Amazon FBA: The Importance of Branding and Positioning with your Private Label Products
On my website, I offer a free report on how to source products on Alibaba to sell on Amazon. You may have already read it.
This was an experiment to test myself. I laid out some pretty simple rules for the experiment, too:
- I’d go on Alibaba and find a totally random product. Something I’d never researched before.
- Then, I’d do a little research on Amazon to see what sort of average sales the product would get and what kind of competition I’d run into with it.
- Finally, I would offer tips on branding and positioning.
The product I selected was a double wall stainless steel water bottle. Using the Jungle Scout chrome extension, I discovered that this product was selling an average of 1,212 products per month. Competition was considerable, with the average water bottle having over 600 reviews.
I finished the report by stating that I’d sell the product for $40/each. Then, I showed off a little Instagram “jiujitsu” for marketing and estimated that we could probably get 125 sales per month with the product.
Of course, this all sounds totally insane. After all, who in their right mind would pay $40 for a water bottle when you can buy one for $15?
Memes and Things
Today, I was scrolling through Facebook and discovered this funny little meme:
If you aren’t familiar with the YETI brand, they love to take rudimentary “manly” products like coolers, slap their logo on the outside, and charge the shit out of them.
It’s no joke, either. Check out these Amazon listings:
Is YETI a good brand? Sure. Their products are pretty durable and they seem to care about their customers.
But when you’re paying $349.99 for a cooler, are you really buying a cooler, or are you buying the name?
Are YETI products made better?
Look at the bottom of one of their 30oz stainless steel cups:
They say “designed in Austin” but as you can see, it’s “Made in China.” Does that mean that stuff Made in China is bad? Heck no. In fact, 90% of household products are made in China whether people realize it or not. Stores like Pier-1 Imports, Anthropologie, West Elm, and Williams-Sonoma — all objectively “high end” stores — couldn’t exist without Chinese manufacturers.
But the thing to understand is that the cups that YETI makes aren’t too different from the ones their competitors make.
For example, their biggest competitor, RTIC’s 30oz tumbler:
I’ve compared the two. Same shape. Same double wall technology. Same embossed logo on the front of the cup. Both Made in China. But the big difference, of course, is price.
As you can see, the Yeti tumbler is nearly twice the price of the RTIC. And that’s not even as cheap as I’ve seen it go. Sometimes, it gets up to as much as $49.99. Meanwhile, RTIC will drop as low as $13.95.
And they’re virtually the same product.
Let’s talk relative sales numbers…
RTIC is probably the cheapest of the 30oz Stainless Steel Tumblers. And YETI is probably the most expensive. So how does each brand fare in terms of sales?
According to the Jungle Scout chrome extension, the cheaper RTIC tumbler sells an estimated 3,700 units per month.
And how many does does YETI sell?
3,700 units per month!
Insane, right? Here’s two products that are miles apart in relative price bringing in almost the same amount of sales.
Now, these aren’t the only two stainless steel tumblers selling on Amazon, of course. There’s plenty others. But how do they do?
Nowhere close to what those guys are doing.
On the first page of search results (YETI and RTIC products removed) we see that the products are doing an average of 162 monthly sales. The next highest is BEAST brand with only 347 sales.
If you can’t be the cheapest…
Russell Brunson has a cool quote from one of his books, “If you can’t be the cheapest, be the most expensive.”
In his book Influence, Bob Cialdini tells a story about a friend of his who was selling turqoise jewelry in Arizona. No matter how she marketed it, she couldn’t get rid of the stuff. Just before leaving on a vacation, she scribbled a note to her employee to mark the stuff “x 1/2” — she wanted to be done with it.
When she returned from her trip, to her surprise, all of the jewelry was gone. But not for the reason she thought. The employee misread her handwriting as “x 2” and doubled the price of the jewelry. The tourists thought that since the jewelry was so much more expensive than other pieces of jewelry around town, it clearly must be better. “Expensive = good.”
Therefore, when a shopper sees a normally mundane cooler marked up to $349.99 with a recognizable name like YETI attached to it, they assume it’s got to be better than the $79.00 IGLOO sitting beside it.
So, back to my water bottle experiment…
By creating a strong brand position and marking up the price to $40, easily 2–3 times more than the next person, I’m making a statement. I’m telling customers that “while I may not be the cheapest water bottle around, I am the best, and I’m totally worth the $20 bump in price over my competitor.”
Don’t get me wrong. If you’re going to price high, you have to back everything up. You’ll need a nice website, enhanced brand content, warranties, great packaging — the works.
And you have to understand who will buy those sort of products and how to market to those types of customers.
It’s more complicated, sure, but in the end, it pays a lot better.
Consider YETI and RTIC’s Amazon sales for their 30oz cups.
We’ll pretend that both cups cost $5 to manufacture. And we’ll also assume, at this point, that neither company spends a single dollar in ads on Amazon. After all, they’re both recognizable brands that pop up organically with most searches.
RTIC’s selling 3,700 cups at $17 each. After costs and fees, they’re bringing in $5 per unit. That’s $18,500 in gross profit. That’s a return-on-investment of 200%.
YETI’s selling 3,700 cups at $29.70 each. After costs and fees, they’re bringing in roughly $15.76 per cup for a total of $58,293.50 in gross profit.
If they were even making 1/3 of the number of sales as RTIC with an additional dollar in cost, it’s still a better investment. That’s $18,197.83 off only $7,400 investment for a total ROI of 345%.
Which product would you rather be selling?
If you’re interested in learning more about Amazon FBA Private Label, grab a copy of the free report I describe in this blog entry. Additionally, you’ll receive 26 guides to making money online.