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Private Label: Import Products

A little about Private Label (PL)

What is Private Label (PL)
Advantages of PL
Disadvantages of PL
PL and Profit Margins

A private label product is manufactured by a contract or third-party manufacturer and sold under a retailer’s brand name. As the retailer, you specify everything about the product – what goes in it, how it’s packaged, what the label looks like – and pay to have it produced and delivered to your store. This is in contrast to buying products from other companies with their brand names on them. Almost every consumer product category has both branded and private label offerings, including: Personal care Beverages Cosmetics Paper products Household cleaners Condiments and salad dressings Dairy items Frozen foods also known as "phantom brands", are typically those manufactured or provided by one company for offer under another company's brand. Private-label goods and services are available in a wide range of industries from food to cosmetics to web hosting. They are often positioned as lower-cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands. Products (or services) which are generally manufactured or provided by one company under another company's brand are known as private label. Commonly referred to as OEM products (Other Equipment Manufacturer) these items can add major margin to your store and, if done right, give your store a credibility and trust with shoppers. The chances are, you have bought a private label product sometime in your life. Whether it was the bottle of mayonnaise at the grocer or the pills at your pharmacy or the shirt at Target; the truth is people have become very comfortable with private labels and "generics."

Retailers interested in filling their shelves with products featuring their brand name have good reason. Some of the biggest advantages of private label products include: Control over production - Third-party manufacturers work at the retailer’s direction, offering complete control over product ingredients and quality. Control over pricing - Thanks to control over the product, retailers can also determine product cost and profitable pricing. Adaptability - Smaller retailers have the ability to move quickly to get a private label product in production in response to rising market demand for a new feature, while larger companies might not be interested in a niche product. Control over branding - Private label products bear the brand name and packaging design created by the retailer. Control over profitability - Thanks to control over production costs and pricing, retailers therefore control the level of profitability its products provide.

The disadvantages of adding a private label line are few, as long as you have the financial resources to invest in developing such a product. The main disadvantages include: • Manufacturer dependency - Since production of your product line is in the hands of a third-party manufacturer, it’s important to partner with well-established companies. Otherwise, you could miss out on opportunities if your manufacturer runs into problems. • Difficulty building loyalty - Established household brands have the upper hand and can often be found in a variety of retail outlets. Your product will only be sold in your stores, limiting customer access to it. Of course, limited availability could also be an advantage, giving customers a reason to come back and buy from you. Although private label products are typically sold at a lower price point than their name brand brethren, some private label brands are now being positioned as premium products, with the higher price tag to prove it. Private label or OEM merchandise can be a great benefit for your store, but it does have some risks. Start slow. Ease into it. Test the idea with one or two products versus a whole line of items. There are still many customers who prefer the brand. In fact, the brands spend millions of dollars to convince them that the brand is better than generic or private label. So, be careful and conservative. It can work for you if you move slow and steady.

Increased Margins. Typically, since you are bypassing the "brand" name, there is no added cost for the vendor. After all, A vendor must add some cost to their products to help promote its brand name to drive people into your stores to buy it. Funny thing it, you are actually paying for the traffic.

To enter the market, you would need a solid product. By solid, we mean a product that has been researched well and all data points to high profit margins. Few steps to locate a product 1.Choose your selling platform 2. Locate best selling items 3. Calculate profit margins 4. Add value and favorable changes or improvements to the product. Get as creative as possible without making dramatic changes to the basic structure of the product 5. Locate suppliers and manufactures 6. Negotiate terms and manufacturing to bring in most profits 7. Receive product with your brand name 8. List and sell !

You've made it this far. This alone is a huge achievement but you can't rest are your laurels quite yet. Now you have to find a supplier for your product idea. If your plan is to make your product yourself, you're going to require the sourcing of raw materials and parts. Manufacturing will require factory sourcing. Wholesaling will require making direct communication with manufacturers or with their distribution partners. Although each of these methods are slightly different, they all require searching, communicating, convincing someone to work with you and negotiating price and minimum order quantities. First, as we mentioned in the intro to this chapter, you need to determine which type of supplier you're looking for. This will help determine the terminology you need to use in your research. There are several common options: • A manufacturer to produce your own product idea • A supplier, who may also be a manufacturer, wholesaler or distributor to purchase already existing product to place your brand on

The next step is to ask yourself if you want to source your products domestically or from overseas. Overseas sourcing can refer to any country overseas but typically refers to Asian countries like China, India and Taiwan where cost of production and therefore product, is generally much lower. Both domestic and overseas sourcing have their advantages as well as disadvantages. Let's take a look at the pros and cons of each method in the next tabs

Advantages: Typically higher manufacturing quality and labor standards Ease of communication with no language barrier Additional marketing appeal of products being made in North America Easier to verify manufacturers and their reputations Quicker shipping time Increased intellectual property right protection Higher payment security Disadvantages: Higher manufacturing and product costs Less product choice (There are many items that just aren’t made in North America anymore)

Advantages: Lower manufacturing costs High number of manufacturers to choose from One-stop services like Alibaba have made it very easy to navigate suppliers Disadvantages: Lower perceived quality from customers (Usually) lower manufacturing and labor standards Almost no intellectual property protection Language and communication barrier can be difficult to overcome Difficult/costly to verify manufacturer and visit on-site Longer shipping time Cultural differences in business practices Product importation and customs clearance Low level of payment security and recourse

Requesting a quote (many times referred to as a RFQ, Request For Quote) is a relatively simple process, however, taking a few extra minutes to plan your email can make a significant difference in the number and quality of replies you receive. Here are a few important questions to consider for your email: • What is your minimum order quantity? - Also referred to as a MOQ. You'll want to make sure their minimums are manageable for you and that you can afford them. This minimum order quantity can vary wildly depending on the product and the supplier so it's important to ask upfront. Keep in mind, minimum order quantity is almost always negotiable. • What is your sample pricing? - You'll likely want samples to inspect before making a full order. Sample pricing ranges, depending on the product and supplier. Some suppliers that receive many requests may change the full retail pricing, others will offer you samples at a discounted rate, and some may even send you samples for free. • What is your production pricing? - One of the most important questions is how much your products cost per unit will cost. You’ll probably wan't to ask for pricing for several quantities to get a sense of if and how they do discounted pricing at higher quantity levels. • What is your turnaround time? - Knowing how long it will take to produce your order is an important consideration and depending your exact business, time can be critical. • What are your payment terms? - Many suppliers will require new businesses to pay for the full order upfront. This is important to know since inventory is a major cost for ecommerce startups. You may want to also ask if they provide payment terms on future orders. A lack of supplier responsiveness is a common complaint from new ecommerce entrepreneurs. The most common reason suppliers don't reply is because many suppliers get bombarded with email quote requests all the time from flaky buyers that are just ‘kicking the tires’. Because of this, they simply don't have the time to reply to all requests. So how do you avoid being ignored? There are a few things that you should avoid when reaching out to suppliers for the first time: • Email From Personal Email- Remember, suppliers receive lots of requests. Because they invest time into replying to your email, they are looking for signs that you're real potential lead for them. Emailing them from ilovebritneyspears@hotmail.com is a surefire way to not receive a reply. It may cost a bit of money, however, purchasing a domain name and even setting up a very quick landing page with a service like Striking.ly can go a long ways in making your look more qualified in a suppliers eyes. • Long emails - Your first email to a manufacturer should be clear and concise. Avoid telling too much about your story and background. The first email should be purely to assess potential fit at a high level. Focus on what suppliers care about the most like the details of what you’re trying to source. • Asking for too much - Requests aren't always easy for the supplier to produce. It's important to ask for a few prices for multiple quantities, but avoid asking for too much or too many quotes. Stick to asking for what you absolutely need to assess fit between you and the supplier. • Asking for too little - If you ask for a quote well below the supplier’s minimum order quantity (MOQ) you risk being met with silence. Sometimes it's better to request quotes for a larger amount to begin the email communications. Finally, if you're contacting a supplier from overseas, keep in mind that in many cases, they may be using a translation program like Google Translate to translate your email as well as their reply. Keeping your emails short, concise, well formatted and spelling error free will not only help the manufacturer but it will ultimately provide you with better replies. When asking your questions and formatting your email to suppliers, especially to overseas suppliers, it's best to number your questions so that they can easily reply to each number, keeping the questions and communication clean and organized.

Once you have found a supplier now go back to the same steps: 1.Choose your selling platform 2. Locate best selling items 3. Calculate profit margins 4. Add value and favorable changes or improvements to the product. Get as creative as possible without making dramatic changes to the basic structure of the product 5. Locate suppliers and manufactures 6. Negotiate terms and manufacturing to bring in most profits 7. Receive product with your brand name 8. List and sell !

Private Label And Import