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Hey, how's it going? It's Ollie here. Today we've got a question from James, and James asks, if you're selling an item that's been imported from China successfully, is it really worth turning it into a private label product? Is all the extra work and possibly cost involved with branding it, putting a logo on it, etc. worth it?
This is a great question and many people who are doing test batches at the moment - you know, you've got 50 units, you haven't bothered putting a logo on them or anything else, maybe you've put into a bundle and you send it into the warehouse, you're transitioning from the test batch into a bigger order of a proper private label launch, you're negotiating prices, and you're thinking about putting a logo on the stuff - this question will apply to you because right now when you've transitioned from a test batch, and you're essentially selling wholesale stuff, and you're transitioning to a private label, one of the big questions on your mind is, how can I make this profitable? Right?
How can I make this profitable? Test batches aren't supposed to be profitable. Private label launches are. All the product is supposed to be able to make profit at some point within the first few months, ideally. So is it worth it? Should you bother putting a logo on it? Should you bother really launching a private label and doing all of that extra stuff even though it costs more and it takes a bit of hassle?
Well, this is my two cents. Generally, the cost differences between doing a test batch and doing a private label launch are vast anyway. So when you're doing a test batch, you've got the cost per unit, which is usually relatively high because you're not buying a bulk amount, you're buying like 50 units, which is relatively small.
Therefore, you're probably not going to save much on the cost per unit. It's probably going to be the most expensive it will ever be at 50 units. Sometimes people buy test batches from Ali Express, DH Gate, sometimes Alibaba, sometimes I saw some locally, but the cost per unit is going to be expensive. The cost per unit goes down when you order a lot more. So let's say you order 300, you've already saved money because you're ordering more, in most cases.
Also, the shipping. The express shipping is usually equal to or more expensive than the cost of the goods. Let's say you spend £200 on goods. Sometimes if the goods are heavy, you can spend £300 on express shipping. Can be more expensive than the actual stock, right? So by transitioning from a test batch to big private label import, you're already saving a ton of money.
Now, when you speak to your supplier about private labeling the product, putting on a label and stuff like that, the cost of doing all this stuff is usually very minimal compared to the cost per unit. For example, one of my products, I didn't put a logo on it, I just put it in a box and they made the packaging, organized the packaging, and it was a pound per unit to do that extra. So, very inconsequential costs, very cheap to do.
That wasn't much effort even. I mean, the supplier actually helped me design the packaging themselves. They had an in house designer at the factory, which by the way is great if you can get a supplier like that. Not always possible, but it's great. In other instances, I've actually hired people on Upwork, paid them two or £300 to design packaging for me as well, and that's paid off.
So there is a bit of extra cost. But the point I'm trying to make is, it's not very much and you do save a lot compared to the test batch. But here's the real answer to your question. Why would you absorb this extra cost? Why would you put all this effort into private labeling a product properly rather than just continually selling the thing without a label on it?
Well, when you have a great brand, when you have great packaging, and you're presenting your product really well, the value of your product skyrockets. It skyrockets. You will be able to sell your product for so much more than the competition. In fact, by spending one pound extra on each unit, getting a packaging design for that product of mine, I was able to charge five to £10 more than the competition when I first launched my products. And it's been consistently good ever since.
I'm able to charge more than everybody else. So spending an extra pound has enabled me to make an extra five to £10 per unit. That is a hell of a lot more profit. That means I can be much more aggressive with my advertising, right? 'Cause I can spend more per sale on ads because there's more margin. That means I can dominate the niche more. I can stay on page one.
Other people with lower margins, they can't be as competitive because they'll go into a loss before I do. Right? So just spending a little bit of money on a decent brand, making great packaging, making the product look gift-able, which is always a good idea, it really does go a long way. That's why we want to go to the effort to do this stuff.
But, you only want to do that once you've tested the product, once you know it's profitable, once you understand the price you're going to be able to charge for it, roughly, once you know it's going to sell, and once you've validated the niche and the value you're adding to the niche i.e. why is your product better than everyone else? Do customers care about that and will they pay for it?
I hope this answers your question, James. And you know, if you're thinking about the costs, what it takes to create a real private label product and put a logo on it, etc.. this is why we go to all that effort and this is why we spend money on it - because it enables you to charge more.
So thank you so much for your question and if you've got any follow up questions, James, leave a comment below. If you've watched this video and you've got a question, then leave a comment below and I'll answer it on a video.
If you're watching this video outside of the Facebook group, then what I would like you to do is click on the link below or above this video. You'll see a link to join the Facebook group. As you're entering the group, you'll see a box and you can put a question in there, type a question in the box, I'll answer it on video, so you get support as you're growing your business.
Also, in the group, there's tons and tons of resources that you can use. If you want to know how to set up an Amazon account, I've got a video for that. If you don't know how to get your first sale in two weeks, I've got a video for that. If you want to know how to find hot private label products, I've got an entire course for you to follow. We've got lists of hot private label products that you can just download so you can get inspiration and find out what sells on Amazon, etc.
It's really worth being part of the community of some incredible sellers, and you get to watch all of the other videos I've done daily for the whole of this year. So it's a great resource. I can't wait to welcome you into the group and answer your question. I'll speak to you very soon.