What I Learned from Launching My First Private Label Product

I’ve wanted to launch a private label product for over two years. Private labeling a product means to find a popular product on Amazon, source it, and create a brand around it. They’re also known as “me-too” products.

I have a history of not finishing projects so it was very important to me to launch my first private label product to prove to myself that I could do it. It didn’t matter much to me whether I failed or succeeded. All I needed to know was that I did everything I possibly could and that was good enough.

When I first started selling on Amazon, I started by buying $1 CDs and $5 books at thrift shops. I remember the first time I spent $100 on inventory, it was a big deal for me, because I didn’t have $100 to spare.

First of all, I had no idea what I was doing, I had never run a business before. Spending hundreds of dollars to create my first business entity was a fun experience. Since then I’ve slowly grown and also made a lot of mistakes. The more mistakes I made, the more I improved my processes, and the more risk-averse I became. Sometimes maybe too risk-averse for my own good. But I always operated from the opinion that I did not ever want to risk more than I could afford. Since then, after reading some Warren Buffett and Charlie Munger wisdom, I have also changed my strategy to reflect theirs. I highly recommend their wisdom on building a moat for your products and as well as having a margin of safety.

Regardless, I slowly built my way up. I switched to wholesale, learned how to land wholesale accounts, optimized my first client’s Amazon listing and doubled their sales, and then even learned how to code to start optimizing my own Amazon business and reverse engineer Amazon tools that I used. (Secret: Lots of Amazon software tools might be breaking Amazon Terms of Service. It’s quite depressing/scary actually.)

Eventually I started ordering up to $10k inventory a month which is a huge step from wondering if I could meet a $250 minimum order. But every time I thought about launching my own private label product, I had so many excuses. I didn’t know how to source a product or optimize a product listing. So I started consulting and learned how to optimize product listings.

The biggest excuse I had was that I couldn’t afford to risk $2500 to $5000 on something that could just completely fail. For wholesale, I could get a return on my investment within one month because those were the types of products I sourced. I got a 700% ROI on one of my best products but my typical return is ~20%. It’s rare to get over a 100% ROI for me when it comes to wholesale. Probably because I need that fast 30-45 day turnover so I have very strict requirements.

After doing some research for a few months collecting private label ideas, I realized that I could at least test the waters with $500. I had finally reached a place where I could afford to invest $500 in a new business strategy. It wasn’t an excuse anymore.

Next step was to learn more about manufacturing. I thought about going to the Canton Fair in China which is one of the biggest manufacturing consumer goods trade shows in the world. I was going to go until I realized that I wasn’t at that level yet. It didn’t make sense for me to spend $2000 to go to China to launch my first private label product. I asked lots of people for help when it comes to sourcing and I also did a lot of research. I chatted with my first Alibaba sales reps but I decided to go with a sourcing agent that a friend had recommended.

I’m really glad that I went with a sourcing agent because he was able to negotiate a lot for me that I couldn’t like packaging, extra goods, and lower MOQ. The only mistake I did make was not inspecting the samples myself because I skimped out on the $100 to get the samples. I thought a virtual inspection with my sourcing agent would be good enough and I was wrong. So pro-tip if you ever decide to source a product, do not be like me and skimp on the samples.

I was really surprised when I got my shipment. It was a very exciting moment. I was a little disappointed but I learned my lesson. The product wasn’t as good as I wanted it to be. I realized there was an engineering design flaw that was impossible to see through photos. You had to actually see and try the sample to realize. Fortunately, many of the other products on the market have this same problem so it’ll be fine for my first shipment but I have no intentions of ordering this same model unless I can source or create an improvement.

So after this entire process- what have I realized about developing or launching a consumer product?

One, is that Amazon is a gold mine when it comes to product research. Jeff Bezos talks about the divine discontent of customers and that is an amazing resource that Amazon has. Amazon gets a lot of heat for fake reviews but their negative reviews are a gold mine.

Companies like Anker and InstantPot built their businesses around Amazon reviews.¬†Their founders were programmers that scraped and analyzed reviews. Side note, I tried scraping and analyzing hundreds of reviews for keyword analysis but I didn’t find anything useful that you couldn’t do by hand. I don’t think programming is the key feature here. The key is the rapid feedback loop that Amazon makes possible for product innovation.

When you’re doing product research, you can read all the reviews of your competitors, and eventually you’ll find that many of them complain about the same things. So the easiest thing to do is to improve on those problems. Some things might be more difficult to fix than others- but that’s the easiest, best way to launch a great product. Find a product with demand and launch a better product.

Another problem I have is that I feel like my ridiculously high standards is literally choking my business growth sometimes. I worry about a lot of things I supposedly have no business worrying about like automation, sustainability, and an ethical supply chain. I feel like if I have the power to create a product and business then that I do have a responsibility to at least try my best to find a reasonable solution. Answer to that is, it’s really hard to find a solution for at least the first problem of automation but I think sustainability and an ethical supply chain is at least less societal and thus possible to tackle. Either way, all three of those problems are very intimidating. I’ve done a decent amount of research and have found a lack of resources on fixing those problems for a person, young entrepreneur like me.

To tackle sustainability- the adage is REDUCE, REUSE, RECYCLE, in that order because that order is very specific. Recycling is a band aid- it can’t really solve anything. It can make you feel better but if you’re still over-consuming, recycling isn’t going to make a difference. In fact, there are many states in the USA that don’t even have a bottle recycling program.

So in my opinion, the key to sustainability as a business, is to stop making trendy products like fast fashion. Stop making cheap poorly manufactured goods that will only be used once and end up in a landfill.

Why do people make trendy goods? Because it sells and makes a lot of money. I sold a lot of holiday items that I’m not too proud about. Many people tell me that that’s not my responsibility. Maybe it’s almost communist to be like, you don’t really need that, but I just hate the idea of producing or selling something that will end up in a landfill and make the world a worse place. I want to make the world a better place not just buy into this system of consumerism and over-consumption and actively take part in making it worse beyond being a consumer and now as a manufacturer. I didn’t start a business to make the world a worse place and unfortunately I’m not okay with making the world a worse place just because most people are.

So my guidelines for my next private label product is to make things that people need. Avoid trendy. Avoid cheap poor manufacturing and design. I learned a lot from Patagonia’s principles so if you’re interested in sustainable design, development, and manufacturing, I highly recommend¬†Let My People Go Surfing: The Education of a Reluctant Businessman by Yvon Chouinard.

Another way to tackle sustainability is to use biodegradable or better materials. If you can create your products with less plastic then at least when it ends up in the landfill, it won’t outlive you for 1000 years. The easiest way to do this is to avoid plastic in your packaging. Cardboard and paper is best. Bamboo is a big trend but I’m not actually sure how bamboo is better than plastic (does bamboo not get moldy when it’s used for water bottles, bowls, or toothbrushes?). Glass is also better than plastic when it comes to water bottles because plastic can leech into drinking water. Metal is also a good material that is also long-lasting. Silicone can be better than plastic. If you do have to use plastic, there is biodegradable plastic. The only potential problem for this is that depending on how this plastic was made, the plastic could potentially have pesticides. Tiny thing that you probably shouldn’t have to worry about but hey you never know, it’s good to double check.

Sustainable product guidelines so far:

  1. Make things that people need.
  2. Make things out of sustainable materials.

The problem with sustainable products is that they can be expensive. So the next step in finding a product opportunity is to find market inefficiencies. In a competitive market, prices should be at their ideal price point, and the cheapest for customers. As companies compete with each other, they will find the optimal price point, where they make enough money for the business to be feasible or worth it for them. Some businesses cannot operate at certain margins so they will quit and eventually you will have big players that can get lower costs because they produce greater quantity and thus have greater market share. You see these race to the bottoms often on Amazon and it is also why it’s getting harder to compete with bigger pockets when it comes to launching products on Amazon.

However, there are 2 billion products on Amazon over 20+ categories. Some categories have stricter regulations than others like baby, food, topicals, electronics, medical, and more. If you search, you will find market inefficiencies where there’s not a lot of competition and thus businesses that are marking up their products a lot. This is the ideal product opportunity. Now if you can make improvements to the product, lower the price to increase demand, and also lower the price even more when you start doing higher volume- that is how you find a great product opportunity.

How do you figure out if there’s a market inefficiency? Search for the product on Alibaba and compare costs. It depends on the size of your product but if you know your Amazon numbers, you can identify market inefficiencies. Unfortunately, I don’t know the numbers off the top of my head because the costs can vary for a number of reasons like size or regulations.

If you share my concerns, you will find that all the things that you want to do like sustainability or an ethical supply chain will increase costs to make most products unfeasible. That’s my challenge. Luckily, most people don’t have that problem so I hope this post was helpful for you.

If anyone shares my concerns about sustainable and ethical manufacturing, I would love to connect. If you need help getting started, feel free to comment below or send me a message.

tl;dr- Sustainable Product Guidelines:

  1. Make things that people need.
  2. Make things out of sustainable materials.
  3. Identify market inefficiencies.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.