Jun 5, 2018
4 Reasons You Should Be Selling Private Label Products
If you are seeking the most profitable products to sell – ones with great margins, exclusive access, and control over pricing and distribution – your best choice may be to sell under your own name. Private label products allow you to create your own brand using luxury ingredients available straight from the manufacturer. Just as a supermarket will develop and market their own “store brand” to great profit, you can sell the same high-quality products many top retail names are already using.
Many independent sellers are finding success with private label products. Here are some of the reasons why:
Well-known brands have the obvious advantage of name recognition, but they can be very particular about rules if you want to sell them on your e-commerce site. The price of using wholesale products is following rules and restrictions about how much inventory you can receive in your region and at what time. And if they decide to discontinue your customers’ favorite product, you are out of luck.
In addition to distribution, wholesale distributors also have a lot of say in how you price your products. Sometimes this will work out fine, but it can be frustrating to have to stay above a manufacturer’s minimum suggested price when you know that a short-term deep discount is best for your market. Conversely, your supplier may want to cut prices right when your own customers are comfortable paying close to retail.
With a private label product, you can respond to your own individual market when you set prices or choose how many units to order. If you sell a certain amount each day, your private label manufacturer may even be able to process and ship your orders on the same day you place them. And if you know your market will respond to certain trendy ingredients, many manufacturers can add them to your line for as long as you need them.
Private label products are usually (although not always) more profitable to sell than wholesale products because it is easier to keep costs down. For some products, the cost of manufacturing and distributing a store brand is 40% to 50% less compared to name brands. Part of this is due to the streamlined nature of selling one’s own brand. When you sell someone else’s product, you have to deal with not only the manufacturer and yourself, but also distributors and regional wholesalers, and everyone at each stage needs some compensation.
In general, wholesalers on Amazon can expect 10% to 25% profits margins, but private label sellers may see profit margins of up to 40%.
E-commerce allows any seller potential access to customers from anywhere in the world, but the flipside to this wide-open marketplace is that customers can also compare your prices to everyone else’s. Many sellers have to resort to a race-to-the-bottom strategy to compete on price, which reduces profit margins down to the bare minimum for survival. Many sellers can’t compete on price at all, and their business folds.
However, if you are the only one selling your label, you will not have to worry about a different seller undercutting your sales by a few cents. Even if you grow to the point where you decide to become the wholesale distributor to other sellers, you still control who sells your product. If an unauthorized seller does appear, you have recourse for getting them removed.
There are different ways growing your own brand can help you sell private label products profitably. Your products may become an extension of a retail business you already run, such as a salon or spa. Adding luxury products under your own name can help you seem more established, and your customers can have a reminder of you on their shelves after they go home.
Developing a strong brand identity also helps e-commerce sellers stand out from their competition. You are not just another seller of a big-name brand, but you can (with research and effort) develop brand loyalty for a product only you offer. Engage your audience with your own personal vision, and listen to their feedback, to keep your brand growing.
Finally, a really successful brand may even be purchased for a substantial amount by a larger distributor. Some entrepreneurs even build up brands with the goal of selling them later.
To learn how Evora can help you develop your product and brand identity, contact us here.