How Much Money Do I Need To Launch My Own Private Label Product on Amazon?

How Much Money Do I Need To Launch My Own Private Label Product on Amazon?

How Much Money Do I Need To Launch My Own Private Label Product on Amazon? What if I say you can have your own Amazon Private Label business with only $670 to invest? Seriously, that is the bare minimum required to launch your first product. However, if you want to make sure you succeed, you should be willing to spend a little more. In this article, I will give you a quick breakdown of how to launch your own Private Label Product with just $1,200-$5000 initial capital so that there are no surprises along your entrepreneurial journey.

Let’s face it, Private Labelling on Amazon has potential to generate more than a million dollars in revenue for you just in the first year but with the increasing competition, it is becoming increasingly difficult to successfully launch your first product.

“Approximately 60% of new Amazon sellers give up on their business because their initial investment begins to exceed their budget.”

Why is it such a common mistake amongst sellers? It’s simple. Usually entrepreneurs start a Private Label business on Amazon without knowing all the costs. In order to properly execute your launch, you should be aware of all the expenses throughout the process, especially because it takes at least 3 months from choosing your product to your first sale on Amazon.

So let’s dive right into it. There are 12 different costs to budget for when launching a Private Label product:

Type of Cost

Min Budget Max Budget

Unavoidable Costs – Min = $670, Max = $2,105

1. Product cost

$500

$1500

2. Shipping cost

$125

$500

3. Amazon account monthly fee (Professional)

$40

$40

4. Barcode purchase

$5

$65

Essential Costs – Min = $255, Max = $1,285

5. Samples

$30

$150

6. Product research tool

$30

$135

7. Photography

$175

$500

8. Listing optimization service/tool

$20

$500

Optional Costs – Min = $285, Max = $1,500

9. Logo

$15

$100

10. Label

$100

$500

11. Inspection

$100

$400

12. Amazon PPC advertising

$70

$500

Total Budget Required – Min = $1,210, Max = $4,835

If you are interested to know about cutting some of these costs and where to source a few of these services you can keep reading.

Disclaimer: I will not be talking about amazon referral and storage fees as they are deducted from each sale and we do not pay them up front.

 

Product cost (Landing cost)

When picking the first product, it is recommended to go with a low priced item. A rule of thumb is to go with a product that is selling for $25 or less. Ideally, the landing cost should be 20%-30% of selling price. So if a product is priced at $10 on Amazon, 20% of that is $2, which is what we should be paying the manufacturer. Majority of sellers on Amazon source their product from China through Alibaba due to the low cost manufacturing.

Tip: Negotiate the price and agree to the minimum order quantity (MOQ).

If the MOQ is 250 units, you will pay $500 in total (250units x $2/unit). Similarly, the landing cost may be $6 if it is an expensive item. In this case our cost for MOQ will be $1,500 (250units x $6/unit).

 

Shipping cost

The shipping cost varies based on the weight, the mode of transport (air, sea) and the final destination (port, door). On average it costs $0.5-$2 per unit.

Tip: Arrange the shipment yourself. The manufacturer’s quote will be expensive and less reliable.

 

Amazon monthly fee

When you register for Amazon, you will get an option to either choose Individual or Professional. There are many benefits to go with Professional, for example being able to run ads. This is why it is crucial to select the Pro account and pay $39.99 a month. The fee may vary for other countries.

Tip: If you are selling in North America, register on amazon.ca. It enables you to sell all over North America and the fee is $29.99CAD a month.

 

Barcode Purchase

To setup your own branded product on Amazon seller central, you will need a UPC barcode from either GS1 or a UPC reseller. You can use websites such as Speedy Barcodes or Nationwide Barcode to find cheap barcodes for resale.

Speedy Barcodes                                    Price: $5/barcode

Nationwide Barcode                                Price: $10/barcode

 

Samples

It is always a good idea to ask for a sample before committing to a hefty investment. A sample is air shipped for quick delivery and can cost anywhere from $30-$100.

Tip: Get the first sample when initially testing the product and a second sample once all customization, logo engraving and brand labelling is done by the manufacturer.

 

Product Research Tool

If you want to find a potential product that will make you thousands of dollars, you most certainly need a tool for product research. These tools will either provide you with product ideas that have sales potential and less competition or give a competition comparison for a product of your liking. In both cases, without such a tool, it is almost impossible to tell the good products from the bad.

The two widely used tools are Jungle Scout and Viral Launch.

Jungle Scout:     Web App – $39/month   Chrome Extension – $97/one time

Viral Launch:      Web App – $59/month

Tip: Search for coupon codes to get up to 50% discount on certain tools.

 

Photography

Unless you are an extremely good photographer, I will recommend this task to be outsourced. Every so often Amazon sellers try to save money on professional quality photographs and it comes at the expense of sluggish sales. To boost your sales and catch the eyes of the customers, have the product photography done professionally. Fiverr is a good place to find freelance photographers and they charge between $25/photo to $80/photo. It is a bit risky using Fiverr because professional photographers who produce high quality results rarely list their services on that website. If you need to avail the services of expert photographers who have years of experience in Amazon product photography, AMZ One Step is you best bet. They can guarantee appealing and unique photographs of your product that are catered specifically for your target audience.

 

Listing optimization service/tool

This is one other area where a professional can do wonders. If your listing is fully optimized and your description is written by a qualified copywriter, your product will rank on the first page and that’s when you can sit back and watch the sales chart go up.

There are tools like Merchant Words and Keyword Inspector that can help with keyword research but the volumetric keywords these tools spit out should be strategically picked and placed. Plus that still leaves the product description copywriting to you.

Merchant Words:            $30/month

Keyword Inspector:        $20/month

A professional listing optimization service will cost around $500 (excluding photography) and trust me, it is worth every penny. If it is your first time, you want to make sure you outsource as much work as possible so it is done professionally. Before moving forward, consult with an AMZ One Step Optimization Expert to see what optimization service would work best for you.

 

Product Logo

This is an optional cost and can be left to the manufacturers most of the time. However, if you would like the product to perform well in the long run and potentially sell outside of Amazon, you can find freelance designers on Fiverr or Upwork to design your product logo for $15-$100 depending on the complexity of the logo.

 

Product Label

Similar to a logo, this will be an optional cost. The label determines how your product’s packaging or boxing will look like. It can also be left to a manufacturer and most of the time there is no issue. However, the manufacturer may be selling the same packaging to other sellers. You can either find someone on Upwork or go to 99 Designs. The benefit with 99 Designs is that you can post the requirements for your label and a bunch of graphic designers send you samples. You usually pay for the design you end up selecting for your product. Please keep in mind that this is a costly endeavor and require on average $100-$500.

 

Inspection

For the first order, make sure you either inspect your shipment yourself or get it inspected via an inspection company. Manufacturing and importing products from an overseas country can be overwhelming. Your relationship with a manufacturer is built over time and it takes at least one order for both parties to understand things like the proper packaging to avoid damages, product defect rates, quality of material, etc.

Inspecting the products yourself comes at no cost but can be time consuming. Also, there will be additional shipping charges since you would have to get the products shipped to you first for inspection and then to Amazon. There are companies like V-Trust or Asian Inspection that have a global presence and can do loading inspections from $100-$400. Alibaba also lists third party inspectors that can be paid via Trade Assurance.

 

Amazon PPC advertising

Amazon’s advertising works on a Pay-per-click basis. Each seller runs ad campaigns on keywords that customers search for. This is strictly optional based on the preference of the seller. However, during the launch, successful sellers deem it mandatory to run ads so that their product can compete with already successful brands. Your margins will take a huge hit initially but this is more of a long term strategy because once your product is ranked amongst the top sellers, you will get organic sales without any advertising. For PPC ads, a daily budget is set which isn’t always used to the maximum. So a $10 budget can be set for either a week or two months depending on how much time it takes to rank your product.

Tip: The ad campaigns to be run for keywords should be manually selected for optimal performance. These keywords would also be covered in listing optimization service and can help you save on advertising costs by ranking your product quickly.

 

Final thoughts

Now you are all set for your product launch. These are all the costs that would be incurred throughout the process. Depending on your budget, you should decide to prioritize on what costs you’d like to keep to the minimum and which ones you’d want to spend more on.

A useful strategy that many sellers use is that they figure the other costs first before deciding on the product’s landing cost. This prevents you from compromising the other areas of the launch. To ensure a successful launch, it is better to incur all these costs. However, the focus should be on the unavoidable and essential costs outlined above. Take advantage of the resources and tools available to you and optimize your process from the beginning.

 

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