Private labeling has boomed in popularity in recent years because of its profitability and customer advantages. More and more sellers are building their own brands on and off e-commerce marketplaces as a way to differentiate between bigger retailers.
With 50% of Amazon sellers involved in private labeling, though, competition is fierce. If you want to succeed, you need to know what you’re doing. You need the know-how, resources, and capital to start a strong private label.
Why should you private label?
Private labeling is when you put your logo and brand on a generic product. This differentiates your product from similar competitors and retailers.
With a private label, you have complete control over your business. You build a unique brand, which is critical for strong marketing and customer retention. Customers are loyal to brands, not products. Your private label can build customer loyalty and repeat business. You also have control over your price and position within the market.
On Amazon, a private label allows you to create a separate product listing just for your product. This provides real estate dedicated to your brand and ensures you aren’t competing for the Buy Box against other sellers.
You also have the ability to apply for the Brand Registry, which allows you to control the price, content, and sellers of your product. You also have access to Enhanced Brand Content, which boosts conversion and sales on Amazon.
Customers love private labels because they get greater value. Private label products are generally cheaper but the quality is the same—if not better—than major retailers. In fact, nearly 98% of consumers purchase at least one type of private label product.
Consumers can also purchase products based on their lifestyle. One study found that customers don’t just choose private label for price, they also choose it based on experience. They purchase from private brands with which they most identify.
Ultimately, a private label differentiates your brand in a sea of competitors, gives you more control over your sales, and appeals to a niche target of customers.
So you’ve decided to start your own private label… now what?
Below are the steps to follow to help you start a successful private label from idea to launch.
1. Understand the costs of private labeling.
It’s important to understand your initial startup costs before delving into a private label. Private labeling is more expensive than reselling or drop-shipping. However, this input of capital generally results in a higher return on your investment in the long run.
You’ll have to pay for typical production costs like materials, manufacturing, labor, and shipping. You’ll also need to take into account the customization fee. Most factories will charge a fee to customize a product with your logo, packaging, or specifications.
You’ll also need capital to design your brand itself. You’ll likely want to hire a graphic designer to build your logo and package design. You may also want to build a content strategy to emphasize your brand’s voice.
A major aspect of private labeling is marketing. Customers don’t know about your brand, so you need to spread awareness to become more visible. Marketing like sponsored and boosted posts can create a significant expense. You will likely also need to pay for a website builder and domain name.
Other: You should also add in a sizable cushion for any other unexpected fees or changes that come up at the beginning of launching a new business.
2. Choose the products you want to sell.
Most businesses and brands start with a product. The product is how you make your money and sales. The product is the driving force of your business.
Starting your brand with a product helps dictate your margins, manufacturing, and supply. The brand is the customer experience, but ultimately you also need to deliver a valuable product to your customers.
When selling private label, you’ll likely choose a generic product that you put your own label on. This means that your “brand” starts with a single generic product. How can you use that product to further grow and expand your branding?
Product selection tip: When selecting a product, you want high-ranking and high-margin units. You also want small, lightweight products to reduce warehousing and shipping costs.
You can always switch products if the first product you sell doesn’t work out or you want to change directions. The goal is less to stick to one product but instead to use product research as a lens into your overall industry and niche.
With this in mind, you should also consider complementary products. When selecting key products you’ll sell, you want to think about a number of similar products that will also fit into your brand. For example, if you sell travel mugs, you can expand within the travel sphere or beverage industry. If you sell eco-friendly laundry detergent, you can sell other eco-friendly home goods as well.
3. Define your target market.
Who is your ideal customer? Who is most likely to purchase your specific product?
This will help you determine the types of products you’ll sell and how you’ll market those products. The customer is the key to your market and your brand.
Learn how to define your target market here:
4. Consider your differentiating factor.
You’ve decided on a product and market. Now, what will make you different than your competitors in your industry?
Look at your competition. What is their focus? Where are they lacking? The area where they are lacking the most is a great place for you to position your brand.
For example, maybe you notice that all of your competitors have a serious tone; you could take a goofy and fun tone with your brand.
It doesn’t have to be a major change in order for it to become a strong differentiator.
Your differentiator becomes the cornerstone of your brand.
Keep in mind that price can also be a differentiator. If you are a premium or luxury product, you’ll have a different audience and market than an inexpensive or discount product.
5. Create your brand look.
Your “brand” consists of your products, market, and differentiator. But it’s also your content and aesthetic.
When private labeling, you need a specific logo that reflects your brand. Your logo says who you are and where the product comes from. You should use this logo in all correspondences as well as packaging and labeling.
Before choosing your brand name, make sure it’s available as a business and website. This will ensure you don’t infringe on any trademarks or compete for similarly-named businesses. Make sure that the domain is available as well, so you can build a site off-Amazon for future branding and marketing.
You’ll likely want to hire a graphic designer to create your logo and package design. This is the best way to make your private label appear professional and trustworthy.
6. Create an experience.
Ultimately, a brand is more than a logo, though. Your “brand” is how the customer experiences your business. It’s a consistent way of communicating with your audience.
Based on your brand differentiation, you need to figure out how customers will uniquely experience your brand. What will your content look like? What can you provide that is unique to your brand’s experience?
For example, you can create visually appealing social media pictures that relate to the lifestyle surrounding your dog collars. Or you can make sure you respond to, and answer, every comment or message on social media. Maybe you use specific and unique packaging to keep your brand top-of-mind.
Create an experience and your one-time customers will convert to long-term clients.
7. Find a supplier.
An important part of private labeling is working with a strong supplier. Your manufacturer should have experience private labeling so they can help you turn a profit on your goods.
Many overseas factories will make a generic product for a number of clients and customize those products with private labeling packaging. For example, you work with a supplier who makes water bottles and T-shirts. They have 10 clients who sell water bottles, each with their own unique logo printed on the bottles. The factory will usually charge a customization and packaging fee.
8. Build the brand.
You’ve positioned yourself, created a differentiator, and found a supplier. Now it’s time to start building your business. You need to:
- Copyright name and logo
- Set up website
- Create a social media presence
- Form an LLC
Consider your e-commerce business just as you would any other legitimate business. You need to protect yourself, your products, and your profits.
You also want to start branding your online product listings. Especially on Amazon, a private label means you don’t have to compete for a Buy Box. You own your own “real estate” with a separate listing for your branded products. This is a strong opportunity to optimize the listing in accordance with your brand experience.
The Bottom Line
A private label is a great way to differentiate your product and brand the millions of e-commerce competitors. With your brand, you can sell generic products while building a loyal and engaged customer base.
When creating your private label, you want to continuously ask the question: What do I want this brand to say?
Building a private label from scratch is time-consuming, but it’s worth it. A private label takes you from an online seller to an e-commerce business.