This is the 7th post in our Brand Building Series and today it’s my turn to talk about this next blog post.
In this post I’ll talk about private label versus your own design and why being unique (in the long run) is better.
I will also talk about Industry Research & Demographics (Who will be your customer?) because I feel this goes hand in hand with the decision on choosing a product.
Before we discuss private label versus your own design I will dig into Research & Demographics first – who will be your customer? Is there enough demand? Your customers or target market can also determine whether you go for private label or your own design.
Industry Research & Demographics
I’ve talked in previous blog posts on how to choose a product and do your industry research. So I won’t go too much into detail in this post, check out the post I did on this a while ago: http://importdojo.com/the-ultimate-guide-on-how-to-find-a-product/
Let’s imagine that you aren’t sure yet which product you want to sell in but you have a certain industry in mind. I always say follow your passion or something that you can relate to.
After all it doesn’t make sense to start selling Bluetooth speakers when you know nothing about them let alone explain features or answer technical questions of your customers.
So ideally you start with something that you can at least relate to or feel that you can improve on.
Let’s pick an industry. As some of you know this from me already – I love hiking and trail running here in Hong Kong, so lets look at that niche
Me last week hiking/trail running in HK’s mountains
1) I go onto Google and start my search.
2) I check the first few links and I find a site that has a compilation of the top 10 products – makes it very easy for me.
Here’s the Top 10:
- Handheld bottle
- Neck Gaiter
- Medical Kit
3) Next thing I do is go onto Google.trends.com and enter “trail running”.
It is a very trendy topic as you can see
4) Now lets look at particular states in the US:
Colorado, Utah, Washington, Arizona, North Carolina are the top 5.
If I look into cities as you can see there is a very high demand in Denver, Portland, Seattle, Austin & San Francisco (& a few more).
I know from living here in HK there is very high demand as well. Now if Amazon would have a store here that would be probably my first item to put up on as a listing.
As an alternative I could also set up an eCommerce shop here in Hong Kong (there’s my next business idea).
However I am going to focus on selling a product in the US now either on Amazon or my own eCommerce shop.
Next thing to do would be to research the particular top 10 products and then focus on either the highest demand or the product I can affiliate myself with the most.
After I pick a product I go onto Google keywords planner. I pick “trail running jacket” and as you can see there’s a very high demand (100,000 – 1Million monthly searches on Google).
If I were to go after shoes it would even be 1M-10M per month. Thats a lot of potential customers
What do I do now with all those numbers? Nothing for now since I still am far away from launching a product, but the point of this exercise is that I become aware of the trends, the search and interest volume of my potential clients and how I can take that to my advantage.
E.g. I can set up my own shop or sell on Amazon and drive traffic via targeted Facebook ads (or Google) to my listing. And I can specify that by country, state, city and interest. I am not going into detail now (thats for later) but just a quick look at a Facebook campaign with these keywords and targets generates a audience of 790,000 people. Something for later when my product is live (or during the launch).
Now obviously this is just a brief and short trip into researching demographics and interests. But as you can see from above, there’s literally a million potential clients for me.
Obviously I would now have to do my product research, find suppliers etc but this will be a post for next week.
What you can do from here on is to look up the competition on Amazon and how you can improve a product or even get unique ideas. See also our blow post from 2 weeks ago here.
Lets assume that you have your product and industry well researched. What do you pick now? Private Label or having your own design?
Lets look at the options:
2-3 years ago Amazon FBA private labelling became the No.1 way to start your new business with a small capital. Simple – find a lightweight product, fits in a shoe box and costs less than 2$.
So many people jumped onto that train that today we have immense competition on Amazon. While there are still categories and products out there that have small competition, its getting more and more difficult for everyone.
I am sorry to tell you but those days where you start off with 1000$ or less are over. I still see success stories with private labelling however starting capital should be at least 3-5,000USD. You are going to want to order a quantity (say 500-1000 pieces) that last you 1-3 months when you launch, especially if your product goes well. You will need capital for marketing (PPC, Facebook ads etc., influencer campaigns), logistic costs from China, inspection costs, photography and business set up costs. If you are looking at higher priced items from China – because they have less competition, 5000US$ are easily spent on product costs only.
How does private label work? By now I think most of you how it works but basically you are buying a product off the shelve from a manufacturer, maybe improve it (see last blog post), put your own logo on the product or packaging and send it to Amazon. Obviously there are many steps in between but thats pretty much it in a nutshell.
Does private labelling still work? Yes it does, but the competition is just immense right now that you’ll want to pick your product carefully with extensive research. Perhaps instead of making it difficult for yourself with limited capital you may want to look into other private labelling like wholesale private labelling. What’s that? Check out my good friend Will Tjernlund’s speech at the Global Sources Summit last year October in HK: https://www.facebook.com/globalsources/videos/10154597697889785/
So while private labelling in its different forms is still a viable option and will make you money you will have to have a good product that stands out plus extra capital for marketing and advertising since the TOS change from October 2016 in regards to giving away products and review services has more or less collapsed as a sure way to gain traction in your first few weeks.
The most obvious downside on a private label item is that anyone can come in and hijack or have the same product up after a few weeks. Even if you are brand registered, a competitor can come in and modify the product with his factory, maybe even improve it and sell under his own listing. Within a matter of weeks you can have 4-5 competitors and the price gets driven to the ground. Think of the melon slicer that everyone tried to sell and within 2 months there were 30+ sellers of this product. Imagine you would have been the person designing this item, how long you’d been the only one making huge profits. All the other guys that came in after you had to fight for the price and customers. Basically a race to the bottom.
What are the advantages on private labelling?
- Small investment costs (3-10,000USD+)
- Quick turnaround time from placing orders to selling the product
- Good starting point to make money on the side and learning the process
Don’t get me wrong, to start out and if you are concerned about capital and big investments private labelling is a great way to get started. You’ll learn the ropes, get your first experience in China and on Amazon and you’ll be set up with your business.
Even I started with a private label but quickly moved on to create unique products.
Your own design and why unique is being better
What’s your own design and what are the risks involved? What sort of capital do you need to invest?
OK, so first off you might say – even my unique products can be copied at some point. Yes, thats true but you’ll have a head-start of at least 6-8 months and by the time the competition comes in you’ll have a lot of reviews (that he doesn’t have) and you’ve already made good money and ideally even work on your next product. Thats the business cycle anyway, you create a product, someone comes and copies you. Deal with it and move on.
Next question may even be how to avoid that anyone copies you – patents and trademarks. First you’ll definitely want to register your brand on Amazon so that anyone trying to hijack your listing has to ask you for approval – guess you won’t approve Second you may even want to patent your design in the US (or wherever you are selling) So anyone trying to copy you has a very low chance of succeeding. You can easily report them to Amazon infringing your patents or design.
Whats the downside with your on design? There are three things that come to mind.
- Long period of development & perhaps the feeling of missing out on action
- Medium to Large investment costs (10,000USD+)
- Risk of product not selling well (but you’ll have that risk with private label items as well) as it is new to the market and “no one knows it exists yet”.
Whats the upsides of your own design?
- You dictate the selling price and market. Out of experience your margins can be 100% upwards. Private Label usually has anywhere from 15-45% (which is actually not bad when you are starting out)
- You can interest retailers and other businesses with a unique design. It’s very unlikely that Walmart is interested in buying a private label garlic press.
- You have a USP (Unique Selling Point) that your competitors (private labellers) don’t have. If you keep coming out with unique products your customers will return. Just think of Nike or Adidas how they constantly re-invent themselves with new designs, material etc. If you are a one hit wonder there’s not really a momentum that you can build (e.g. improving the garlic press for the 50th time).
I think it is pretty clear that a lot depends on your capital and assessing your risk tolerance. Investment more and get paid off (hopefully) or start small and grow slow. It is really a personal decision that I can’t take off your hands
Researching your demographics and possible target audience helps making a decision.
I hope this post has helped in some way and I look forward to your comments
All the best and happy sourcing,