- Patrick Muir
- On January 6, 2015
- 0 Comments
The rise of Amazon (and the recent rise of Alibaba.com) is empowering people to build and sell their own products on a mass scale. Sourcing product from the world’s best manufacturers used to require significant investment and expertise, but Alibaba.com is making it possible to go directly to China and big manufacturers, and the Amazon.com infrastructure makes it simple to distribute those products. And now companies like Seller Labs are building tools that further empower people to build successful brands.
I’m starting my own journey to build, distribute, and sell products. I have a full-time job and family commitments, but will use nights and my days off to build a small company – Next Distributors. Seller Labs is seeding the company with a $25,000 investment. They will also offer their expertise, which I will document.
The most basic objective is to build a company that generates a healthy profit. I have outlined a strategy that has four levels to achieve profitable growth.
I’ve read about people starting eCommerce businesses, but I’ve never built or been involved in one myself. I’ve outlined a four level strategy, and hope to sell multiple products in each of the levels:
- Resell inventory from local manufacturers
- Import an existing product from China
- Create or license a brand
- Invent a new product
Level 1 – Resell inventory from local manufacturers
There is a local geographic advantage for every seller on Amazon, whether they choose to use it or not. If you can source product from a local manufacturer, you can potentially reduce shipping costs and greatly lower the minimum quantities needed to place an order.
Shipping costs are likely going to be the largest or second largest cost driver of every product you sell on Amazon. Many sellers have to pay to ship product from a manufacturer and then ship product again to the end consumer or to an Amazon Fulfillment Center. But you can reduce the cost of shipping if you can personally drive and pick up product because you have sourced locally. This advantage grows even larger when you create multipacks or sell bundles.
Manufacturers typically have a minimum order size that you need to begin with in order to open a wholesale account. This minimum is often a pallet-load of product. This is also driven by shipping costs and the need to ship in large quantities. But if you’re local, these companies will waive the minimum required order size if you will pick up the product yourself. This can greatly reduce the amount of cash you have to invest into inventory.
Level 2 – Import an existing product from China
The largest cost driver is likely going to be the cost of the product itself. Importing that product from China is a tactic to reduce the cost of building the product. This is a common strategy used by regular U.S. businesses and many Amazon businesses.
I’ve never personally imported a product from China, and from my research so far, it’s difficult. The rise of Alibaba.com makes it easier to connect with factories in China, but that only reduces the complexity of communication and not the entire process.
Level 3 – Create a brand or license a brand
Creating a brand that consumers prefer or trust more than others is a key competitive advantage to build a successful business. It will both pull people to buy your product, but also allow you earn a higher profit margin by charging more.
Building a brand on Amazon requires a different set of tactics than those traditionally used. I’ve never built a brand on Amazon, but the experts at Seller Labs have done this. Two tools, Feedback Genius and SnagShout, are brand building tools that I will use to build a brand on Amazon.
Licensing a brand is another great differentiator that separates your product from the competition. In Level 1, I will likely source products that carry a license. But the strategy would be to acquire a license that’s exclusive to the product that I manufacture and sell.
Level 4 – Invent a new product that is patent protected
Inventing a product that is patented protected is a great way to build a business. It’s also the most difficult and is the one level I’m not sure I will be able to complete in 2015. I may be able to acquire the rights to a product that is patent protected or create a partnership.