"Build" Guide - how to Build your Private Label Business
This 2nd way of increasing sales is so neglected, you can get ahead simply by implementing anything in this area!
The simple idea is to increase the AOV=Average Order Value.
It can be more difficult to implement on Amazon than just getting new customers but is potentially much more profitable.
If someone usually buys a $10 widget at 50% margin, you get $5 profit per sale. If you usually sell say 10 orders of 1 $10 widget a day, your profit per month=$5X10X30=$1500
If you can increase the AOV by say just $1, you would end up with $11X50%X10X30 profit=$1650. $150 extra ie 10% extra.
Multiply such effects across several products and it can add to your bottom line quickly.
The simplest way to increase your AOV is simply to increase price! But you have to weigh up against conversion rate changes etc. to see whether that increases or decreases your price.
Another way is to bundle together products physically eg a 3-pack, 4-pack, 6-pack etc etc. Easy and very very easy to sell on Amazon.
Another way that is even easier is to offer a discount via a promotion code. Eg BOGOF (Buy One, Get One Free) or buy 3, get 10% etc etc.
If you set things up wrongly, you’ll make less profit, not more, so know your numbers going into this! Done right, this is a simple way to edge up your profit margin.
A harder way but possible on Amazon, is to do cross-sells eg “this is also bought with X” (spatula with slotted spoon for example). It’s possible to influence this again using promo codes – you can offer a 25% discount off a slotted spoon, for example, when you buy a silicone spatula etc.
Another way that is hard to do on Amazon but possible, is to upsell eg from a $5 spatula to a $25 frying pan. Same kinds of methods.
Increasingly, we are looking at strategies that will work best when you have control – in other words, you start to build your own email lists (and other assets like social media subscribers/followers etc.).
There is one more basic way to increase sales that is used least of all by Amazon sellers but could be the most powerful of all…read on…to the next episode…
To find out more about the Amazing FBA London Mastermind mentioned in the episode, click here
**WARNING: Contains a bit of swearing & A Lot of Truth!**
How did you come to be selling on Amazon?
Entrepreneur since age 4 when resold bubble gum to friends! Not had a job as an employee since age 17. Direct marketing background not SEO. Sells calendars directly to consumers, also wholesale.
Been selling on Amazon since late 1990s – e.g. old CDs, DVDs etc.
Also in calendar business signed up for Amazon Advantage – media only e.g. CDs, DVDs
In Q4 gets purchase orders. Start of season 3-4 a week; end of season say 1000 a week.
That alone pulls in six figures – and everything else on top of Amazon orders is 100% profit.
So Kevin has seen the power of Amazon grow.
2 years ago he looked into the PL model but didn’t jump on it, which he regrets.
Started doing it May last year – doing some Retail Arbitrage – see how shipping and systems work. He realised RA is too much work and not scaleable. Race to the bottom.
Why do PL?
Calendars are seasonal. He had pay-per-view TV revenue stream but the internet had killed that off. Plus Kevin’s Background matched all the skills needed, including:
developing packaging, product development, online marketing -plus sourcing from China and Korea. So he went for it.
Kevin’s philosophy is to prove a product on Amazon then take them into retail on other channels.
Amazon is the bulk of his revenue. This is problematic long term because they could in theory shut your account down or suspend your best selling product at any point.
Recent example: Amazon wrote to Kevin saying they’re suspending his best selling product because of an image violation. They didn’t even tell Kevin what the violation was!
Kevin worked out it could be cartoons or extra elements in the images that he had put in. So he was able to deal with the issue. But it was a reminder that you’re vulnerable to some robots or some employee doing things by the book.
Where would you get started as a newbie with Product Selection?
How much money do you need to start in Amazon PL?
Product selection depends on how much money you have to start with.
Even Scott Voelker and other people say unrealistic things about how much you need to start. Kevin says you need a lot of money. There are stories of someone who started with $300 and made a lot of money. Some of the stories are untrue, some are true. But what’s missing: five days later that person took a loan from the uncle for $10,000 & 10 days later put $20,000 on the credit card. etc.
It paints a false picture. Some people get lucky, but it’s very rare. It takes a lot of work and a lot of money. If you just want a bit of extra holiday money you could do one of two products. But to make a living demands serious money, determination and hard work. Even Kevin didn’t realise how much money it takes even with his product.
Do you believe in staying in one Amazon category and building a brand? Or do you pick each product on its own merits/just follow the numbers?
In Kevin’s case, he started five brands because he came from a product background so he was a aware one might not work. So he wanted to increase odds of success.
Launching second product won’t double sales unless it’s just an add-on or extremely complementary. So he’s not so worried about potential complementary sales.
However, if you can, do get them. An example is that Kevin started in the makeup category. The problem was massive competition because it was easy to get into. Now for example he sells makeup tools instead of makeup itself, and many of those are complementary [cross sales potential].
How do you go about picking products? If you had $5000 to start out but potentially use credit card later?
If it’s capital intensive, what’s your approach to finance?
Kevin will make use of available credits. For example at bankrate.com you can get find credit cards listed. Like City and Chase which will give you know percent balance transfer and also wash purchases for about 15 months
If you have good credit and some good history, there’re other places like a deal struck on deck etc. If you have a pro seller account for a year and the metrics look good, Amazon will offer you a decent rate on loans as well.
How do you differentiate your products on the competition?
In some cases, Kevin sources products that are straight up private label from Ali Baba. But he makes a few changes. Every product has retail packaging.
A lot of people will take the brown box that is given by manufacturer, but customers care about the look of packaging.
Kevin doesn’t do an initial order under 1000 units – if he doesn’t have confidence in the product he won’t buy it. He believes he can sell out over time if it was a dud product. It may take a year and tie up cash but you can sell anything on Amazon in time. So the risk is not that great.
Kevin picked his first product in May 2015 it took two months to get products out but that was okay because he used for long photo shoots and made a really beautiful products and packaging.
Three Product Examples.
Example 1: Product for dogs, just wanted to do it, the research tool said no but Kevin wants to do it anyway. It’s doing well because it’s a great positioning and marketing.
He went to www.upwork.com for CAD design in Argentina which he had sketched on paper.
He went to one factory that messed it up; 2nd factory however made new moulds.
Kevin rarely has a hijacker because they are original. The only time that ever happens to him is when you sell the products for $0.99 to people who have accounts on review groups. So they probably have 10 accounts and they basically use it today bit of retail arbitrage..
Example 2: Kevin spent $30,000 dollars on creating a mould and tooling. But where the best seller is selling a product for $10, Kevin is doing it for $100. BSR doesn’t matter to Kevin for that reason.
The competitor is making only $1 a sale, Kevin is making $20-$30. Because Kevin has differentiation against the high end to compete, BSR does not matter to him, also at the high end of product quality and price there is less competition.
Example 3: Kevin recently launched another product in the dog space. He did use tools like: ASIN Inspector, Jungle Scout, other tools including Merchant Words and UberSuggest. However, all these tools are just guesses. The only numbers you can totally trust are Amazon ads results.
Again, most of the competition were playing at the low end. They were the equivalent of McDonald’s, whereas he wanted to create a product that was equivalent of the best steak house in town/French chef. It’s a smaller market but enough to make it work. They were using cheap packaging, where is Kevin created a kind of cigar box type packaging.
Kevin’s product is twice as expensive as the main competition, and has half the number of products e.g. five treats instead of 20. On Friday it was put up with no promotion. He had 3 sales with no reviews. He started PPC (one sale) but it is already selling at a high price point without it.
Differentiation and going for the High End
Kevin makes sure to be different and go for the high end of the market [less crowded/more profit].
Kevin may sometimes go to Alibaba and source an existing product. However he will add pieces to it change things so it is different.That might be thought of as bundling, but Kevin things it’s bigger than that. It is about changing things so it is different from the existing products.
He does not go into the model of getting it in fast and then get it shipped. He is in for the long haul, not “get rich quick”. People preach that model but Kevin doesn’t buy that.
Differentiation and building a brand is an end to end process. It is no good skimping on the product or if you have issues, even if the packaging is good, it will still go wrong!
Building on email list from your Amazon customers
If you use a manage by stats, they will take your Amazon customer’s postal address is match them up email addresses. This is not perfect, but 30 to 40% should match up.
Testing your market and their views on products
Kevin recently send out an email to 100 people on his email list. He had 20 responses and he email he sent out 20 units from his competitors, In plain packaging.
He got great feedback on the pros and cons of different models. He also got the sales copy for his bullet and title. And he knew what was a good product.
Those who raved, he went back to and asked them for reviews. He had up a dead listing for the product said that it could have reviews on. So it actually had eight reviews on it before the product went live.
Reviews – numbers and discounts
It is a myth that you need 50 or hundred or 500 reviews. However, now you really need verified reviews. If you sell it out over 50% discount, it won’t be a “verified” review. Customers are also getting savvy.
Kevin now sorts by verified reviews when he is searching on Amazon, and other Amazon customers are probably starting to do the same.
An example of this is that Kevin got a product that got five stars reviews across the board from giveaways. But after it was used for real, the real reviews went down fast.
How to maximize positive reviews – Email followup tip
Kevin has the first email which does not even offer anything, it contains tips and suggestions and checks. For example if it is a potentially dangerous product, it tells the consumer to be careful when opening it.
The timing of this email is crucial. Assuming that most customers use Prime, they will receive the product two days after ordering. So Kevin times this email to arrive one day off to the order. In other words it is after the order but before they receive the actual product.
He puts the question in the PS: “Why did you choose us?” And offers a free gift if they onto this question. Always put something in the PS if you want someone to read it.
This gives an important psychological insight before they have a product in their hands. From this he can change the listing, bullet points etc. and he gets a lot of verified reviews. About 10% respond. It gives great insight into why they hit the buy button. The product itself can negatively or positively influence them.
You start to see patterns here.
What are your main points? Photos? Title? Bullet points?
The title is really important. The reviews the second most important thing including a video on page 20 possible. Images are also very important. If somebody’s shopping for a well-known brand, the images not so important. But for private label, they are crucial.
Packaging is also very very important. If you have great packaging, it can help you make sales with the photo of the packaging itself.
An example of improving packaging: Kevin started with a $1 box. The new box cost $2.20 but he was able to raise the price to $40- $50, his customers didn’t feel ripped off, they felt they were getting a good deal. This is what to aim for.
If you look at high-end products like Apple Samsung, the packaging is absolutely critical especially somewhere as competitive as Amazon. It gives the customer confidence even if it’s not fancy, it can be a couple bucks but the spelling must be good and it must look like something they can get in a retail store. In a retail store if you think about the people by based on packaging anyway.
You can use great packaging in your photos to catch the eye and differentiate your product.
Careful who you listen to
The figure of “ 50% of full price figure to get verified reviews” comes from Kevin’s own testing and people who know what they are saying.
Kevin warns that some people don’t have a clue are giving advice, in Facebook groups and even some podcasters. Some give great value but a lot of the podcasters don’t have a lot of experience selling. It varies a lot. It’s best to trust the guests are doing the numbers.
[Michael does not claim to be an expert in doing big numbers, which is why these days he focuses more on more on getting in guests who are doing big numbers, and focusing on what they have to say]
HOW TO SUBSCRIBE TO THIS PODCAST
A podcast is a free downloadable audio show that enables you to learn while you’re on the go. To subscribe to my podcast for free, you’ll need an app to listen to the show from.
For iPhone/iPad/iPod listeners – Grab your phone or device and go to the iTunes store and search “Amazing FBA”.
This will help you to download the free Podcasts App (produced by Apple) and then subscribe to the show from within that app. Every time I produce a new episode, you’ll get it downloaded right away.
For podcast enthusiasts – If you already listen to podcasts and have a podcatcher that you prefer, the feed you’ll need to add is: http:// amazingfba.com/feed/podcast.
For those who don’t have a mobile device – You can always listen to the show by clicking the audio file at the top of this page.
If you have any queries, just go to www.amazingfba.com/ask
Master Marketing Principles Mini Series:
SUMMARY SO FAR
2nd PRINCIPLE: DIFFERENTIATE!
Problem: Same as everyone else
Result: No sales, or shopped on price