Start selling on amazon? – why NOT to start with private label! (Episode #206)

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How to start selling on amazon?

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!

Whatever Works is good

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.

Real learning versus the the Art of Aping…

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.

Vested interests trump real learning

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.

Experience is the best teacher (no surprise there)

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.

15 reasons to start selling on amazon with something other than private label

BIG RISKS -AT THE TIME OF LOWEST COMPETENCE!

when you start out, you know little and have little experience. That’s fine. That’s also not the time to take big risks!

MOQs and freight costs from China –
these nearly always make for a rather unpalatable large upfront order. It’s all relative of course. If you have £10-20K to invest, you might get away with a budget of £2-3K per order plus some giveaway money. Not for any serious product in the USA, though. And for most people, that’s about half their money for Amazon, in my experience.

Cashflow
It usually takes months to get a decent private label product off the ground. The fastest I’ve personally done it was four months, with a business partner – so we had a combined 4 years of Amazon experience at the time and access to some very experienced people. It’s still challenging enough.
That means no money coming in at all for months.
AND a large lump sum out a few months in.

TIME TILL YOU START SELLING
It takes months to get a PL product off the ground.
Meanwhile you’re not learning from the marketplace directly – you’re an outsider attempting to learn from the rather minimal data Amazon releases. Data which the rest of the planet is also trying to learn from. This is a huge downside.
You’re not learning to ship in products or deal with Amazon systems. That’s a large learning curve. The sooner you can start the better
You’re not getting access to Amazon business reports with more insider information like conversion percentages
You’re not getting access to the Search Term Reports which I believe are the real value you’ll get from Amazon ads. That’s where you find out keyword-level conversion percentages which is VERY powerful info.
you’re also not earning! See the cashflow issue above.

The percentage of successes is so low!
This is the real kicker, I’m afraid. I do know several people who started with private labelling and are still at it today and making great money. Maybe 10-15 people. Maybe 20 max.
However, I must have known hundreds people (vaguely known of at any rate) who started around the same time as me, or have drifted into (and out of) the Amazing FBA Facebook group . Most have apparently drifted away without achieving anything. Or worse, they are fantasising about making money for 2 or 3 years – and wasting those years (that was me for years, by the way – which is why I try my best to stop anybody else wasting their life in the same way)
True, most people who start anything don’t follow through. And that is perhaps even more true for online businesses.
Still, it would be nice to see a little more consistency if it really is going to be advertised as a potential replacement for the day job (by the way, I’m super cautious about what I say to any potential mentoring client or member of a my London masterminds about replacing day jobs. In most cases, I say give it a minimum of a year – and that’s short)

Conclusions on Private label as a way to start selling on Amazon

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.

Don’t start with Mount Everest

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.

There are alternatives

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.

Amazon is still business as usual

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…

Go for it – but lower risk and increase learning!

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?

No again.

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…)

Happy hunting.