Private labeling has become an integral part of all our lives, whether you realize it or not. Every single day, we are inundated with private label brands that we don’t even realize. Just think about the last time you walked through a grocery store. Nearly every product in the store has a private label equivalent, from chips to batteries. Many times, in grocery stores, there is a brand associated with the store itself that sells a similar version of the product at a lower price.
More and more, people are becoming less brand loyal and deciding to seek value in these store brands. Per a report by the Private Label Manufacturer’s Association (PLMA) in 2016, “store brand sales in the US reached $118.4 billion.” It’s obvious that there is a lot of opportunity in the private label space, but many entrepreneurs find themselves wondering how to get started.
For many, the solution is to turn to e-commerce, Amazon, and a bevy of online channels that enable you to tap into the huge audience and market potential that the internet brings to the table.
Private labeling allows you to utilize all the channels and build a legit business from the ground up and control your destiny, are you ready?
Step 1. Identify Your Niche
This can be a major struggle for many business owners getting into the private label game. Everyone has their own system for identifying profitable niches and beginning a program.
Choosing a niche can depend a lot on how much capital investment you have available, to begin with on your new private label product. For example, if you are looking for a low cost of entry, you are not going to want to attempt private labeling a high-cost item unless there is an opportunity for low minimum ordering or drop shipping options.
The options for private label niches are endless, we here at PLS believe that private label skin care is one of the best niches because the size of the market is so huge and there is a lot of opportunities for customers to market to. But, each entrepreneur will need to come to their own decision about what market speaks to them from a profit perspective.
One of the best ways to identify a niche is to research heavily using data combined with intuition and think about the resources you have available. If you already have an audience or large social following, think about products that this audience would find valuable and voila, you are private label selling. The data can come from a variety of sources and sellers usually, go by Amazon’s volume whether the plan is to specifically sell on that channel. There are a variety of tools like Jungle Scout and Merchant Words that can give you data on keywords surrounding a specific topic
The gut portion is about building an effective checklist to score your niche opportunities and decide what threshold you must hit to pursue an opportunity. The facets that make up this checklist is going to vary but should focus on keywords, competition, product size and weight, availability of suppliers, minimum order quantities. The qualities will help you judge the market potential and understand ways for your product line to be successful.
For an example of how this scoring system should work, we can look at the potential for a garcinia cambogia supplement line and look at these factors. There are a whole bunch of keywords for this and they have a ton of volume from the initial research. On Google, there are thousands of terms ranging from 550,000 searches per month, all the way down to just a few searches per month. Using Merchant Words tool, I can see there are over 2,000 keywords with some having millions of searches per month. So, we know that the market potential is there, after that we can research how many sellers are in the market and how many reviews they must get a sense of what is working in that channel. From there we consider that the weight is low and the physical footprint of a bottle is small, so shipping costs will be low. You can see from this very quick example how you would begin to score attributes of a potential product that you want to begin selling.
Step 2. Find a Private Label Manufacturer or Supplier
Working with a reputable private label manufacturer is going to be a major factor in your success on your private label journey. The only way customers are going to continue to come back and buy more is because you have a great product and provide them good customer service.
This step is another where your options can vary greatly depending on the money you have at your disposal to invest and the type of product you are looking to source. Many look to import products from overseas but can run into some issues being able to communicate effectively, reduce shipping times and costs, and handle quality control effectively. This leads many businesses to forego the quick buck opportunity and work with private label manufacturers in the USA. In some niches, it may not necessarily be more cost effective to acquire product overseas, which can make the decision easier to work with companies in the US.
When vetting your private label suppliers, make sure that they have a system in place that is going to be able to scale with your business. The last thing you want is to be running low on product or not be able to get shipments out in time due to manufacturing capabilities.
Find out what their manufacturing capabilities are and what the general turnaround time is so you can get a sense of how partnering with this company will support your marketing and sales effort. Truly high-quality private label manufacturers will be happy to provide these details and look at themselves as an extension of your business. The relationship between your business should basically be symbiotic, whereas helping you succeed is a part of their mission.
Another element to vet with potential suppliers is the range of services they can provide so that you can reduce overhead and save time. Some suppliers will have options that allow you to play around with minimum order quantities, fulfillment, package design, and a variety of other services. Having a company that can handle a multitude of services makes managing your business relationships easier by reducing the number of suppliers you deal with and possibly bundle costs and reduce overhead or increase cash flow potential.
Step 3. Identify Your Sales Channels
The internet has opened the world for sellers and you have an endless stream of potential customers to reach with your message. This can lead to paralysis by analysis when looking at all the options and deciding which channels work for your brand.
There are a variety of methods for this and many sellers jump right on Amazon to take advantage of their tremendous user base. This can be a great option for many niches, Amazon is getting billions of users on every month and most with the intent of purchasing or researching to make a purchase decision.
Another method many sellers take is to create a website that can process transaction themselves so they can have more control over the brand message than a seller on Amazon is afforded. Creating a website is very simple these days with widely available options like Shopify, Squarespace, WordPress, and a whole host of other options. The option you choose will most likely be decided, again, by your resources and how capable you are of coming up with the branding elements on the site. These days, you certainly don’t need to be some expert level coding ninja? to build your own site, so don’t let that stop you.
Step 4. Market Your Private Label Product
At the end of the day, your private label selling experience is only going to be as profitable as you make it. Marketing and sales are where the winners and losers of private labeling are made and your sales are going to be directly correlated with your ability to market effectively. This can mean different things depending on the channel being marketed to, Amazon or your own site are going to require different tactics.
There are thousands of sites at this point preaching that they have figured out the secret sauce to marketing and will make you the next millionaire. But, many of the tried and true methods of making a sale still apply today, some just with digital updates. The “secret” is still simply to get your product in front of an audience that is receptive to your offering and has an attractive offer to show them.
Many sites are leveraging the amazing opportunity that social media has become when marketing their private label products. Everyone is familiar with Facebook, Instagram, Pinterest, and Twitter at this point and their billions of users tell that story.
One of the ways entrepreneurs take advantage of this opportunity is to use social advertising platforms from the big social networks. Depending on the product and landing page effectiveness, some of the social networks are better than others.
The biggest social ads platform right now is Facebook, simply because it is the most robust and the user base numbers of Facebook are simply staggering. Facebook ads allow you to tweak demographic information to narrow your focus to very specific subsets of people that fit the profile of your ideal customer. Many business owners have completely built their empires on Facebook ads and effective landing page tactics, the key is testing everything and reading as much quality training material on the ad platform as you can find.
Paid ads are also available on Amazon and many sellers use this system to garner sales to grow their budget and then more effectively market as growth continues. The Amazon ad platform can be quite lucrative if utilized effectively, although it’s important to keep track of your margins and how much you are spending on ads.
Step 5. Deliver Quality Customer Service
The way to succeed in business is retention, plain and simple. Raising the lifetime value of your customers is going to reduce overhead and enable you to live the life you have always wanted with a successful business.
The only surefire way to retain customers is to delight them at every step of the way and deliver the type of customer service that would have them recommend you to a friend or family member. Building these type of evangelist customers can be the secret to a profitable business that achieves the growth you would never have considered.
Delivering quality customer service can take a variety of looks and mean a lot of different things situationally. Basically, any touch point the customer has with your company is an opportunity to form a bond with them and serve their need. From the initial advertising, all through way through fulfillment and even returns. Companies who get all these touchpoints right are the companies that succeed.
Step 6. Continue to Test and Evolve
Very rarely is a business going to live on the “set it and forget it” model, although we all would love that! One of the keys to growth and success is to continue evolving your marketing, product offering, and everything within your power.
Optimizing different parts of your business will open new opportunities to reduce costs, improve customer service, and gain new customers. As you grow, continue to check with your suppliers and private label manufacturer to see what services are available to you and how you can expand your operation or leverage economies of scale.
With today’s internet age, it has never been easier to go out and start a business and build a brand. With literally billions of people just a click away, there is no reason to leave money on the table. The key is to be ready to work hard and use your brain to leverage the tools that the internet provides combined with your intelligence.