The Real Cost of Private Labeling

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When you see a slew of Instagram posts with people lounging by the pool while their online businesses generate income, it can be easy to overlook the cost of private labeling. You want to jump in, spread your beach towel out and join them, right?  

But the fact is, those posters are potentially years into their Amazon journey… and getting where they are is not free. As wonderful as selling on Amazon is, no business venture has 0 costs, so this is the lowdown on the real cost of private labeling. Of course, not everything in this post is necessary, but all of these aspects are important to consider when you’re creating a private label business on Amazon

**Please note, these prices are estimates and meant for example purposes only.**

 As wonderful as selling on Amazon is, no business venture has 0 costs, so this is the lowdown on the real cost of private labeling.

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Amazon Seller Central Account:

This account is the hub of your business, and the professional version has a recurring monthly charge. However, you can create the account for free to poke around before you get everything up and running.

$39 per month

Jungle Scout:

In my recent blog post, the Ultimate Guide to Creating a Private Label Business on Amazon, I mentioned Jungle Scout as a way to select products. Obviously selecting what products you want to sell in your Amazon business is a critical step, so this is not a place to skimp.

Jungle Scout analyzes products and gives you detailed insight. Plus, it collects information like average monthly sales, average sales rank, average price, and opportunity score. The time saving and valuable reports alone made this tool a no-brainer for me.

Chrome Extension - $197 one time fee
Web App - $29 per month

Product Samples:

Once you decide what product you want to sell (thanks to Jungle Scout!), you’ll need to order samples. This helps you test different manufactures, and ensure the quality of product your customer is receiving. Just like with product selection, this process is critical to your business.

I estimate spending between $30 to $125 per product on samples. This fee can range based on the kind of product you’re selling.

$30-125 per product    

Logo:

When you set your private label business up, you’ll want to do everything you would do for any other kind of business. That includes creating marketing material like a logo. Beware, you do not have to sink a ton of cash into a pretty logo. Websites like 99Designs and Fiverr can give you a lot of graphic bang for your buck, and leave you with something you’re proud to show off.

This logo can appear on your website, in your customer service emails, and on your social media pages. So be sure it really suits you and your business before moving forward.

Fiverr - $5 - $25
99Designs - $250+

Website:

Up next in your marketing checklist should your website. Please note, this website does not need to be super crazy or elaborate, so don’t get stuck here! However, it is important to have a professional online “home base” so that your Amazon customers see you as a real brand.

Because your website will predominantly be e-commerce driven, you’ll want to stick with SquareSpace or Shopify. I know, there are a ton of options out there, but don’t let yourself go down that bunny trail. Either of those platforms will work fantastic for your needs.

Squarespace - $27 per month
Shopify - $29 per month

Email Marketing:

When customers visit your website, you’ll want to be able to follow up with them -- regardless of if they buy from you or not! A great way to achieve this is to create a lead magnet that entices them to provide their email address. These lead magnets can be anything from a pdf download, to a checklist, to an eBook. Think about what your customers will be looking for when they first find your website, and then create something that answers their question or solves their problem.

Once you have their email address, use it to follow up. Showing up in visitor’s inboxes increases your “know-like-trust” factor, and increases your chance of closing the sale. I use ConvertKit as an email marketing service. It’s so easy to integrate and is super user-friendly.

$29 per month

Trademark:

There’s one thing you can’t avoid when creating your private label business… trademarking. This is something you’ll need for your brand registry, products, and business material.

Estimate around $300

First Inventory Order:

Hurray! You created your brand, picked your products, ordered samples, launched your website, and now you’re ready to private label on Amazon! Your first inventory order is the next step.

The obvious expense is your product cost X the amount of products you ordered. But don’t forget about shipping and miscellaneous fees like the freight forwarder.

There are multiple ways to ship your order, which will vary your cost greatly.

  • Air express: Fastest and most expensive (plus, if an order is under $2,500 no need to clear customs)
  • Air Freight: Slower than Air Express, but cheaper and needs to clear customs
  • Sea Freight: Slowest form but cheapest (and needs to clear customs)

Keep all of that in mind as you prepare to order your visit inventory shipment.

Example: 500 units @$3 = $1500 + Shipping $5-700

Freight Forwarder:

Freight forwarding fees can be tough to estimate because it depends on how many units you order, and the size of those units. However, the average fee is around $300.

Freight forwarders act as your shipping liaison and communicate directly with your supplier. Using a freight forwarder can smooth over an often confusing process, so I find it’s is well worth their fees. Plus, most companies can pick up your items up directly from the factory overseas, ensure they are sent over correctly and have a customs broker service to assist with clearing your goods through customs.

Average - $300 per shipment

Duties:

Duties are paid on your shipment when your order clears customs. Typically orders over $2,500 will require duties, and your freight forwarder should coordinate everything.

~4% of order

Shipment into Amazon:

Once your order travels from the supplier to an Amazon warehouse, they will land on shelves ready to be purchased! However, before your customers can snatch your products up, you’ll also need to pay the stateside shipping fees to get the units into FBA warehouses (this fee is added into your seller central account).This shipping fee depends on how many boxes they are receiving, but it’s let’s estimate around $100.

~$100 per order

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Listing Photos:

Have you ever read a fantastic product description, only to click on the photo of the item and have it blurry, dim, or nondescript? Don’t let that frustration happen to your customer! I always factor in professional photos to my private labeling budget.

You can provide the listing photos yourself, but be very careful that they are not only well done but in compliance with Amazon’s guidelines.

$200 - $300

Fulfilled By Amazon:

Amazon obviously charges a fee for using their wonderful warehouse and shipping fulfillment services! This fee is separate from your Amazon Central Seller Account fee and depends on the size of your products.

Calculate your fee here

Pay Per Click Campaigns (Marketing):

Even though you are listing on the world’s largest retail/e-commerce space, you’ll still need to do some marketing. :)

A PPC (pay per click) campaign is where ads within the Amazon platform are targeted towards customers searching for your product (you can also drive outside traffic to your listing through your email list and social media marketing strategies).

However, the cost of marketing campaigns varies based on time length, settings, and campaign type. Plus, you don’t want to run a campaign to a product with little to no reviews. So before you dive in, educate yourself on some different marketing strategies. This is an ongoing expense, but it’s one of the most effective ways to get eyes on your listing, so it’s well worth it!   

$20-30 per day (initially)

Fetcher Software:

Fetcher calculates and displays the accounting and bookkeeping metrics that matter most to your business. I love how easy it is to use, and its reports have my accountant singing.

Plus, not only does it keep your bookkeeping in order, it allows you to figure out exactly what you’re making by calculating and analyzing all your expenses. This software is a must-have for Amazon private labeling.

$19 per month

Scope:

This tool is not mission critical, but it’s a great boost to have. Scope tracks and analyzes Amazon keywords and products. This software allows you to improve your paid (CPC) and organic search ranking by embedding high-traffic keywords into your product listing and description.

Basically, this means more people will find your listings -- both organically and sponsored. They have three plans, so you can find what works best for you!

Extension (just access): Free
Essentials (up to 100 keywords): $390 per year
Startup (up to 400 keywords): $690 per year

Well, there you have it! That is the rundown on the real cost of private labeling. But before you head off to secure your logo, keep these other things in mind:

  • Amazon pays every two weeks, so cash flow management is a must!

  • Track the total time products production and shipping takes from start to completion. This will give you a good rule of thumb for inventory. Don’t forget about Chinese holidays!  

Bonus Inventory Example:

Let’s say you order 500 units, and are selling 5 a day. That means you will have about 100 days worth of inventory in stock. If the time it takes to refill an inventory order is 60 days from start to finish, you will need to place a new order around 40 days after you start selling.

This part of the business can be tricky, but once you start to plan accordingly, it will begin to get easier.

Initial Investment:

Given the wide range of variables within this business a good estimate of the amount of capital needed to start a private label product is going to run you anywhere from $3000-$5000. This is important to keep in mind when evaluating the financials of beggining this business.

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