7 Reasons Why I am Starting an FBA Private Label Business

I’ve made my decision. I’m going to source some private label products from China, slap a logo on them and sell them online using FBA (Fulfillment by Amazon). It can’t be too hard. Right?

Yeah. Right.

Let’s just say the path that led me to this decision was not well marked.

Online businesses come in many different forms: blogs, eBooks, affiliate websites, online courses, email marketing, niche websites, newsletters, premium membership sites, consulting, contract work, eCommerce, etc. The list goes on and on. Some of the businesses require more work up front but offer more residual income (blogs, niche websites, etc.). Others follow a more traditional model where you get paid for services rendered (consulting, web design, etc.). I can tell you the ins and outs of every single online business model there is.

How do I know all of this? Because I became obsessed with finding alternate streams of income several years ago. It started with a couple of books that I was introduced to: Choose Yourself! by James Altucher and (of course) The 4-Hour Workweek by Tim Ferriss. I know I am late to the game. But I became obsessed with reading everything I could get my hands on. Especially if it dealt with different online business approaches.

And I do mean obsessed. My journey into non-fiction books opened the doors to dozens of other books and blogs. And then those resources turned me onto dozens more. Do you see where this is going? It’s called “analysis paralysis.” Or something like that.

I’ve consumed more content in the last three years than I can even remember. And I knew I wanted to try my hand at starting an online business. So I would get caught up in whatever I was reading about at the moment and decide I had found the path I wanted to take.

Until I started the next book or blog. Then I wanted to go that route. It was a never-ending cycle.

Enough is enough!

I’ve settled on my first online business: private label products. It’s basic eCommerce. Nothing fancy. You just find a manufacturer who makes private label products. Create a brand and have your logo printed on them. Sell the products online. Rinse and repeat.

However, I have a wife and two crazy puppies. And a full-time job. And now I want to add these responsibilities to my plate: sourcing products; maintaining inventory; market analysis; shipping products; processing returns; customer service. And that’s just at a high level.

Enter: “FBA.” Fulfillment by Amazon. It’s a glorious thing! You just have your products shipped to an Amazon warehouse. When someone buys your product on Amazon, they process the payment and send the order to a fulfillment center. Someone packs and ships your product, and they also handle customer service and returns. Amazon just takes their fee and sends you the rest of your money. Sign me up!

There’s nothing earth shattering or novel about this idea. People have been doing this for years, and there are more and more people joining every day. You can go on Amazon right now and search for any type of product. You’ll see a dozen different “brands” of that product that all look exactly the same. Some may say that means there is too much competition. I say that means people must be buying the products.

But right now, that’s not important. I’ve made my decision and I’m sticking to it. Here is why I am starting an FBA business selling private label products:

FBA Offers a Low Barrier to Entry

All I really need is a computer and an Internet connection. With those two things I can research products and communicate with manufacturers (via email or Skype). I can create my Amazon store and a branded website. I can monitor inventory, send and receive money. You know the deal. I don’t need any office or warehouse space. And I don’t need any employees. At least not yet!

It’s Easy to Scale

I know I am talking about an FBA business, but I’m not going to start out using Amazon’s fulfillment service. I want to make sure I’m selling a quality product, so I’ll have the first order of inventory shipped directly to my house. I don’t expect to have 100 orders a day rolling in when my first product launches, so I should be able to handle shipping a few items per day at first. But the plan is obviously to sell a lot more than that, and to continue adding new products to my business. Once I’m ready to hand it over to the FBA program, then the sky is the limit! Amazon sells gazillions of products every day. I know this because I contribute to that total. FREQUENTLY. And I very rarely have a problem. Amazon has their logistics perfected, and I plan to use that. So as long as I keep finding products to source, I’ll keep scaling up the business.

The Investment is Small (Kind of)

It’s not as cheap as starting a blog or building a website.

Wait. This is a blog. And I am building a website.

I digress. The point is that you can start with a pretty small amount of money compared to other conventional business models. I already mentioned that I won’t need an office or warehouse. All I need is enough inventory to start selling. I’ll go into this more in future articles, but your product order can be as large or small as you want it. If you choose to start with a product that costs $5 a piece from the manufacturer, you don’t have to order 1,000 of them just to get the bulk discount. Why take that sort of risk? You can start with 30 of them. Sure, you may pay $8 each with that low of an order. But $240 is a much cheaper way to test the market. What if you dropped $5,000 on inventory only to find out that you couldn’t sell it? It’s better to break even or take a small loss early on to make sure you can sell your product.

So that’s a few hundred bucks for your first order. A couple hundred more dollars for samples while you’re researching products and manufacturers. And another hundred bucks for a website and hosting. For $500-800 I’ll be in business.

e-Commerce is Growing

I’m not even going to link to an article or graph, because there are a million of them to choose from. Just Google “ecommerce growth trends.” As of early 2016, ecommerce is still growing every year. And it’s not going to go down or disappear. There are fulfillment centers in every major metropolitan area. You can now get SAME-DAY delivery. It’s so incredibly simple to buy stuff online that many people don’t even bother to step foot in retail buildings anymore.

You don’t have to biggest. You don’t have to compete with Nike or Apple. Just carve out your own little niche and offer something of value. There are billions of customers in the world, and you only need to reach a few of them.

FBA is Perfect for a Side Project

Like I said earlier, I don’t exactly have a ton of free time to start and grow a business. It’s taken me 6 months just to get to this point.

What is this point? Well, I am finally awaiting delivery of my first prototype product from China. It has my logo on it. And if I like it, then I’ll be ready to pull the trigger on my first bulk order. Over the last 6 months I’ve researched products and ordered numerous samples from different manufacturers. I’ve started this blog, and I’m in the process of setting up my brand website.

If I didn’t have other responsibilities, this would have taken a month or less. But I have only a few hours a week that I can dedicate to this, thus it is a side project. Once I get my product up and it starts selling, then I’ll start looking at getting it into the FBA program. And once that product is on cruise control (hopefully), then I’ll start adding new products. And since Amazon handles all of the logistics, payments and customer service, I can dedicate the few hours a week I have on sourcing new products.

Let Amazon handle the dirty work.

It’s Quick to Profitability

And this one is huge.

With a blog or niche website, you need major amounts of traffic before you can make any money off it. You can throw up some Google ads and sprinkle in some affiliate links, but none of that is going to do anything unless you have a ton of visitors. And how do you get that kind of traffic? Well, I guess you could use some Facebook or Google ads. But you have to pay for those. For organic search traffic, you’ll need a ton of good content. That takes tons of time!

For a newsletter or email marketing, you need an email list. How do you get an email list? See above regarding traffic. You may spend tons of time and money acquiring website visitors before you start making any money.

But the private label product model can be profitable as soon as you start getting sales. If you’re making $10 profit per sale on a product and you’ve invested $800, then you break even at 80 products. There’s some Georgia Tech calculus for you. I did that in my head.

But what about sales? Don’t you need “traffic” to get sales?

Amazon Provides TONS of Free Traffic

Amazon has MILLIONS of visitors per day. And those visitors are the best kind: they’re there to spend money. If you want to find out information, you go to Google. If you want to search for something to buy, you go to Amazon. If you put your product on Amazon, people will see it. Now there is some work involved with keywords and copywriting. It’s going to take some work to get into the top page or two of search results for your product (unless you’ve found an amazing niche). But you don’t have to do anything special.

Let me repeat: People to go Amazon to spend money. Someone is going there right now to buy a product just like the one you are thinking about selling. Amazon will send that traffic to your product for free.

Why bother competing for keywords on Google?

So that’s it. Those are the main reasons that I’ve decided to start an FBA business selling private label products.

Oh, and I’m also starting this blog to document my journey. As I said earlier, I’ve actually been working on sourcing my first two products for the last 6 months. And I’m still probably another 2-3 months away from actually going live on Amazon. But I’ve already learned a ton, and I have much more to figure out.

I’m not going to reveal what my first two products are just yet. Maybe one day. But I do plan to write a lot about the process, and I’ll reveal successes and failures along the way. Like the URL says, this is my “FBA Road Map.”

Only I’m just kind of plotting it out as I go.

 

Brandon