How To Start A Private Label Business
At the fast-growing pace of the world today, potential entrepreneurs feel the need to go into businesses not just for the sole purpose of making profits, but to get the chance to express their passion.
On the flip side of things, there are competitors who have come to be known as authorities in different industries. Hence, it is often difficult for newbies to break into markets and make sales/conversion.
Despite the difficulties, owning a private label business is one way to break into a difficult industry by establishing a partnership with an industry authority.
This business is still quite lucrative and to set up one, you will need to understand what the business is all about, and what will be required for starting.
What is a Private Label Business?
Merchandises which are commonly produced or provided by one company, then labeled with another company’s brand, are regarded as private-labeled products.
So, a private label business entails a business model where business owners/retailers manufacture their goods using a contract or a third-party manufacturer but sell under their own brand name.
The retailers, then, make payment to have the goods produced and delivered to stores.
This form of business is different from buying goods from other companies, where these companies have their names on the products.
A target’s private label brand can be any consumer good at all. For example, a beauty parlor may decide to have their own branded skincare products and sell to their customers.
This may also be extended to stores who will stock them up on their shelves for customers to buy directly. This is the case with many Amazon sellers.
The Processes Involved in Creating A Private Label
The Private label business has two main types:
- Products that stand on their own merit and name.
- Products that attach to an existing brand.
The decision regarding the type of private label business to settle for should be well base on research as this will influence the success of the business in the long run.
The process of Starting a private label business can appear daunting, and without a little help, it’s difficult to navigate the unfamiliar terrain. The steps below should guide you:
Step 1: Selecting Your Product
Once this is done right, every other thing in the processes of starting a private label business would easily fall into place.
Unsurprisingly, the product forms the core of this business and it tends to pose a lot of problem to sellers, especially those who are looking at selling on Amazon.
- It is important to consider a product that reflects directly into an existing brand as well as those that can stand by their own name and create merit by themselves.
These are the factors that will determine where and how far a product will go and your chances of success at it.
- The choice of products will also determine the costs needed for the business. For this reason, one will also need to opt for some certain products, as opposed to the others.
Keep in mind that bulky products are more expensive to produce, store and ship. It is more profitable to choose lightweight products for the ease of packaging and the maximization of shelve space during storage.
Since it is always more expensive to make products with intricate parts, it is necessary that a product is kept simple.
Moreover, less time and energy will also be spent on finding a suitable producer that is capable of producing high-quality simple items.
Once this is kept in perspective, there will be less worry about damages during shipping.
Step 2: Cost
It is important to keep in mind that the goal of every business is to maximize profit, this is one of the reasons why everything on a business journey, revolves around costs.
Starting this business may seem like a very arduous task but making the right financial decisions will guarantee a profit in the long run.
- One will have to consider all the expenses that will be incurred before the product gets to the warehouse. This will include the cost of manufacturing, shipping and that of customs.
- The cost of getting a befitting logo design should not be ignored. Sometimes, a manufacturer may overlook this as a very trivial point in the production chain but keep in mind that a company’s logo is the first point of appeal to customers.
It serves as a visual representation of everything that the company stands for. To get a good logo design may likely translate to expending some bucks but not to worry, it is all a means to a profitable end.
- Also, it is important to consider the costs of marketing. To run a successful private label business, do not hesitate to spend money on marketing campaigns.
Ads on online platforms like Facebook and Amazon are often a sure bet at getting returns on investments. Do not also forget to make provision for other costs that may pop up.
Step 3: Finding the Right Supplier
The next step is to find a manufacturer for your product. You can decide to go local or international, depending on your budget and the kind of product you want.
Finding the right manufacturer can be quite difficult especially with the rate of fraud around. Look to get a respected, trustworthy and reliable manufacturer.
Step 4: Get Your Logo, Design, and Packaging
Getting a good logo is very important. Your logo represents your company and creating a good logo will leave an impact on the targeted consumers.
Step 5: Channels for Private Label Businesses
Once you have decided on your product choice, with the costs in perspective, it is important to consider the channels with which you intend to get your products out there.
There are quite a number of easy channels that have proven to be profitable and stress-free.
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Drop Shipping:
This channel eliminates any form of contact with your goods and its manufacturers.
Owning an inventory is not required as you will simply be purchasing orders directly from the manufacturer or suppliers who then deliver directly to the customer.
Although this is somewhat risky since there is no inventory to make use of as reference if the supplier tends to be unreliable in the case of a product shortage.
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Fulfillment by Amazon (FBA):
This channel is very effective when you are starting up. Here, you ship your items to Amazon who handles every other thing thereafter, including storage, packaging, and shipping to customers.
This gives you more time to focus on the other areas of the business.
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Order Fulfilment:
This is the channel that allows you to handle everything concerning the product, from the manufacturing of products, packaging, and shipping to customers.
This channel not only allows you to keep track of your goods, but you are also aware of the products you have at every point, so you can avoid making false promises to customers.
However, getting this done as swift as possible is challenging and can be time-consuming, but it is worth the time and effort at the end of the day.
Benefits of Owning A Private Business Label
- Control of Over-Production: The retailer has control over what goes into the product, hence the manufacturers work at the discretion of the retailer.
- Control Pricing: Private label owners have the power to determine the price that works for them, to help them maximize ample profit.
- Control Branding: Products bear the name of the retailer’s brand as well as product design that has been decided by the owner.
- Profit Control: Because of the retailer’s ability to control price and production, he is also able to determine the level of profit that his goods provide.