"Build" Guide - how to Build your Private Label Business
Brad runs a one-stop consulting firm that helps Amazon sellers and one of the strategies they use is not to think of a product or product sales life cycle one dimensionally. There are different phases a product goes through. You want to identify those phases and what is need for each phase. A lot of people are wondering what to do for an Amazon launch. After the review blast is over, what do you do?
They have something called “Spur the Machine” that they do for their ASINs and sellers. It’s a four phase approach to the first step of getting something up on Amazon. In their experience, it takes about three months to get a product up and running and there’s a lot going into this.
The big thing is to take a snapshot, then stop and review your data. People tend to keep going and make small adjustments along the way. Doing that makes it difficult to see what’s happening and what’s causing it.
Some research was done on this topic. They gathered data from millions of SKUs and they found that the number of reviews stop mattering after 21 reviews. After that, it’s the amount of stars you have. Reviews matter for sure. Intuition would say that a product with 3000 reviews would do better than one with 100. However, according to the data, what really matters is the star rating.
Brad has found that when you run promotions, there is a higher rate of reviews that comes from people buying your product. The normal rate is about 1-3% of people who buy your product, will review your product. That number jumps up quite a bit when you run promotions. Usually, you don’t have to give away more than 30-50 units on products with a lower price point. With product over $100, you could probably get away with less.
A Facebook crowd around your brand is a great resource. You can promote new products there and get a good response
If you have built up a following around your brand. i.e. A Facebook page or group. You can leverage that following to help you. When you have an Amazon launch and are trying to get a new product out there, you can post about it on your page or group and tell them about your promotions, and ask them to leave a review. It’s a great resource if you have that following.
You can. It’s the idea of making your Facebook community feel special.
It’s hard to say. Within Amazon, it’s an individual person making the call every time. They have their SOPs that say if someone is given a promotion for a review, take it off. If it’s in a grey area, Brad has seen them overreach their bounds too much. However, there should be nothing against giving away promotions for your products.
It shouldn’t. It’s such a new thing and Brad doesn’t know what the internal procedures are but it’s not an incentivised review. You’re not saying, “Here’s a product so that you’ll review it for us.”
Brad could see that argument between two VPs as he has seen in the past, however, he doesn’t have much more insight than that. All he can really go on is the success of promotions in that past that his firm has experienced.
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.
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.
It’s no surprise to anyone that sales with Amazon in 2017 will get more complicated. There is more competition. It will probably weed out those that aren’t committed and aren’t willing to invest the time and money needed. It’s going to get more sophisticated. The person just throwing something up on Amazon probably isn’t going to make it. The ones that put in the effort, and work to make sure it’s a good product to sell will excel.
We’re going to need better listings now that there is enhanced brand content. More people will start using that making it more difficult for those who don’t.
Email follow-up sequences will become more important. They’ve always been important, but now that they are the only real way to get reviews, they are that much more important.
Inventory management will become more important. It’s not secret that Amazon’s distribution centers are bursting at the seams. That can’t really hold more products. So we will likely see stricter inventory control. Whether that’s higher storage fees, or they don’t allow to send in shipments on products that they already have a lot of inventory for.
It’s seems obvious hearing that, but I didn’t really think about it. A couple months ago we were trying to ship products to Amazon. We were warned against sending new products until after the holidays. And it’s fantastic that you were able to talk to Amazon lawyers. It’s reassuring to know that JumpSend is sound and don’t have to worry about getting flagged or banned for using it. I’m definitely going to use it with my next launch.
Greg has first-hand experience with this as he has launched six or seven products since October; three or four in the last few weeks. An Amazon product launch is very different after this updated Terms of Service was released.
Let’s take a 10,000 ft. look at this. In order to rank organically on Amazon, you need to have sales. There are a few ways to get sales. You can make your products really cheap, you can try to drive outside traffic, you can use deal sites like JumpSend. Without sales, you can launch your product but it will end up in the deep dark hole of Amazon and no one will find it. As Amazon sellers, we need to be thinking about how we can get sales on a product that is not organically ranking and doesn’t have any reviews so there’s no social proof.
Greg utilizes his JumpSend tool. It’s a deal site where about 30,000 people are visiting and looking for good deals. It’s no longer a place to get reviews, it’s a place to get sales. It still works, and it is completely within the Terms of Service of Amazon.
So Greg puts his products on JumpSend. Then he offers it at a price people want it, which can vary. He offers about five coupons a day, maybe ten if it’s competitive. From this, he is getting sales. He will do this for about a week. After that time, the product will be ranking very well. From those sales, a few will end up resulting in a review. He will also turn on pay-per-click advertising (PPC). It’s costly, but it does get you sales. That’s what you need to get started; you have to have these sales.
Where most people go wrong, is that they get scared of spending the money. Usually, Greg has to turn PPC so high that he is losing money on that sale. If he is offering 70% off, then he is likely losing money. People seem to get shy about losing money. However, that’s a part of doing business but you will recoup this money in the long-term. A big problem for people is that they’re afraid to bid the PPC that high, or they’re afraid to give that big of a discount because they’re afraid of losing money.
That’s the gist of it. To do an Amazon product launch, you have to force sales somehow. The easiest way is deal sites and PPC. Then you’ll start ranking organically, and start getting reviews. Another thing is that you definitely want to have an email follow up sequence turned on. You can use any tool for that, but keep in mind that JumpSend is also a follow-up email service as well as a deal site. It’s nice that it is a full launch package. No matter what you use, before you do your first giveaway, you need to have some sort of email follow-up that asks for a review.
The first email will thank them for the purchase. The second may let them know that they can contact you if you have any issues. The third could ask for a review. With an email sequence you’ll see that you can get 10-15 reviews out of 100 compared to the 3 out of 100 you may get without one.
Going back to the coupons. Amazon forbids any action that tries to manipulate the sales ranking, and in a way, giving out coupons does that. It’s not so much following the letter of the law but how Amazon sees that. If you give coupons to only JumpSend users but not to the general public, is that potentially violating the Terms of Service?
There is a clause in the ToS that was release in the first quarter of 2016 that said something to the effect that purposely manipulating sales rank is against the rules. It comes down to, what does this mean? It is a bit of a grey area. Greg’s personal opinion is that Amazon put that in because, at the time, sellers were doing these massive giveaways, especially in the supplement category. They were giving away about 100 units everyday for a couple days. That is probably what that clause was looking to prevent.
So, is giving away a couple coupons a day considered manipulating sales rank? All Greg really cares about is making sales and ranking organically in the search results. Since those Terms of Service were released, there hasn’t been anyone, that we’re aware of, that has gotten in trouble for manipulating sales rank. Some have gotten in trouble for some review type infractions. They have been big sellers doing about $500,000 a month. One seller, their VA got in touch with a top reviewer, didn’t ask for a review but it might have been implicated that they expected one, and their account was suspended for two months.
Some sellers have mentioned that some of their reviews were removed if the discount was too high. The sales were legitimate and organic in every way, but if the discount was over 50% off the regular price, then they were removed. You mention that you might give 70%-80% off, does that create any issues, as far as Terms of Service?
Amazon’s ToS are really vague, so Greg bases his knowledge off data and what people are actually experiencing. Whatever you do, do NOT imply that they are getting the discount in exchange for a review! That is a clear violation of Amazon’s ToS. If a person uses a coupon to buy a product, you’re just giving out coupons to make sales. Since October, Gerg has noticed that some of the reviews have been marked “unverified”, so he assumes that those are the ones bought with a coupon.
There is no way to know since you can’t track a review to an order. It seems that, for now, they are sticking. They might not stick a year from now. For the short-term, they are nice to have since, when you do an Amazon product launch, you won’t have many reviews. So even though they are unverified, it’s better to have them than little to no reviews.
They’ve done a lot of testing, and there is no one number, say 30% off, that will get a product verified. Some products, you can give a 50% off coupon and it will show verified. You can give 20% on another, and that will result in it being unverified. Even if you post it publically in the listing.
It’s reassuring that you’re not hearing about people getting their accounts suspended for giving away coupons and that, if you have a follow-up sequence, you can still get reviews. Since you have so many JumpSend users, you have a good amount of data. Also, that Amazon doesn’t seem as trigger happy with this as they seem to be with reviews.
Greg gives away about 5-10 units a day. That isn’t really manipulating sales rank. If it was 100 units a day or 500 units a day, it is probably more likely that Amazon will come knocking on your door. You just have to be mindful.
With the reviews, it’s worth repeating, you CANNOT give a coupon with the purpose of getting a review, or expect a review, or require a review. There is no more incentivised review.
Greg and some others that were running review sites had the chance to speak with Amazon lawyers. At first it was a bit scary but in the end it was a great experience. The lawyers were willing to work with them because they were looking to make the whole industry more legitimate and do away with the whole incentivized reviews.
There were a few things that aren’t in the ToS, but they did put it in writing. Big picture, you can’t incentivise anyone you’re giving a coupon to, in any way, to leave a review. An example of this, is that there were a lot of Facebook groups that had implied reviews with each other. They were saying that you don’t have to leave a review, but if you do you get more coupons. That’s not okay.
They’re not cool with you checking their review profile to see if they left a review. You may not require a review, but maybe you could check to see if they left one or not, and kick them out of the Facebook group.
Offering them more deals or giving them more coupons if they left a review is something Amazon is not okay with.
Basically, anything you do to check up on reviews, or anything link to reviews at all. That was when ReviewKick was relaunched as JumpSend. It’s totally legit and by the books. They have the lawyers blessing. You give out coupons to these people, but you have no idea who they are, you can’t follow up to see if they left a review. They don’t get more coupons for reviews. You’re just giving away coupons in the hopes of getting more sales.
Another thing that was surprising, Amazon’s not dumb. They are very in the loop. All these Facebook groups with the implied reviews, there is probably an Amazon lawyer in the group. Amazon is very attuned with what sellers are doing.
It’s surprising that people think they can fly under the radar. Amazon is one of the biggest companies in the world, and third-party sellers account for ⅓ of their sales.
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.
Problem #3: Low Conversions
Result: Wasted Ad dollars, lower sales, lower profits.
To find your conversion rate for each product on Amazon, there are two sources of info:
Analysing Amazon ads data is a big topic in its own right. If it’s overwhelming you, just start with the global conversion data.
Product Example A
Sales Price $15
Total Landed Cost $5
Amazon fees $5
Gross profit $5
Amazon ads costs
100 clicks @ $0.50 a click=$50 ad cost
Relationship between conversion rate and profit per unit
example A1 (sales price $15, gross profit $5)
At 20% conversion rate:
20 clicks out of 100 result in a sale.
Ad cost total=$50
20 sales @$5 gross profit=$100 gross profit
Profit after advertising (for 20 units)=$50
So profit after advertising per unit=$50/20=$2.50
Example A2 (sales price still $15, gross profit still $5)
At 10% conversion rate:
10 clicks out of 100 result in a sale.
Ad cost total SAME= STILL $50
10 sales @$5 gross profit=$50 gross profit
Profit after advertising (for 20 units)=ZERO!
So profit after advertising per unit= ZERO!
Relationship between price, conversion % and profit
In practice, conversion rate is strongly affected by price. The lower the price, the higher the conversion rate tends to be. NB This is not always true if higher price gives a perception of a better quality product- test your prices!
compare with example A2 above.
Product example B1
Sales Price $14
Total Landed Cost $5
Amazon fees $5
Gross profit $4
Amazon ads costs per 100 clicks (average): $50
At 15% conversion rate: (Sales price $14 , gross profit $4)
15 sales @$4 gross profit=$65 gross profit
Overall Profit after ads costs=$65-50=$15
Profit per unit=$15 overall profit ÷15 units=$1
Although the price is $1 lower ($14 instead of $15), the profit is actually greater per unit ($1 a unit average over zero) and greater overall (15 units sold at $1 profit per time instead of 10 units sold at no profit)
To find the price at which you optimise overall profit, you will need to do some form of split testing.
Simple/primitive method: You can just run the listing at one price for 7 days (or longer) then change the price and repeat. Then compare results. Without software, that’s the best you can do on Amazon.
All other things being equal, that will tell you what effect price has on conversion %, overall sales and overall profits.
However, all other things may not be equal e.g. if the demand for your main keywords happens to drop off that week due to say a national holiday, good weather, etc.
To get a more reliable result, you need to use split-testing software. In the USA, I’ve just started using Amzsplit= Splitly
Sadly it is not yet available for the UK, although they keep promising jam tomorrow! I’m exploring a UK equivalent – if it works, I’ll let you know in the Facebook group – don’t forget to join if you haven’t already!
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