The Private Labeling Craze and Why I’ll Never Make it as a Marketer

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trademarkThe concept of private labeling has become a huge topic among online sellers and continues to be the area of my business I receive the most questions about.  A couple of years ago, a big online course was released covering this topic which largely sparked all of the interest.  

At the time the first version of the course was being promoted, I had already been making a full time living utilizing private labeling (and other strategies that I talk about on this blog and in my book) for years.  I was excited to see a course that would explain all of the ins and outs of this to people who wanted to explore selling online.  After all, when I started, I had to figure out everything myself- through making a ton of mistakes!  When the promotional videos for the course were released, I felt like they provided a lot of great value and some fantastic actionable information (in the free videos alone!)  However, there were also elements of the videos where I felt the over-the-top marketing techniques shined through.  I’m not a fan of these techniques, but I still felt the information in the videos was really valuable.  I eventually connected with several individuals who had actually gone through the course and had become very successful very quickly.  I ended up promoting the course to my readers for versions 3 and 4.  In the emails, however, I spent a great deal of time cautioning readers to overlook the hype, not give into fear or a scarcity mentality and to think long and hard about the decision (because the monetary investment of the course was very large!)  My primary objective is always to consider the best interest of my readers.  I do this by putting myself in their shoes and give them what I would want.  If there was good helpful course available that would benefit me, I would want to know about it, but I also wouldn’t want to be manipulated.  I would want the freedom to think things through rationally.

WHAT MY PAST TELLS YOU ABOUT MY FUTURE:

Let me stop here for a moment and back up to a personal story.  In 2005, I worked at a music gear store.  I worked primarily on commission ( I had a sales draw which meant I was paid a minimum wage until my commission level reached beyond that wage).  I was taught sales techniques, how to “generate leads”, how to “utilize those leads”, how to “up sell” and “cross sell” and many other techniques including how to “close the deal.”  I loved music gear and I loved people who loved music gear.  I was genuinely interested in what these people were doing with their music and what their specific needs were.  I wanted to help them reach their personal goals and I was happy to suggest gear that would meet these goals, but I was a horrible “salesman”!  To me, all of the “techniques” I learned seemed to be motivated by the end goal of making as much money as possible.  My personal “end goal” was helping musicians meet their music needs and reach their music goals.  At times these 2 objectives or “end goals” were at odds with each other.  As a result, my customers loved me.  I believe they felt that I was going to genuinely work in their best interest.  However, my paycheck and my “performance” (sales standards) suffered severely as a result of not embracing many of the sales tactics.

If a customer came in, I would allow the customer to explain his musical goals, the vision that he had and the current tools he had to make that happen (music gear, budget etc.)  Sometimes a customer would gravitate toward a specific piece of equipment- usually because they were told they needed it by an ad, a sales rep at another store or by someone else with financial interest in the product.  I would often realize that the customer’s need could be met for hundreds of dollars less than the gear they were looking at.  I would naturally direct them to the less expensive comparable product.

Now, in some cases, keeping within a particular budget was not the customer’s main concern.  In some cases, the customer simply wanted the top of the line, highest quality, feature rich piece of equipment.  In other cases, the objective was status (and some brands will provide this more than others despite the similar functionality.)  In these cases, of course I directed those customers to what fit best for them.  I definitely sold my share of high end gear, but never by telling a customer he needed something he did not just to make a little extra commission.

MY “SALES STRATEGY”:

After spending years looking into internet marketing and internet sales, I find that many of the techniques are the same as I learned in my commission based job.  Why?  Because they work!  People respond to fear, a sense of scarcity, manipulation, hype, excitement and many other profoundly powerful emotions and people have deep needs to feel important, competent, successful, inspired, protected and secure.   The techniques work, but it is my opinion that they work at a cost.  I may get the desired result (a commission check) at the expense of trust of my readers.  This is not worth it to me.

As an affiliate of this large course, I am sent pre-made emails to send out to subscribers which are saturated with the marketing language that targets these emotions (“don’t wait another minute!” “this could be your last chance!”  “Do you want to secure your future?” “Learn a SUPER SIMPLE method…” etc etc).  Don’t get me wrong, I don’t have a problem with language the encourages people to buy as long as it’s moderately used and not extreme.  However, even during my promotion of this course, I simply could not bring myself to use those emails (even knowing statistically how effective they were having been meticulously tested).  Instead, I crafted my honest thoughts of the information and I took a fair look at the positive and negative elements of the course.  As a result, my performance as an affiliate was extremely poor!

A couple of you reached out to me during the previous promotion and expressed some concern that perhaps I was becoming “another one of those marketers”  by promoting a big course like this.  The truth is, I think the course is valuable, the course creators actually do what they teach (and have made a lot of money doing so).  I personally know several people who have gone through the course and have done very well and I’m confident that if you take it seriously, you’ll make your investment back in a very short period of time.  However, I take comments and concerns from readers very seriously and have given this a lot of thought.  What is comes down to for me is this:

It’s more important to maintain trust with my readers than to promote a course that may cause suspicion from some readers- even if I personally believe in it!  It simply isn’t worth it.

Now, there were some who truly were grateful for my thoughts about the course last year.  It helped some people who were on the fence decide to pursue it and helped many others decide not to!  if you want my thoughts on it, just email me and I’ll be happy to tell you.  I ultimately feel the course has value, but for the reasons mentioned above, I have decided not to actively promote the course.  This essentially makes me a “failure” as a marketer, but hopefully will have long term benefits in terms of relationships, trust and authenticity.

With all of this said, my intention is and has always been to provide as much value for my readers as possible.  Over the next several weeks, I plan to write some posts specifically targeting the topic of private labeling.  I believe it will provide a lot of value to you and if you’ve not yet pursued private labeling, it may help you understand the risks and rewards of doing so.

FREE AND INEXPENSIVE RESOURCES

In the meantime, feel free to take a look at the resources that have helped me which include free and low cost tools and courses that got me to where I am.  These provide tons of value and I hope you find them helpful!

If you are just starting and want a free guide that will give you actionable steps to start making money right away, please sign up below for my free ebook “system start up.”

Thanks so much for your continued support!

15 thoughts on “The Private Labeling Craze and Why I’ll Never Make it as a Marketer

  1. If you purchased the course and truly believed in it then who cares about the marketing. Let us know exactly what we’re getting and who it’s for and make that commission.

    I have the same problem making the hard push. I hate the thought of someone spending thousands and how that could affect their lives negatively but if you truly believe in the product it’s almost a disservice not convince people how it could help them.

    Just my thoughts.

    1. Hi Bo,
      Thanks for the alternate perspective on this. I promoted this course the first couple times around (and made my points about the marketing in those promotions). There are a couple of factors (other than the marketing tactics) that have contributed to my decision not to promote it this time around, but it IS a great course overall and has truly helped many people get to where they want to be. If you’d like to hear my thoughts on it, feel free to contact me directly (daniel@alittlesliceofthepie.com) and I’ll be happy to help! I would certainly never want to withhold my thoughts from anyone who wants to know them. Thanks for reaching out!

  2. Hey Daniel,

    Thanks for your honesty, not many marketers put their readers first but you do and I thank you for that. I am currently taking a course by jim cockrum on selling on amazon and private labeling and it is really helpful. Can I ask you how long it took you to see results when you first started on amazon? Oh just one last thing, I like your income reports, one day I hope to have an income like yours.

    1. Hi Whitney,
      Thanks for the kind words. I’m glad you find the stuff I write helpful. When I started Amazon things were very different and there were virtually no “how to” courses. The upside was the competition was far less. The downside was I needed to figure everything out myself. I sold online (as a hobby while figuring it out) for a couple of years before I finally “got it”. When I connected with a couple of great wholesale sources and got some regular sales going in addition to arbitrage, this was when things started to come together. After releasing my first private label product (in addition to sourcing arbitrage and wholesale) it provided enough regular income to quit my job. If you work very hard at it and follow proven systems, there it is very possible to generate a full time income in a year or less. Jim’s courses are a great place to start!

      1. Thanks Daniel, you are very kind, so which one would be better to start with, buy and sell products from existing brands or start with private labeling? I know that to get maximum exposure you have to win the buy box firts, this can be challenging for there are many people competing for it. This is not the case with private labeling but I also know that the process of private labeling can be a little complicated. Please advice me here what do you suggest? Which one do you recommend to start with?

        1. Hi Whitney,
          You’re absolutely right. There are advantages and disadvantages to each. Here they are (from my experience)

          Wholesale:
          pros:
          existing brand, loyal following, start selling immediately (you could have a sale the day you list it!)
          simple- connect with supplier, order sell
          Order in small quantities (usually)- 1-100 of each item
          smaller investment per product (due to lower quantity requirement)
          Many U.S. suppliers,
          lower liability issues
          customer inquiries about products and brands can be directed to the brand owner

          cons:
          lower profit margin (usually but not always)
          competing with other sellers for the buy box (and sometimes Amazon!)
          takes a lot of time to find products to sell that are both
          a. profitable
          b. sellable on Amazon (some suppliers won’t work with Amazon sellers)

          Private labeling:
          Pros:
          high profit margin (usually)
          no buy box competition (but still competition with other brands)
          fairly easy to find suppliers- particularly overseas, but many U.S. suppliers as well
          can build up your own following more easily

          cons:
          Usually fairly expensive (expect to spend between $3000 and $10,000 for your first order
          large quantities required (anywhere from 100-5000 minimum quantity if you expect to put your own brand/logo on the product)
          A solid promotion strategy is required- no brand loyalty in the beginning- it’s very difficult to get your brand recognized
          You handle all customer inquiries. If there is a problem with the product, YOU will be dealing with it
          a lot more work involved from picking your brand to building a website (not necessary, but recommended) to hiring designer, ordering samples, approving samples, recommending modifications (if necessary), communicating with a company with some language barriers, providing clear instructions, working with importing etc etc.
          Some liability issues to deal with (though technically you are liable for all products you sell whether your brand is stamped on them or not- liability insurance is highly recommended)

          I recommend starting with wholesale. Overall, there is far less risk, less investment, less confusion, less work, and most importantly, you’re not relying on a SINGLE PRODUCT (which realistically is the way you’ll likely private label- one product a time due to cost, time and the energy you have to invest into promotions). With wholesale, you can start with 50 products if you’d like (order 2 of these, 5 of those, 10 of these, 3 of those etc) Private labeling is trendy these days but in my opinion it’s not the place to start unless you have some experience, or someone teaching you how to do it. That’s my opinion and I hope it helps!

          1. Whew, that private label con list is long, I think I’ll start with wholesale as you suggested. Also, I do not have $10.000 dollars to spend at the moment. Thanks again for the advice. I might try private labeling in the future do you do coaching sessions on private labeling? I mean literally taking the person through every step of private labeling?

            1. Hi Whitney,
              Yes, there are a lot of cons, but also a lot of pros (that make it worth it!) Keep in mind too that you can get around some of the cons- for instance, there are some companies that will private label in lower quantities (they are just difficult to find) which would lower your investment (but would also lower your profit). Overall, I still feel starting with wholesale is best.

              I don’t “officially” do any private coaching. I am currently working with a couple of guys over skype, but it is very casual and we are doing an exchange (they teach me something they know, I teach them something I know). If I get more comfortable with it, I may offer this kind of thing in the future. I’m learning that “coaching” is very different from “doing” (I don’t always stop to think about all of the reasons I do the things I do. These skype sessions are helping me learn how to explain things in a systematic manor that is helpful for the recipient rather than just dumping a bunch of information all at once.) If I do this in the future, I will let you know. Thanks for asking!

  3. wow Daniel……God bless you for your honesty! I am a newbie in all of this and subscribed to yr blog about a month ago. I am glad I did :). Your story is amazing! This is awesome. Thank you so much.

  4. Well said. In an ideal world you should earn a commission for saving people’s money. Hope you don’t mind but there is a free Webinar series on private labelling that has better info than the course mentioned. Check out theamazingseller.com and pay Daniel a few hundred bucks as a thank you for saving yourself $3500 and using that money for inventory. Get cracking..

    1. Hey Rob!
      Yes, it would be nice to earn by saving others money, but that’s not generally the way the world works. It’s ok though. I’m quite happy just making connections with all of the fantastic people I’ve met through this blog!

      I was just made aware of theamazingseller a couple of days ago. I’ve not had a chance to check out the podcasts and interviews yet, but it came highly recommended!

      By the way, the version 5 course is actually close to $6000 (up from the old $3500). Anyone who wants to pay me for any of the advice I’ve offered, just email me, I’ll gladly accept ;)

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