5 Biggest Mistakes When Selling Private Label Products on Amazon
In this article, I’m going to share the five biggest mistakes I’ve made selling private label products on Amazon. If you avoid the mistakes in this article, you’ll achieve success a lot faster and avoid a lot of pain, wasted money, and wasted time.
My business partner, Ryan, and I have been selling products on Amazon now for over five years. We’ve sourced and sold over 200 products. We’ve created and been involved with more than two-dozen brands, and we’ve hired more than 150 people and set up multiple offices in China and the Philippines. In other words, we have a lot of experience. We’ve also made a lot of mistakes.
(By the way, you may have read my article about the seven biggest mistakes advanced Amazon sellers make. If not, be sure to check it out here).
I do want to say, though, that making mistakes is okay as long as you use them as a learning experience. All of us make mistakes. It’s just part of life. But it’s how you learn from your mistakes that matters. That being said, of course it’s best to learn from others instead of making mistakes yourself. That’s what I’m here for—so you can learn from the mistakes I’ve made!
I could go on and on about the mistakes I’ve made and the lessons I’ve learned. But today I’m just going to share the most important ones with you. I’m also going to give you insight into what can be learned from each mistake. Sound good? Let’s dive right in. Here are the biggest mistakes people make when it comes to selling private label products on Amazon.
Mistake #1: Wasting Time
You see, money loves speed. That’s one of the biggest lessons I’ve learned as an entrepreneur. So how do you avoid wasting time? For starters, avoid making mistakes as much as possible, because mistakes only slow you down. Also, don’t waste time on things that don’t work. How do you know what works and what doesn’t? Well, a lot of that comes from experience. But you can also learn what works from those who have experience. There’s no need to learn everything from scratch on your own.
Focus on quality actions that actually get results.
In business, there are thousands of different things you can do. The key is to focus on only the actions that get results. When I started out, I had no idea what actions actually got results, and I didn’t know how to gain that knowledge from others. I wasted a lot of time trying to figure that stuff out. Don’t make the same mistake that I did.
So, how can you avoid wasting time and energy on actions that don’t get you any results? It’s simple. Find someone who really knows what they’re doing. Learn from those who have real knowledge and on-the-ground experience running a business like yours. And don’t get advice from someone who’s all talk.
There’s a major difference between someone who teaches theory and someone who actually has the experience and knows firsthand what actually matters, what actually works, and what is actually practical and profitable in business. There’s really nothing more valuable than learning from someone else’s experience. It will help you avoid spending years and tens of thousands of dollars spinning your wheels. You’ll be successful must faster when you avoid wasting time.
Mistake #2: Over-Expansion
I know what you’re thinking—isn’t expansion a good thing? It means your business is doing well and growing, right? But I’m talking about over-expansion, meaning that you’re growing too fast. It’s one of the biggest mistakes I’ve made. I’ve experienced this mistake with more than three different businesses, and it took me a while to really understand why it kept happening. You see, when you’re building an Amazon FBA private label business, it’s critical to pace the growth of the business to keep it sustainable.
One of the incredible things about Amazon is the pace at which you can grow. Because you’re tapping into one of the biggest stores in the world, that means there’s the potential to sell an incredible amount of product very quickly once you start gaining visibility. This is a great thing, but it’s also a pitfall, and it’s something you need to understand and manage.
One of the worst things that can happen when selling on Amazon is running out inventory. If you grow too quickly, meaning if you add more products than you can handle, your business is going to implode. Let me explain in more detail.
Cash flow is the lifeblood of any business, and it’s greatly misunderstood by most entrepreneurs.
It becomes a particularly big problem when you experience incredible growth on Amazon. Without enough cash to handle sudden growth, you’ll run out of inventory. And if this happens, especially with multiple products, your business will essentially implode.
A Practical Example
Let me give you a practical example. This is very similar to what happened with some of my businesses. Let’s say you’re selling three products on Amazon and you’ve done really well. Each one of them is selling an average of 10 units a day. Let’s also say that you have 500 units of inventory for each product, and you’ve spent all your business’s available cash on that inventory. You have no cash in the bank, but you have 500 units of three different products.
Let’s now pretend that the sales of one of your products really starts to take off. Let’s say your sales triple overnight. See the problem? You don’t have the cash to order more inventory because you’ve already put it into other inventory. The result? You end up running out of inventory and you can’t immediately restock the product because you don’t have the cash to do so. This can crush the momentum of your sales.
Let’s make it even worse. Let’s say that not one but two of your products experience an explosive growth in sales. You end up running out of inventory for two products. The more you run out of inventory, the more you’ll lose your momentum, and the worse off you’ll be. That’s how your business will essentially implode. And you might even be stuck with inventory that you can’t sell. It’s much better to manage growth in a sustainable way with just one product and build up your cash reserves before you expand to a second and third product.
Don’t underestimate the power of compounded growth over time. Quick gains are really for losers. Patience and long-term growth are for winners.
That’s what will build up true momentum and lead to hockey stick growth for your products and your Amazon business as a whole.
When I made the mistake of over-expansion, I had to close down two of my brands because they essentially imploded. And I had way more than three products, so it was actually much worse than the scenario I just laid out as an example. Trust me when I say that you’ll be very glad if you avoid this mistake. It’s an easy mistake to make on Amazon, so you need to be very aware of it. It’s incredibly important to grow your business slowly and sustainably.
And speaking of growing your business sustainably, are you familiar with our free Selling on Amazon Crash Course? It teaches you scientifically proven methods for successfully selling private label products on Amazon. It even includes a step-by-step blueprint that will ensure your success. It’s a really awesome video mini course, and it’s absolutely free. That’s right. It’s free. Click here to learn more.
Now let’s get back to those mistakes!
Mistake #3: Running Out of Inventory
As I’ve just mentioned, you never want to run out of inventory when selling private label products on Amazon. As the famous investor Warren Buffett once said,
“Rule number one is never run out of inventory, and rule number two is never forget rule number one.”
Without properly managed inventory, you’ll run into trouble and delays.
Unnecessary pauses in sales are very expensive. It means you lose a lot of potential sales. That’s the most obvious problem with running out of inventory. But it also causes you to lose momentum. More specifically, it causes you to lose those valuable rankings and visibility that you’ve put so much effort into building up over time.
When you have success with a product, you actually see a snowball effect and your success begets more success.
So what happens when you run out of inventory? Depending on how long your product is out of stock, you could very well lose a lot of your rankings and visibility. And when you eventually restock your product, you’re not in the same place you used to be. You have to rebuild the momentum you once had.
Are you seeing now how costly this can be? Not only do you lose, let’s say, three weeks of sales, but you also have to rebuild all the momentum you once had. Running out of inventory might put you months and months behind on sales. It can be incredibly harmful. It can kill the ROI you get from your marketing efforts, as well.
Again, rule number one for selling private label products on Amazon is never run out of inventory, and rule number two is to never forget rule number one. Learn to steer the ship in a sustainable manner. That’s how you build momentum, and ultimately incredible growth and success on Amazon. It’s how you achieve compounded growth over time.
The cost of making this mistake has been so great that I honestly don’t even want to think about it. I’m sure I’ve lost out on thousands, if not millions, of dollars in sales simply because I ran out of inventory for short periods of time. Please take this mistake to heart and make sure that whatever you do, you never, ever run out of inventory when you’re selling private label products on Amazon. Make that your number one priority, and everything else will be much easier. Trust me on that.
Mistake #4: Guessing What Product to Sell
If you make this mistake, you may never have to worry about making the previous mistake, which is actually not a good thing, because if you never have to worry about running out of inventory, that means you’re not growing.
Want to hear something scary? Most sellers and people giving advice suggest that you guess what to sell. Think about it. How do most people suggest you find what products to sell on Amazon? Usually they recommend using some sort of tool or service to figure it out. But here’s a news flash for you:
Every single tool available to research products on Amazon is essentially guessing based on surface-level data, what products are a good opportunity, and how much a product is selling.
It’s not completely accurate. Oftentimes, it’s actually incredibly inaccurate. Now, of course it’s better to use tools or software to get an idea about what might sell well rather than making decisions based on nothing at all. But you shouldn’t totally rely on it. It’s not the most profitable or practical approach.
If you’re just starting out, it’s understandable that you don’t want to invest your money, time and energy into something that’s not guaranteed to work out. And the approach that I just mentioned actually used to work really well. Selling private label products on Amazon used to be so easy. Even if you just guessed what to sell, it would pretty much always work out well for you. But things have changed. Now that everyone uses the same methods, they’re less and less likely to actually work.
Data is Everything
In my own experience, as my companies grew, our ways of finding new products became too inaccurate and were no longer profitable enough. We had to adapt and find something better. Now our process of deciding what private label products to sell on Amazon is like a science. It’s 100% data driven, and we never source or spend money unless a product is first proven through our proprietary methodology for doing so. In other words, it’s near-guaranteed to succeed and be profitable.
Again, we never invest money in a product unless it’s almost guaranteed to be profitable. I bet you’re curious about our method, right? I’ll share more about our strategy in another article.
But before we refined our process, we were basically guessing what products to sell. And doing this was a very costly mistake. Even when we got our money back, it caused a lot of wasted time, energy, and opportunities. If you can avoid making this mistake by properly researching products to sell, you’ll be much more likely to succeed and you’ll be much less likely to waste or lose money. It dramatically reduces risk and can practically guarantee success.
Mistake #5: Investing Too Heavily in a New Product
A common misconception that people have about selling private label products on Amazon is that it’s risky and expensive to start. But what most people don’t seem to understand is that you can purchase private label products in as few units of inventory as you want, meaning you can spend as little money as you want.
You can’t buy private label products without private labeling the actual unit. In other words, you have to pay for the product to be made specifically for you with your own branding on the item. But you can start out by just selling an unbranded item. You can buy just a couple of units of that inventory, or you can even buy it from a middleman to start with.
There’s usually a ton of options, especially when sourcing products from China. Then all you have to do is put this unbranded product into some very simple packaging, such as a poly bag, and put a sticker on the packaging that has your own branding on it. You’re essentially private labeling the product yourself. It’s literally now your own brand.
Trust me. This is enough to start. As long as the product is high quality, the customer won’t care that you’re branding it yourself. And then, gradually, as you start selling more and more of that product, you can expand into a full private label product, where you place a minimum order of, let’s say, 300 units with your own branding printed on the product and its packaging.
I learned this strategy many years ago when I spent a lot of time visiting factories in China. I’ve learned all the ins and outs of the manufacturing process and what can be done when you understand how it all works.
There’s literally no reason at all why you can’t start a new private label product with only a handful of units.
When I started out, though, I made the mistake of investing too heavily into new products. All it did was tie up my cash. It really slowed me down. So I’ve learned that the best way to sell private labels on Amazon is to start small with a new product and fully prove the concept before scaling and really investing in the product.
If you invest too heavily in a product, you’ll only tie up your cash and slow down your growth. Worst-case scenario, you’ll lose a lot of money because you put too much into a new product before you’ve ever sold it. If you avoid this mistake, you’ll speed up growth and greatly reduce risk. You’ll also have more opportunities to sell many more products, and then you can scale the winners.
So there you have it! Those are the five biggest mistakes I’ve made selling private label products on Amazon: wasting time, over-expansion, running out of inventory, guessing what product to sell, and investing too heavily in a new product. Avoid these mistakes and you’ll be so much more successful.
Before I wrap up this article, I also want to leave you with a few words about how to avoid mistakes in general. As you’ve read throughout this article, there are so many incredibly detrimental mistakes you can make, but there’s also so much tremendous opportunity to be realized and so much profit and success to be had. But to achieve this, you have to learn from your mistakes and learn what to do instead.
Four Pieces of Advice
Here are a few pieces of advice that will help you avoid making your own mistakes:
1. First, always learn from your past mistakes. And when you do make mistakes, look at them honestly and find the lesson in the mistake. Find the opportunity to learn and grow. Be purposeful about not repeating the same mistakes again.
2. I mentioned this earlier — learn from other people’s mistakes. Learn from those that have a ton of experience selling on Amazon. Then you can grow and be more successful without having to commit those painful, costly mistakes yourself.
3. Get a second opinion. If you have a business partner, a friend, or even a mentor or coach who has experience and knows what they’re talking about, get a second opinion from them. It always helps to have someone else look at what you’re doing, especially if they know what they’re doing.
4. Work with an experienced mentor or coach. They can help guide you on your journey and help you avoid big mistakes. They’ll also show you what to do. A mentor or coach is the most valuable thing you can ever acquire on your journey. Trust me. Nothing else will pay off as much as that.
I hope you found this article helpful. If feel like you still need some help with your business, I have some good news for you. I have a great resource that you can take advantage of, and best of all, it’s free. I’m talking about our free Amazon FBA Crash Course, which uses proprietary methods that will help you succeed with selling private label products on Amazon. It also includes a step-by-step blueprint for success – and it only takes a few seconds to sign up.
Also, if you know someone who would benefit from learning about the mistakes I just shared, be sure to share this article with them. And don’t forget to subscribe to our YouTube channel, check out this video and others, and connect with us on social media.
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