The main downside to selling private label products is the upfront cost. Because you are dealing with factories in Asia, your minimum order quantities will be much higher than acquiring your goods wholesale in your home country. In addition, importing goods from China carries other disadvantages which include:. You are in full control over your entire supply chain which makes it much more difficult for another store to compete with you.
Selling private label has similar downsides to selling wholesale in that you have to deal with inventory and fulfillment. However, because your margins are significantly higher, you can sell on Amazon and use Amazon as your primary fulfillment center.
When an order comes in, your shopping cart will notify Amazon and Amazon will ship your product to the end customer. By leveraging Amazon or a 3PL, selling private label products can be as scalable as a dropshipped online store. Selling your goods on Amazon is probably the fastest way to make money selling physical products online. The marketplace is that huge! Now there are many different ways to sell on Amazon that are beyond the scope of this post. But bottom line, Amazon charges you a lot of money for the privilege of selling on their platform.
As a result, you need to sell your own private label products to make the numbers work. In terms of cost, the amount of money to start a private label business on Amazon is roughly the same as starting your own online store selling private label products with a few additional line items. As a result, you need to sell high margin goods.
If you sell private label goods on Amazon , be prepared to purchase at least units upfront from your supplier. The main advantage of selling on Amazon is that you will make a significant amount of money much faster than any other ecommerce business model.
They have a large built in audience and especially over the holidays, it seems like whatever you throw up there will sell. Here are a few examples. The main downside to selling on Amazon is that all sales are transparent to all other sellers. For example if you use a tool like Jungle Scout , you can find out roughly how much money a certain product made in the last 30 days. Amazon is a cut throat platform and you have to be constantly on your toes and monitor your listings. Thanks to FBA, Amazon takes care of storing your goods, shipping them to the end customer and handling returns.
As a result, selling on Amazon is highly scalable. You also end up spending less on customer support because Amazon handles the majority of it for you. You also have to consider your end goals and how much you are willing to risk in order make money sooner rather than later. After running my own online store, selling on Amazon, and helping many others start their own dropshipping stores, I can honestly say that there are pros and cons to each option.
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To stay up to date with all of the latest ecommerce trends, Steve runs a 7 figure ecommerce store , BumblebeeLinens. Steve carries both a bachelors and a masters degree in electrical engineering from Stanford University. Despite majoring in electrical engineering, he spent a good portion of his graduate education studying entrepreneurship and the mechanics of running small businesses.
I hate to sound bad but this question kind of bugged me. I mean what do you expect, something for nothing? No wait, some people do expect this. We started with a very small inventory and have built this up over the years with our own branded products, and we continue to dropship where it works for us.
Most people have enough money, they just want a sure thing which is never the case. BTW, completely agree with your strategy of combining dropshipping with inventory. In a way, it provides the best of both worlds. Stock up on what makes you the most profit and use dropshipping to fill out your shop. THanks for the comment. Sometimes you just have to take the leap of faith and see where it leads.
Ideally without spending a lot of money to find out. Thank you Steve and Mark for addressing this. The viability of mixing drop shipping with branded inventory was my first question after reading this post. One of my main concerns has been the upfront costs of filling out an entire online store. Steve do you have any specific advice for mixing drop shipping with inventory or can you point me to any other posts you might have already written dealing with mixing these methods?
Hi Steve, so, after setting up the online store, creating the website and stocking some products. Thank you for the comparisons. I like the above idea of using both especially at the start. Ah, but what kind of inventory? That is the rub. Awesome article and site Mark. I have been making money from blogs and ppc traffic for awhile now and am now expanding into an ecommerce store. Your articles have helped me big time! For me Drop-shipping is definitely the way to go. Did you just start as a sole proprietorship and use free accounting software?
Thanks again for sharing! Too many people focus too much on the accounting, logo and legalities of a business upfront then after all that effort they find no one wants their product they have no sales and they give up.
They wasted too much time and enrgy on the wrong things at he start. You can get the best accounting package in the world but without sales its a waste of money.
The hardest part of starting an online store is not the legals and accounting its choosing the right products, knowing how to market, knowing how to structure your website for sales, doing social media, writing for your blog if you plan on doing this.
These will make or break your business not accounting or legal. I even paid to have my company name trademarked through a fancy-schmancy law firm. Grrr, it makes me crazy to think about it. I did most of the work and found errors they made that cost me additional time and money. The thing is you have to have at very least a Tax Resale number to even be considered by real dropshippers and suppliers.
All business owners are required to register at tax. After registering your business and filling out tax schedules, you will receive a tax ID and a certificate of registration. Steve, good basic article to get started. That is the main point -Get Started! You can work on that after you are up and running making some money. Just get going -quit making excuses. I have found that carrying inventory is way more expensive on the back end of my business than using a drop shipper. With inventory, I have shipping expenses that include supplies, time and have to do additional inventory accounting at the end of the year, which also takes time and money.
Drop ship fees are expensed on the back end at tax time, making account a lot easier. I am also able to add newer products quicker to my product mix since my money is not tied up in inventory. So for my jewelry and accessory business, drop shipping works very well. The idea is, you have to find drop ship suppliers that you can trust and quality made products. How long was it until you saw any significant or even non-significant revenue from your site? I really appreciate this post, Steve! Essentially, since people know me as a person that can point you into the right direction of finding affordable fashion finds, I wanted to create a platform doing just that.
I started a fashion blog for mothers, but I wanted something more straight to the point while still helping people so I went the affiliate marketing route. I started with a free website template first from Wix to get my idea going, then searched, gathered several paid themes together that I really liked, and asked fellow co-workers that are moms which website was appealing to them more since mothers in general are my target group. Hundreds of small ecommerce stores use this Shortcut to capture their first email and grow their email list.
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Bill Widmer Last Updated Dec 06, Try For Free with. Read Next. Email Marketing. Sumo Growth Studies. If you want to keep your hosting costs to a minimum, consider signing up to a shared hosting service.
Shared hosting services will be adequate for getting your store up and running, however as your store becomes more popular, you will need a more sophisticated alternative, in the form of managed WordPress hosting. These services ensure your website is kept up-to-date, as well as offering faster servers that speed up how quickly your website loads— never underestimate the impact of this.
This is what online users will have to type in to access your site, so it has to be unique. There are a number of domain extensions you can choose from, but if possible go with the.
If you are targeting a specific country, like the UK, a. Fortunately, buying a domain name is inexpensive. You will also need an SSL certificate if you want to take card payments over the Internet—an essential part of running an online store. The SSL certificate encrypts the data on your website, making it safe for visitors to hand over sensitive information like their credit card details. In our opinion, WordPress is the ideal CMS for eCommerce stores and beginners alike, due to the community driven nature of the platform: you can download and install themes for the layout and appearance of your website and plugins for specific functions from a pool of thousands, many of which are free of charge.
This plugin adds the eCommerce functionality to a standard WordPress website, allowing you to create products that visitors can then purchase. The framework for how your WordPress website will look to visitors is provided by your theme.
There are literally thousands to choose from, and many of them are free of charge. However, not all WordPress themes are compatible with WooCommerce. At the time of writing, there were over 4, WordPress themes available.
Have a look around the marketplaces for a WooCommerce compatible theme—you can view a demo of each theme, with the various layout, colour, and customisation options it supports, to get an idea of how it might look on your store.
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