Private label products are made by a third-party manufacturer and sold under a retailer’s brand name (the private label). As the name implies, you put your own label on existing products that might have been modified or enhanced and sell them under your own brand. This way, you can set yourself apart from your competition by being the only seller of this specific product, which results in customers associating the product with your brand. This advantage comes with (typically) costly brand development and expensive pay-per-click advertising campaigns. Not all products can be privately labeled so sellers need to know what to look for. So how do you start an Amazon private label? There are four basic steps you need to take:
- Research profitable high-demand/low-competition products using an Amazon product research tool such as Algopix.
- Source the products found with Algopix from a supplier. Alibaba and SaleHoo are two of the best places to find suitable suppliers for your eCommerce business.
- Create a listing for your product on Amazon. More details on how to do this can be found here.
- Start selling and develop your brand by
- Running ads & promotions to entice new customers to try your product
- Using internal Amazon tools for your listings to appear in search results
- Driving external traffic to your site with Google AdWords & SEO
What to Look out for When Evaluating Product Opportunities (And What to Avoid)1) Small, Light, and Cheap to Ship. Try to find products that are small and don’t weigh too much. Consider the “shoebox test”: Avoid anything that won’t fit into a shoebox and can’t be easily carried with one hand. The simple reason for this is that the heavier your products, the more you will pay in shipping costs and Amazon FBA fees. Also, your supplier will need to send heavy products via surface mail, rather than air mail, which will increase the time you will have to wait for your products to arrive. 2) Keep It Simple. Do yourself a favor and don’t choose intricate and highly sophisticated products that may break easily. This will save you the trouble of dealing with a lot of returns and bad reviews. The more complicated your item, the higher the chances of encountering difficulties. So try to avoid glass, electronics, and highly complex products in general if you can. 3) Moderate Price. Items that sell in the “sweet spot” range of $15 to $50 (or $100 USD max) are ideal. We don’t want to go lower than $15 because this leaves us with too little profit as we have to cover costs like Amazon fees, cost of goods sold, and advertising costs. But we also don’t want to go much higher than $50. Why? Most people won’t purchase products over a certain price threshold (less impulse purchases) and higher prices also mean that you’ll need more capital to source the product from your supplier. In general, you should aim for a profit margin of at least 30-50%. 4) Sufficient Demand and Low Seasonality. It is crucial to sell products that are actually wanted by customers. Additionally, we are looking for items to be sold all year round so that our business does not suffer from inconsistent cash flow. As a quick product demand test, you can use Google Trends to gauge whether or not demand for a product will stay the same or vary by season for a given product or category. For a more thorough analysis, create a free account for Google’s Keyword Planner to uncover search demand by searching for relevant keywords to your product idea. You should get a good impression of the potential market size of your product idea by combining these techniques. 5) Reasonably Low Competition. Another thing you need to consider is competition. For Amazon, there are two indicators you can look at. The first one is product reviews. When you’re evaluating a product category and notice that the top sellers each have thousands of reviews, this is a warning sign for high competition in this category. But when you’ve found a product with sufficient demand where the sellers mostly have few (< 200), and ideally bad, reviews, it is probably worth a try. The second indicator is Amazon’s Best Seller Ranking (BSR), which gives you an idea of how a product sells overall and in a specific subcategory. The close to 0 the score, the better the product performance. While in high demand, products with high BSR scores also mean more competition. Additionally, you can use the BSR to assess demand. Try to avoid products with very low BSR rankings ( > 100,000) since such products likely won’t sell well. The crux is to find a good balance between competition and demand. As you can see, product research is no easy feat and a time-consuming task. There are many elements to consider, and, unfortunately, lots of guesswork is required. Repeating this process for hundreds of products is hardly possible. This is why it is highly recommended to use a product market research tool such as Algopix. You will better understand supply and demand for your product and the fees associated with selling your product on Amazon. Combined with sales and shipping cost estimations as well as expected profit margins, you are well-prepared to make the right product sourcing decisions.
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