"Build" Guide - how to Build your Private Label Business
To find possible best products to sell online, as Greg mentioned in the previous episode, you can look at Amazon’s best seller, or look for trends in your everyday life. If you have time and are cost conscience then that works. However, the Jungle Scout web app was created to solve that problem. There are a few tools in the Jungle Scout web app, which is different than the Chrome extension. It’s more like traditional software. It has a database tool which is a recreation of the Amazon catalog. It’s available for the European and North American marketplaces.
What they’ve done is rebuilt Amazon’s catalog so it’s more user-friendly for sellers. You are able to search by metrics that sellers care about. You can search for all products that sell more than 500 units, have less than 50 reviews, have a poor listing, and weigh less than 5 pounds. You can put all that in and get it down to 5000 listings. From there you can get ideas of the best products to sell online. What people are are some really obscure products that people would have never thought to look for.
There’s a few strategies you can implement. One is finding a product, and improving on it. This is the age old practice. Take an item people are already buying even though it’s crappy, and just improving upon it. That’s what’s great about this day an age. 20 years ago, big corporations had to spend a lot of money doing research to find this same information that any average Joe can get by reading product reviews.
Just find a product to sell online that is selling despite poor reviews. Then filter by 1-star reviews and find out what everyone hates about it. Then contact a factory in China and have them make this one simple change. Put it on Amazon, and now you getting 5-star reviews while your competitors are getting 3-4 star reviews.
You’ll also find that anything with a higher barrier of entry will have less competition. If it’s a larger item that need to come in containers, those will have less competition, but will come with headaches. More expensive items will have less competition. The U.S. is the most competitive out of all the markets, so Greg has been expanding into Europe. According to an Amazon representative, if you combine all the European stores, they do about as much volume as the U.S.
We have Greg Mercer on the show again. You can listen to our previous interview on product research, as well as one on supplier negotiations. Greg studied civil engineering at university and had a corporate job that he hated. He began selling on Amazon as a break from his day job. He managed to quit his day job and just do FBA full-time. He did that for about two years when he was frustrated by trying to find products to add. The best way to scale your Amazon business is by adding more products. Greg didn’t have a lot of capital to throw around so he wanted to find ones. Out of this need, Jungle Scout was born. Now he joins us to help us find the best products to sell on Amazon.
Today, Greg is still selling on Amazon. He has released a few products in the last few months. He’s been working on Jungle Scout, and that has expanded into a quite a tool for Amazon sellers. There is Jungle Scout, which a research tool. Jump Send is a deal site to get you additional sales, as well as a follow-up sequence. Splitly is an AB testing tool for Amazon sellers. Fetcher, which is profit analytics. It calculates what you’re really making after refunds, promos, etc. All the numbers Amazon likes to hide from you.
That’s a common issue. Everyone knows how good of an opportunity Amazon is, but it’s finding products to sell that is a struggle. The best products to sell on Amazon are ones that have existing demand, that means Amazon customers are already searching for it. You want products that have low competition and that have good margins. Those are the main things. Other things you may want to consider are whether they may infringe on any patents, and they don’t need to be licensed. Think of liability; if a person can hurt themselves with it, you may want to steer clear. Lighter, smaller items are generally less complicated. They are easy to ship and you don’t have to worry about oversize storage limits.
Jungle Scout was created to solve that issue, but you can look on the Amazon’s best sellers page. You can get ideas from Pinterest, look at what people pin a lot. You can hang out in big cities where trends start first. Once you do that, make a list of product ideas and go to Amazon. There is actually a free way to find out how well a product sells. You can click on a listing, then look at the best sellers rank under the product description. Then you can go to junglescout.com/estimator. It’s a totally free tool, you don’t even have to put in your email. You put in that sales rank and it will give you an estimated amount of units that product sells on a monthly basis and see what the demand is.
For demand, you want to look for products that are already selling on Amazon. A beginner mistake is that people “know” that a product will do well if it gets on Amazon. A small percentage of the time, that might be true, but more often than not people are wrong. It’s much safer and less risky to go with something that is already selling.
I want to see 2000 units a month, being sold on Amazon. Let’s use a coffee cup as an example. If you search “coffee cup” on Amazon. Then take the top 10 listings, or however many are relevant. Let’s say 8 are selling coffee cups. Then click on each of the listings, get the best sellers rank. This is helpful because it tell us how well this product is selling. This number, by itself, is very difficult to interpret. However, at Jungle Scout, they have come up with an algorithm that can estimate how many units are sold based on that number. It changes on a daily basis and they have a full-time data scientist that is always updating this. So, get that number for each listing, find the units sold on Jungle Scout and add them up. If it’s more than about 2000, then the demand is there.
The first thing is to look out how they drive these algorithms to estimate the sales. Depending on the category, they collect between 200,000 and 500,000 data points every month for that category. This is the relationship between the unit sales and the ranking number for that day. Then they run a regression analysis and they come up with a line of best fit to estimate the sales based on the rank.
The best sellers rank changes on an hourly basis. The way they estimate sales is that if a product continues to sell as well or as poorly as it has for the past few days, this is how many units will sell in a month. If, last week, your product was selling 10 units a day, but this week is selling 1 unit a day, Jungle Scout will estimate based on the 1 unit per day. So you’re sales might be 60 units that month, but Jungle Scout will only estimate 30. It’s the best they can do with the limited data Amazon gives out.
Some people will get on there and see their products are 10% more than Jungle Scout’s estimate and will conclude that you need to add 10%. That’s not true. If you look at the regression analysis, there are some points that run above the line, and some below. They’re taking the average of hundreds of thousands of products in a particular category. So, your 1 product may not fall on that line, but if you average the whole category, it will be on that line.
Exactly. People get caught up, too much, in the tools. Keep in mind this is still just an estimate. You’re using this tool to determine a ballpark range on a product’s sales. Jungle Scout may estimate that a product does 900 units a month. In reality, it might be 800 a month, or 1000 a month, but you know it’s in that range. It helps with forecast and it help determine if there is good demand in there.
This is difficult. One tool that helps is Google Trends. This tool allow you to see how a search term has trended over the years and seasons. This is a fairly good gauge of how items will sell on Amazon. As many people know, Greg has done public case study selling bamboo marshmallow sticks called Jungle Sticks. Based on Google Trends, you can see how the sales have changed based on the seasons. January to February are the slowest times. July and August were the highest times. And if you look at the sales, you can see that matches up. So can look on Google Trends to determine if this is a high season or a low.
The reason I like to use the 2000 or 3000 units, is because people like to answer “It depends”. It’s too arbitrary if you’re a beginner. At the end of the day you’re looking for the item with the biggest spread between demand and competition.
If I was a complete beginner looking to sell my first product on Amazon, I wouldn’t worry about that. That’s more higher level strategy. Focus on getting your first product up on Amazon and learn the rest later.
If you’re already have your products on Amazon, and you’re trying to figure out forecasting, that is a good idea. Two good resources are Google Trends, and Keepa. Keepa has a really nice, free database of how sales rank has trended. A lot of products have two years or so of data. You can look at the and see how the sales rank has trended over the months and seasons. You can try to start estimating how well your product is going to sell.
Some products you can tell by common sense. If you’re selling lawn products, then the summer months are going to be the best. Other products, like the marshmallow sticks, it’s not as clear when they’ll sell well and Google Trends can help with that. If Google Trends shows there is twice as much searching for marshmallow sticks in the summer months, then you know to order a little extra inventory.
Reviews are a great indicator of competition. That’s probably the biggest thing to look at. On top of that, the quality of your competitors listings. If they have a poor listing, like one picture, a really crappy title, than that is someone that would be much easier to outrank. As opposed to someone with a really good listing.
The first thing to look for is how many reviews they have. Older, more mature products that have been selling consistently well, are harder to outrank.One way to tell how mature a product is, is how many reviews it has. An older product that sells well, is going to have more reviews. A product with 1000 reviews is going to be much harder to outrank than one with 15. A rule of thumb is to look for something, where 3 or 4 of the top reviews have under 50 reviews. That signifies that it’s probably a young niche.
One thing to understand is how Amazon ranks the listing. They use keyword relevance. The sales velocity probably makes up about 50% of the algorithm. That would be the number of sales per day. Another factor is the conversion rate of your product. Now the sales velocity and the conversion rate depends on a number of factors. Those including the quality of your pictures, the price, the social proof, the average star rating. If you competing against other listings that have a lower rating, then you’re probably have better conversions and more social proof. People would much rather buy a product with a higher average rating than one with more reviews.
Yeah. Visually, if you have a 4.9 average,Amazon displays 5 stars. But a 4.7, they show 4 and a half stars.
Today I am bringing you another episode on marketing fundamentals: KLT. Know, Like, Trust. Once again, this isn’t a mindset for you, but that of your consumer which is really important to understand. Stepping back, the most important thing to understand is what marketing means. Marketing isn’t about creating a widget and figuring out how to sell a lot of it. It may look like that, but marketing is really understanding markets. Simply put, supply and demand.
If you start by understanding the markets, and find what people are looking for, then create a product that fulfills that need, that it truly smart marketing. To take a pre-existing product, and then try to sell it is much more primitive and difficult to do.
Last episode, we talked about message to market match. If you are the only person selling red dog bowls, even though a lot of people are selling dog bowls, you win. The caveat to that is credibility. I gave the example of trying to sell the world’s best dog food to cat owners and how you won’t find success with that.
Now, imagine you have that same dog food in a room full of dog owners, except that you are trying to give this amazing dog food away for free. That puts the questions in people’s minds. Why in the world would someone be willing to give away this great product for free? How can this dog food do everything it claims?
There is a simple marketing principle of KLT. Know. Like. Trust. These are the elements we need to have in place before people will buy from you. Amazon puts a spin on this that you should be aware of.
If people have never heard of you then it’s going to be harder to get people to buy from you. This is difficult to do when you only have a listing to do this with. If you are the only person selling a red dog bowl, it’s less important. However, you won’t likely remain the only one. If there is any sort of competition, you will need to work on your brand marketing off Amazon. You will need to have a website. You need a social media presence and you will want to get YouTube videos up.
The next step is getting people to like your product. It is possible to accomplish this entirely on Amazon. You must have great looking pictures and amazing packaging. No longer can you get away with putting dreadful products on Amazon and sell it. You really must make sure that you have a good quality product.
The last element is trust. If you’re going to sell dog food, and make some big claim that it’s going to make your dog live five years longer, then you need to back that up. Be careful on how to try to backup these claims. Amazon supplement sellers were leveraging the trust people had in Dr. Oz after he claimed vitamin c serum was the next big miracle drug. Soon these sellers started getting cease and desist letters from his lawyers. If you’re going to reference an expert, be sure you have their permission to do so. A long-term strategy might involve referencing celebrities and big names in your industry and paying them for permission to use them.
Let’s bring it back to the simplest stick: how to I make my listing more likely to convert? KLT. The know part is a long-term strategy. If you are around for a long time, keep showing up in Amazon results, dominate a niche, then you gradually become known to people and they start searching for your brand name. That is when you know that you’re starting to build a brand. When you’re sticking in people’s minds to the point they search you out specifically.
To get people to like you, you have to have a remarkable product. Since you, likely, aren’t well-known, your images and packaging have to look simply stunning.
Trust is much harder to build, but you are leveraging Amazon’s trust. Which isn’t the same as your consumers trusting you or your brand. If it’s on Amazon, and it has good reviews, you are leveraging the trust generated by other consumers in their reviews, and the general trust people have in the Amazon platform.
This principle of marketing is harder to implement on Amazon, but it is vital to understand it you are wanting to build a business and if you are planning to sell that business. The more of a brand value it has, the more differentiation it has from any rivals, the greater multiples you can get when you go to sell. That could be the difference between selling your business for 2x your profits versus 3x. This is when you get the payoff for all the hard work you put in now.
I want to emphasize that this is not an instant win situation. You will get quick wins with higher conversion, the real payout shows itself long-term with a strong independent business. There are plenty of tricks you can use to circumvent the system, but Amazon is quick to fix that and then you are left with nothing. What I am teaching you today is a tried and true marketing principle that has stood the test of time.
If you are serious about moving your business forward, there are still spaces left for the December meeting of the Amazing FBA mastermind in London. In January I will be expanding to include a high-level mastermind for those that are serious about creating a strong business.
Today I have a simple but powerful marketing principle: Triple M. This isn’t so much about your mindset, but rather about understanding the mindset of the consumer. By that I mean a shopper that has the potential to buy from you. I feel like people don’t truly understand this and therefore there is an opportunity for you on Amazon.
This is key in driving sales and conversions. Let’s unpack this in non-internet terms. This is a fundamental process that applies in any market in any medium whether it’s face-to-face or online or wherever.
If I was in a room full of cat-owners and they hated dogs, I could offer them the best dog food in the world. I could say, “it would make your dog leap for joy and it will make him/her the happiest and healthiest dog and add five years to their lives. It is normally £50 and I will sell it for £3.” How many responses would I get? Zero! Now, if I had a room full of dog owners, the response would be much different. Message to market match is crucial.
Amazon does its best to ensure there is good message to market match because it leads to happier consumers. Happier consumers will like and trust Amazon more and keep coming back.
Keep in mind that we are leveraging people’s trust in Amazon. When someone does a search on Amazon they are saying, “I am looking to buy xxxx.” Amazon then looks at all the listings it has available. Then compares keywords that are in the title and the bullet points. Then determines whether those keywords have helped that product sell, and delivers the best matches to the consumer.
If you are selling dog food, and the shopper puts in the word “cat food”, you have to hope that Amazon does not display your listing. If it does, then it is just a waste of everyone’s time because the cat owner isn’t looking for your product.
You need to be very clear about the market you’re going after. Instead of trying to find keywords that will help you sell a product, you should be thinking of the customer’s search terms, and finding a product that will fulfill that search.
Let’s use “red dog bowl” as an example. Here is a great way to find a niche market where demand is high but the obvious keywords, dog bowl, are hyper-competitive. It would take a lot of work and giveaways to gain any traction. Now, let’s say you search for red dog bowl and the search results show a black dog bowl, and a silver dog bowl, etc.
That means that Amazon couldn’t find an exact match for the terms had to display similar products that aren’t exactly what you’re looking for. That tells me that there is an opportunity. If I am a shopper that is looking, specifically, for a red dog bowl, and my search results come up with one red dog bowl and the rest are different colours, then I will likely click on that one. This will help your click-through rate and this is called dominating a niche market, which is internet marketing 101.
The other thing to think about is when people have gotten on your listing, they are pretty likely to buy. As long as you don’t actively put them off, they are likely to convert. So you will be getting better click-through rates as well as conversion rates. Therefore, if you’re buying Amazon ads then you will be getting a better return on your investment.
Let’s say you’re paying $1 per click for “red dog bowl” and 30% of people that click end up buying, then the cost per sale. Averaged out, will be $3. Whereas, if you were to pay $2 for the keyword “dog bowl” and people click on it, then see several other listings that are very similar and end up clicking on another product. That conversion rate will be much lower. Let’s say the conversion rate is closer to 10%, you are going to end up paying $20 per sale.
You can find a niche market. Also, if you can find a niche market where you can supply the exact thing that people are searching for and no one else is supplying it, you can secure niche dominance and will have very good click-through and conversion rates. This will lead to fantastic sales since there is less competition.
The next stage in message to market match is believably. If you are selling that miracle dog food to a room full of dog owners. This time you’re giving it away for free. That raises the question of whether or not they can trust you. That question, I will answer, in the next episode.
Are your products beautiful?
If you are selling on Amazon, you are likely private labeling products, probably from China. Although, if you are in America then you might be looking at other alternatives in light of Trump’s plan to raise tariffs. For now, let’s assume you are importing from China. China makes some of the world’s worst products. China makes some of the greatest, such as the Apple iPhone. It’s equally possible to create terrible products as it is to create amazing ones since 80% of the world’s manufacturing happens there.
Have you got a design that is interesting? If not unique, is it at least beautiful? Are you sure you are really checking the quality of your manufacturing?
From the consumer stance, simply put, is your product beautiful? Does it work beautifully? Is it reliable? Is it amazing?
Today, I was out in London and came across the amazing building. It was once a school for choir boys that is now a youth hostel. What makes it truly beautiful is the detail. They put so much care into the details that it is immediately striking. When you really look at the detail, it is magical as well.
Now my question, is your product doing that for your customers? If not, you need to get on that. I am, by no means, an expert in product design, but my business partner and I have some products on their way from China and we are very excited about them. We order samples from about six suppliers and got eight samples from some suppliers. We went through a lot of trouble. We reviewed 60 suppliers! Some were dodgy and their prices came tumbling down from $15/unit to $3; some didn’t have solid business credentials, and we rejected them.
We have a whole complicated system that we use to check out a supplier thoroughly, and I can go into that later if you are interested, but the big thing is to get a sample! Check through different photos on Alibaba, or wherever. Get out of Alibaba, do some Googling, go out and get some samples in real life. Whatever you need to do to get a vision of what would be your perfect vision of you product.
Keep in mind what your market wants. I’m not saying to create something in a vacuum. Never do that! Do research. Look at demand. Look at demand depth. If here a lot of sales in training shoes, but 90% is Nike, forget it. If you want a company that you can sell down the line for two or three times yearly revenue. If, you want a brand that people are willing and excited to buy. When people see your product in their search results, they should immediately be drawn to it and want to click. If you want a product where people will be amazed when they scroll through your photos and want to buy it. They you have to work and sweat and make your product beautiful.
Don’t stint on samples!
I hear complaining all the time about how suppliers want to charge for samples and whether it’s worth paying for. Let me tell you, it is. If you are going down the private label route, you’re going to be spending thousands of pounds, tens of thousands, don’t be cheap about the research. Don’t go too far and get 20 products when you know the 10th is really really good, but take the time to find that 10th products that is really really good. If you can’t afford to get the proper samples, can you really afford to get into private label?
The room is not mass producing cheap crap, it’s being the Apple iPhone of your category. China is the kings of cheap products, but there are still manufacturers where the designs are fantastic and the quality controls are rigorous. Even if you don’t design your own products,at least you can pick one that is still good.
You either have to do research designing your own product, or you have to do research in looking for a great design. Regardless, you have to do the work. Warren Buffett used to say, “You can either create value, or find value.”
The first step to finding a Killer Amazon Private Label Product is generating good ideas.
I think there are basically two ways to do this:
Option 1: Organic Ideas
Option 2: Use research tools to generate ideas
Either way – we just gather ideas at this stage, we don’t want to rule out too much. First we gather, then we whittle down ideas.
Danny’s recent article on the Canton Fair for www.webretailer is here
What are the 5 biggest mistakes people make attending the fair for the first time?
When people don’t plan at all and they get lost and lose their time. Once a phase is over, it’s over. So if you don’t plan out where you need to be you very well may end up missing out on what you went there for. By taking 10 minutes to plan out where you need to be at what time, you can save yourself hours.Read More
Danny - remind us of your background in 2 minutes or fewer!
Danny first got his start in the music industry selling vinyls years ago. That where he first got to work with products and marketing and all that. In 2008 he began working online with different startups which led him to Amazon last year. He was able to consolidate the knowledge he gained from those two industries and put them to use with FBA.Read More