When Does It Make Sense to Create a Private Label Product?
The eBay & Amazon Seller's News ~ November 2016 ~ Volume 17, Issue No. 16
Tips, Tools, News and Resources for eBay, Amazon and Independent Online Sellers
As you may imagine, the holidays are a busy time for our product sales on eBay and Amazon. At the same, my book sales tend to go down. So I usually run a sale on my books. (I apologize in advance for anyone who just bought a book before the sale but I can't go back and undo that)
Starting November 1st and going through December 31st I'm offering $20 off most of my products! (Products costing less than $20 are excluded from this offer.) Just use the coupon code SAV20SKIP. After you enter the coupon be sure and click the button that says APPLY or it will not take.
PLEASE NOTE - If you want to buy more than one book you will need to buy them separately because my shopping cart will only discount the last item sold.
That coupon does not work on my UK shopping cart, so I have just lowered the price on all my UK products by £10.
A few nights ago I had trouble getting to sleep and I ended up watching late night TV. I was really surprised to see a commercial from Amazon. This one was from their Human Resources Division and it said that Amazon was hiring. One the best features of the Ad was that it had a really good tour of an Amazon warehouse showing all the advanced handling equipment.
One thing the ad did not mention was that most of the jobs they are hiring for are temporary jobs for the Christmas selling season.
We talk a lot about brands that are restricted on Amazon, but have you heard about brand gating? My website has an article that explains what brand gating is and offers some suggestions that might help.
Readers of my newsletter are familiar with Robert Cyr. He's an expert in sourcing and selling liquidation products. Now Robert has started a private Facebook group especially for resellers. It's Product Sourcing 101. Robert says, "Our group has a bunch of on and off-line sellers who are more than willing to answer questions and offer B2B advice."
The holiday sales season is fast approaching! Are you ready? Check out this list of to-do items from Amazon to make sure you're prepared.
A recent Feedvisor infographic states the following data about Amazon sellers:
I recently received this from Amazon and want to make sure that everyone sees it:
We are writing to let you know that there was an error in the notification you received previously on October 17, 2016 that included "Utilize Fulfillment by Amazon (FBA) to ship products to customers". From October 10, 2016, we are restricting shipments from sellers who are new to FBA to ensure we have the capacity necessary to receive and store inventory and to ship products to customers quickly. If your first shipment to Amazon occurred on or after October 10, 2016, we invite you to start shipping to Amazon after December 19, 2016.
Special restrictions in Toys & games - As a reminder, to maintain a great customer experience this holiday season, we have established holiday selling guidelines for the Toys & Games store.
Effective on November 17, 2016, only sellers who meet the criteria listed below will be eligible to sell in the Toys & Games category from November 17, 2016 through January 5, 2017.
Orders that use Fulfillment by Amazon will not be subject to the above criteria provided your account is in good standing.
If you currently sell through FBA, you're exempt from these rules. But if you are a brand new seller - then you cannot get on FBA until the holiday season is over.
Here's a tip if you have an online business. Be sure to stay on top of things. Nothing in the business world is static. Once you get your business up and running and you are making money, it is easy to put your feet up and relax. That is a crucial mistake. You should always be on the lookout for new products, new services that can help your business and new methods of marketing. I was guilty of this when it took me two years to recognize the marketing value of Twitter and Facebook. That mistake cost me thousands of dollars
For more business tips see 10 Tips for Starting and Running A Successful Online Business
eBay released their 3rd quarter results last week. Although their total sales (GMV) went up 5% for the quarter, which is normally positive news, eBay's stock dropped quite a bit, because management gave a poor forecast for the 4th quarter.
Lets get started with this month’s articles:
Private Label (PL) is all the rage now on eBay and Amazon, but it may not make sense to create a private label product.
If a product is selling well - and easily available from wholesale sources -then it may not be a great idea to create a PL product when you can make money just fine by buying wholesale and selling under the normal brand name.
My reasoning for doing PL is the following:
Here is an example of a PL product I have done:
The Smart Kitchen is my PL brand
Now - here is an example of a product I sell wholesale and reasons why I don't PL it:
The other thing I see happening is sellers that find a brand name product from a Chinese supplier and try and private label it. Then after they have done all the work and spent the money, they get a note from the supplier telling them they are copying a branded and trademarked product and threatening to inform Amazon if they don't take the listing down. In most cases you can win these battles, but in the meantime your listings are suspended by Amazon and you are spending money on lawyers.
Here is an example of a product where I thought the brand name was not protected and I was considering doing a PL, but after I typed the brand name into Amazon and got dozens of listings from the seller with that brand name. So I decided to pass on this one.
We've seen it coming through the last year of Amazon-initiated litigation against review clubs, membership sites, and even individual Amazon sellers who pay or provide free products in exchange for product reviews. The theory is sound - a new product needs reviews so other buyers can make an informed decision about it. Giving the product away to get customer reviews sounds like a good idea. However, in practice it became more like, "I give you a free product and you give me a 5-star review," and that undermines the purpose of customer reviews on Amazon.
Paid membership clubs were created specifically for connecting willing reviewers to sellers offering free products for reviews. In the past, the only requirement was that the reviewer write that they received a free or discounted product in exchange for writing the review.
But listings were becoming skewed with incentivized reviews of dubious authenticity and how is a potential customer to know the difference between that and a genuine review? Many weren't even looking beyond the average number of stars for reviews.
That has all changed. As of October 3, 2016, Amazon has banned ALL "compensated" reviews unless it is part of Amazon Vine which has a green stripe across the top of the review to identify it as such. You can read the full announcement here but the important part of the new Community Guidelines is:
In order to preserve the integrity of Community content, content and activities consisting of advertising, promotion, or solicitation (whether direct or indirect) is not allowed, including:
Amazon couldn't be clearer. Both the reviewer and the seller are violating the community guidelines if the seller pays or gives a free product to anyone directly or through any other third party in exchange for a review.
Amazon Vine will continue, but the reviewers (Vine Voices) are only selected by Amazon and invited to participate. Amazon also limits the percentage of Vine reviews on a listing versus organic reviews created by people who purchased the item.
So the obvious next question for those who have utilized these review services in the past is, "Can I submit my product to Amazon Vine?" The short answer is probably not.
The only people allowed to submit products to Amazon Vine are those with "Vendor" accounts. If you have a "Seller" account, you are considered a marketplace or third-party seller (even if you're using FBA). To be a "Vendor," you become a distributor for your private label product selling directly to Amazon. It is an invitation-only program and you no longer have any involvement in the sale (or selling price) of your item. Listings will say, "ships from and sold by Amazon" instead of, "Sold by YOUR NAME and Fulfilled by Amazon." Even vendors can't guarantee that their product will be reviewed. They can submit it, and it will be put into a queue and "if selected" Amazon will send the product you submitted to a Vine reviewer. You have no involvement at all beyond sending in the sample product. So becoming a Vendor and utilizing Vine isn't really an option for most sellers.
The only exception to this new rule is books. Amazon still allows advance-reader copy reviews as it has in the past. But since that really only benefits publishers and authors, this doesn't really impact third-party sellers.
The best way to get reviews? Offer a quality product at a good price. I have never paid or offered free products for reviews of any of my items, and I have consistent good reviews across all of my products.
Guest Article By Dana Derricks "The Copywriting Professor"
Amazon Sellers! Are YOU Overlooking Any Of The "6 Business Killers" On YOUR Listings?
A word from Dana Derricks, "The Copywriting Professor":
I have created a simple, profit-boosting workbook just for Amazon sellers that analyzes the above points in more detail…takes you by the hand and walks you through how to optimize your own listings the RIGHT way…plus reveals many secrets that have helped me propel some of my own clients (and myself) from average to selling millions per year.
Guest Article By Kris Eng of Midzi.com
Craigslist has been a wonderful tool for buyers and sellers to connect on the web for free since Craig Newmark began the service as an email blast to friends in 1995. Now spanning over 75 countries, it quickly became the go-to place to find housing, jobs, and popular items.
Despite its rather pedestrian look that has not changed since its inception, it is still one of the most popular ways to connect with strangers. The home page today is still extremely similar to early versions of the website - it still sports the same blue hyperlinks but now contains more categories and geographies.
The New Blood
There have been many companies who have tried to unseat this simple website, but few have come close to succeeding. There are some who are starting to make strides into their domain.
OfferUp, based in Seattle, has a similar product that takes the concept one step further providing the ability to not just contact the seller, but also make an offer for the item below the listed price. The issue with this is that there are a lot of bargain hunters and some buyers just want to see if they can get things at rock-bottom prices. Some will even negotiate beyond their price they offered once meeting in person, knowing that the seller does not have a lot of leverage.
Another relatively new entrant into the space is Facebook Marketplace, which is only offers a similar value proposition as OfferUp, with an additional social connection. As of launch, it includes just a listing of the items and services.
While most solutions want to upend Craigslist, there is another player, Midzi, that is a platform that merely wants to complement it. Midzi is a way to escrow a payment until the buyer and seller are ready for the funds to be released. It helps sellers by ensuring that the funds are available and buyers can be confident that the goods or services are genuine.
The Problem With Craigslist
Despite its tremendous popularity and appeal, there is always a slight hesitation with Craigslist. Since Craigslist merely acts as a classified for local items and services, it does not guarantee or insure any of the items that are posted to its site. Common issues that arise are scams, fraud, and even robberies.
Recently in Grand Rapids Michigan, Teresa Johnson put down $800 as a security deposit for renting a house and sent it to the so-called "owner" through Western Union. However, when she went to the house, the actual owner had no knowledge of the listing and her $800 was nowhere to be seen. Instead of starting their stay in a three-bedroom house, they have to resort to living at a motel, since she was scammed out of the funds for her security deposit.
This story and others are more common than you think as people are getting scammed because there has not been a great way to safely do a transaction in a simple way without paying huge fees.
The Solution For Craigslist
Now, that's changed with the new app called Midzi (www.midzi.com). Midzi's goal is to help progress a transaction beyond the offer so situations like Teresa Johnson's do not happen again.
Midzi's concept is a centuries old technique of using a middleman to hold the funds until the item or service has been delivered. When the buyer and seller are ready, the app simply releases the funds to the seller.
Midzi is currently free. The only charge is if the buyer wants to add funds via a credit card (3% fee) since there is a cost to credit card processing.
There hasn't been a product that has complemented Craigslist so perfectly until now.
If I asked you how much it costs you to sell on eBay or Amazon, you might know if you would look up the fee schedule and say something like: "Amazon's commission is 15% or eBay and PayPal fees average around 18 to 20%. If listing and selling fees were your only costs, you would be essentially correct - but the question is not about fees, the question is: "What are your true selling costs?" Knowing how to determine that is the difference between profits and losses.
True product Cost - The first thing you have to know is how much your products are really costing you. Besides the basic wholesale cost there are other costs you need to add to determine your true products cost. First is your inbound shipping cost. Just yesterday I received a case of an expensive brand name body lotion that I sell on eBay and Amazon.
There were 48 bottles in the case and my cost was $5.30 per bottle. But since lotion is somewhat heavy the shipping cost came to $34.45. So let's do some math: 48 X $5.30 = $254.40. When you add in the shipping the total is $288.85. Now divide by 48 and you get an item cost of $6.01. Now since I sell through Amazon's FBA program, I also have to label and ship the product to Amazon. Labels and plastic bags cost about a penny, so I am now up to $6.02. Shipping to Amazon will run me $19. So dividing that by 48, I get an additional cost of 40¢, which makes my total product cost now $6.42 and we are not done yet.
I also have storage costs at Amazon. The 30-day storage cost on those items are only 40¢, but we are now up to $6.82. And no - we still are not done.
On this product I average about 1 customer return per case of 48. So if I take that total cost of $6.82 and divide it by 48, that adds another 14¢ to my cost which gets us to $6.96.
So even though the product originally cost me $5.30, you can see that my true cost is really $6.96. That assumes I pay cash for the product. If I was borrowing or financing on a credit card, I would also have to add in the interest cost on the entire case until it was fully paid off. (Note - We often use credit cards to pay for merchandise, but except for large buys near Christmas, we pay our cards off each month to avoid interest charges.)
Ok - that is how you find out your true product cost - now how about selling fees?
Amazon Selling Fees - If you are a basic seller fulfilling your own sales, then whenever something sells, you pay 15% + 99¢ on each sale in most categories. If you are a pro seller, you pay $39.95 per month + 15% of each sale.
Note - Some special categories such as Kindle accessories and computers are different but I am going to use 15% to keep things simple. If you sell in one of those other categories, just change the math to suit your needs.
So if you are selling more than 40 items per month, it is better to pay the $39.95 per month and get rid of the extra 99¢ on each sale. So let's just use the 15% for the rest of this example.
Going back to our body lotion in the previous example, I sell that for $12.99. We use FBA which I will get to next, but let's look at it if I were merchant fulfilling.
That means my profit as a percent of the selling price works out to 31%.
Now let's look at FBA
So as you can see I make a lot less money when I use FBA. But what you don't see is that I sell about a dozen of this item a week in FBA, whereas when we were merchant fulfilling I only sold about 1 per week. So I am making $19.32 a week on this one product in FBA versus only $4.09 per week when I merchant fulfilled.
You may have noticed that I have not included shipping as the shipping credit Amazon gives me for this product actually covers the shipping cost. And there is no cost when Amazon ships through FBA.
eBay selling fees - Unlike Amazon, eBay also has listing fees that you pay when you list an item. First off, eBay gives you 50 free listing per month. After that you pay 30¢ per item whether it's auction style or fixed price listing. ($0.05 for fixed price Books, DVDs & Movies, Music, and Video Games listings) Since most full time sellers list far more than 50 items per month let's just use that in our calculations.
Final value fees are the fees you pay when an item sells. (If you offer free shipping eBay also charges you the final value fee on your shipping cost). eBay used to use a sliding scale where fees went down as a percentage as the price went up, but earlier this year eBay went to a simple 10% final value fee on all sales with a $250 maximum fee on really high priced items.
Let's use the same lotion product for this example:
In addition to eBay's fees, about 95% of all eBay sales are paid through PayPal. PayPal's fees are 2.9% + $0.30. So on this sale the PayPal fee would be 38¢ + 30¢ or $0.68 total. Take that away from you net after eBay fees and you are left with $10.71. Now let's subtract our true product cost of $6.96 and you are left with a gross profit of $3.75.
So let's compare our gross profits:
As you can see, from the standpoint of pure profit, merchant fulfilling through Amazon is the most profitable. However, remember when I sell through FBA my sales are far higher than when I merchant fulfill. But let's add another wrinkle. The latest multi-channel strategy used by professional sellers is to use Amazon FBA to fulfill your eBay (and website or any other venue) sales. Let's look at how this works.
One advantage of using FBA to fulfill your eBay sales is that Amazon passes on their extremely low shipping rates to you, the seller. This means you can be more competitive on eBay. Here is the example:
So I make 51¢ more selling on eBay through FBA than I do on Amazon, but less than if I sell it and fulfill myself. (Again we are assuming that when I ship myself shipping, is covered).
By now, you probably are wondering why do all this? OK - here is how it works in the real world:
When I sell on Amazon through FBA I typically sell about 12 of these per week and net $19.32, much more as we near Christmas or Mother's Day.
If I sell these individually on eBay and charge shipping, I typically sell one or two per week. But when I offer free shipping my sales go up to about 4 per week. So my weekly net profit on eBay with Amazon fulfillment is around $8.48. That means just this one product nets me $27.80 per week. And remember I have over 800 individual products on Amazon and over 200 of them also sell on eBay.
If you wonder why I don't sell all 800 on eBay it is because the listing fees would run about $255 per month and many of those products just don't sell that fast to justify that, so we only list our fast moving products on eBay.
And consider this - I don't have to ship the item every time it sells. Since we average about 40 sales per day on eBay and Amazon, just think how much work it would be to pack and ship all of those items. Since our business is just my wife and myself, there is no way we could do that and would have to hire someone to help. And once you do that, there goes a big part of your profits.
eBay optional fees - In addition to the listing and final value fee, eBay has several optional listing enhancement fees. Some of these are listing designer (10¢), Gallery Plus (30¢), sub-title (50¢) and Bold ($2). Given the cost of this item, it would not make sense to use any of those services, but when I sell very high-priced items such as the $400 camera lens I recently sold, then I sometimes use Bold or Gallery featured.
Danny's Silver is a family-owned business that sells items made from 925 Sterling Silver. They also have a nice selection of Tungsten and Stainless Steel items.
The Lookbook has an attractive, trendy line of women's clothing.
Northlight offers seasonal and gift decor including holiday accessories, patio furniture and more. In addition to being a great wholesale source, take a look at their blog for marketing ideas and tips.
Lemon Tree sells women's apparel as well as accessories, handbags, shoes and scarves. Be sure to check out their impressive line of plus-size fashions.
Aromar provides fragrance oils, air fresheners and tea lights. They also have a large selection of fragrance oil burners.
Hartmann Variety sells closeout and surplus tools at wholesale prices. Brands they feature include DeWalt, Bosch, Irwin Industrial, Milwaukee and more.
Schandra offers handbags, jewelry, watches and accessories. Check out their fantastic looking line of Swarovski Crystal Clutches.
Dovetail WoodWorks provides quality outdoor furniture. Their offerings include Adirondack chairs, BBQ benches, planters and more.
Station 1 Wholesale provides themselves in their unusual line of gifts. They certainly have some unique items. They've got candy jars, cookie jars, angel figurines, plaques, jewelry and a cast iron pig bell. Really!
JK Linens provides sheets, soaps, quilts and candles. They also offer private labeling and drop shipping. However, I have no experience with their drop shipping program. So be careful and check them out before you use their dropshipping program.
Unrooted offers Turn-key packages for retailers looking to sell Air Plant Terrariums.
Nature's Garden Seed Company sells high quality products including wildflower, tree & vegetable seeds, and botanical gifts inspired by nature.
LIBRA is a wholesaler dealing in brand name CLOSEOUT MERCHANDISE. They sell closeouts of all kinds, including: excess and obsolete inventories, premium overstocks, buy backs and stock lots.
That’s it for now. See you again soon.
P.S. If you missed the last issue, click here to read it.
© 1999- Harry McGrath, Inc., DBA Skip McGrath, Auction Seller's Resource and Vision-One Marketing. All Rights Reserved.
Please Note: Some of the products and services mentioned in this website, in articles, banner ads and newsletters and blog posts are for products and services for which I earn a referral fee or commission. We always evaluate anything we recommend very carefully and each year we turn down literally dozens of opportunities to recommend products or services where we can earn a commission. Even though we earn a fee on some of our recommendations, we only recommend products and services that we feel will deliver good value and with rare exceptions, they all come with a money back guarantee.