seller Central, you might be ranked in the thousands for iPhone cases, but in Vendor Central you might be rank 1 for waterproof cases.
There is a company in Hong Kong that does Vendor Central so they don’t have to pay taxes in each state whenever they sell in Seller Central. There is all sorts of different scenarios that will affect the decision. Amazon pays for inbound shipping when they order from you in Vendor Central. So if you have a large product that is expensive to ship, you can save a lot of money by using Vendor Central.
So 2017, third-party sales will still grow from 2016. However, at the same time, Amazon will condense. If you look at their earnings report, the number of items offered for sale has gone down; the number of items fulfilled have gone up. Amazon is clearing up a lot of junk sellers. You have people like Will going through and condensing their listings. Once they get rid of the riff-raff, it’ll be much more simple, and you can tell who the private labelers are that care, and who’s selling junk. Eventually, the junk ones will phase out. The sales of third-party sellers will go up, but the amount of third-party sellers and third-party products may fall over time. So, by the time 2018 rolls around, everyone will try to find a way to differentiate themselves because the third-party selling will become a thing of the past.
Kevin King part 3 of 3 show notes
What’s working best in your business now?
Kevin encourages people to focus on Amazon. It is the biggest platform for online shopping and if you focus on maximizing on Amazon first, it will pay off. People are already there with their credit cards out wanting to buy. Since Amazon is always changing things, you need to keep tweaking your listings to keep up with the changes. You can’t just post your products, sit back, and watch the money roll in. It doesn’t work like that.
Once you maximize on Amazon, what do you do to expand off Amazon?
Kevin is working on getting into some big-box retailers as well has having his own Shopify site. Kevin has also found success using JoeLister. Using this tool is Amazon items are automatically submitted to eBay. Any sales from eBay are sent to Amazon for shipping and sends the customer the tracking number. It’s all automated. It does a relatively small amount of sales, roughly $1000-2000 a month. However, since it is all automated he doesn’t require any additional time and effort to get those sales. It’s free for the first couple listings and after that it’s only $29 a month.
He also has his own branded site to go along with his Shopify site to add legitimacy to his brand. That way if first-time buyers try to look him up they will see that his are valid products. However, these are just tools that support his Amazon business. Again, the main focus should be Amazon.
Another great tool is Amazon Assistant for Firefox. This is a plug-in for Firefox that allows you to download your reviews from Amazon as well as the video reviews. He then takes those videos and puts them on his YouTube channel and links those back to the product listing.
Kevin has found that Amazon is a great way to refine and improve your products for another stage. He is looking into getting into big-box stores like Sears or Wal-Mart and has been taking feedback from his Amazon customers to make sure his products are at the highest level. The last thing you would want is to get into a big store like Wal-Mart and have a low quality product. You are going to have a lot of returns and the stores aren’t going to want to carry your products anymore. So use the feedback you get from Amazon and tweak and improve your products.
His long-term goals is to create a strong brand in these big-box stores so that he is covered if something happens with Amazon. If you’re looking to make this a full-time job then at some point you will need to expand beyond Amazon because at anytime Amazon could decide to unlist you. Therefore, in order to survive elsewhere, it is important to build a strong brand. Kevin is looking to take his brand to $10 million a year by the end of 2018 and he is well on his way to reaching that goal.
Kevin explained that he doesn’t want to have a huge business with a lot of employees. He tries to take care of as much as he can by himself because bringing on other people will really eat into his bottom-line. So he isn’t a big fan of outsourcing too early. However, many people don’t have the same background and might need help with shipping and freight and will need to rely on outside help.
Kevin is also looking to expand his business into the UK. Once he gets his VAT number he will be ready to test the waters in Europe. Europeans have very similar cultures to that of the US and are just as willing to spend money. The UK has the highest ratio of online shopping to income in the world. That means that they spend more of their money online than anyone else. Plus there are 60-70 million people buying that have similar cultures and buy similar products, so the UK is a great opportunity for expansion.
A big advantage to selling in the UK is that it will be much easier to expand into other parts of Europe. Customers in, let’s say France or Germany, will have the opportunity to have their products shipped from the UK. When his sales reach a certain point, he will have to open accounts in each of these countries, but until that point he can base it all out of the UK.
A word of warning is that you need to make sure that your products can have a high enough margins because your costs may be higher when selling in other countries due to regulation cost, but more importantly, currency exchange rates. For Kevin, he will be buying everything in USD, but selling them in the UK with GBP. If he has a slow moving product and ships 1000 units, it may take him a year to sell through them. In the meantime the pound gets stronger against the dollar and now he’s losing money. For UK sellers, certain political events are having an effect on pricing, e.g. the Brexit.
What can listeners do if they want to get a hold of you, or find out more about you?
Kevin has considered consulting but doesn’t feel strongly about continuing that. He recently offered a free 15 minutes session and got about 30-40 hits on it from all over the world. Over a few days he worked with each of them, looked over their listings and helped them improve. He quickly realized that you can’t do both. You can’t do consulting as well as selling. For Kevin, consulting isn’t scalable. He can’t make money while sleeping unless he makes a course. At the rate Amazon is changing the course will quickly go out of date so he will focus on that. He is considering starting a mastermind group in the future where people can come in for a four hour session but that would be it.
Other than that you can find him on several of the American Amazon FBA groups on Facebook or just look him up on Facebook, Kevin King in Austin, Texas.
What do you see coming in 2016 and 2017 in the future of Amazon?
Do you have any final words for Amazon sellers?
If you are willing to work hard, put in the time and dedication, and have a little money to play with, you will succeed. Just stay positive. take your failures as they come; learn from them and get better.