7 most common mistakes in private labeling

If only I had known ________, my business would be thriving. These famous last words are unfortunately all too common. And when it comes to private label mistakes made by first-timers, a little warning can go a long way.

If you’re a first-time private label seller, or an experienced one who just wants some reliable advice, we’ve compiled a list of the 7 most common mistakes so you know to avoid them. Private label retail has its own particular dangers, so don’t let them catch you by surprise.

 

1. Entering a Market that’s Too Broad

For starters, you want to avoid oversaturated markets, just like any retailer. However, broad and mainstream markets are even more perilous for private labels, as they tend to be loyal to existing products. While private label products may thrive during recessions or tight economies as a cheaper counterpart to more expensive products, in general, consumers prefer the original over a private-label version.

That’s why niche markets are almost always a better choice. One of the most effective private-label strategies is to take a popular product idea and modify it for a niche audience — adding certain features that appeal to a smaller group. This both separates you from the competition and also helps build a more loyal customer-base.

To get you started, here’s a list of the top ecommerce niches and a quick guide on how to choose your niche.

 

2. Waiting Too Long to Expand

Every new private-label product is a risk, which is why sellers are hesitant to “rock the boat” by expanding their product ranges. As the cofounder of SalesBacker, Chris Guthrie said on the AM/PM Podcast, “The biggest mistake that I’ve ever made in private label was not launching more products soon enough… Stick with just the one product and you’re going [to] live or die by that one SKU. Just [make] sure you launch more products, more quickly.”

Although introducing new products is always risky, so is relying on only a few items to sustain your business. A little market research, explained below, can mitigate that risk and offer the chance at an entirely new segment of your market.

 

3. Poor Pricing

Pricing is one of the trickier elements of private label selling. On the one hand, you need to charge enough of a markup to keep your company afloat. On the other hand, you need to undercut your competitors to entice shoppers.

You always want your prices to be reasonable, even if it means less profit for you. When pricing your private label products, consider:

  • the price the brand leaders are selling at
  • the income of your target customer group
  • your brand identity — are you a luxury brand or an affordable brand?
  • the value of the unique features your product offers
  • the cost to create and store your products

The right price is about balance, so try to weigh all factors together and come up with a number that satisfies your bottom line and brand identity.

 

4. No Differentiation from Product Leaders

You may look at the market leader and think, “what they’re doing seems to work for them, so I’ll do it, too.” That, however, is one of the biggest private label mistakes. In this case, what’s good for the goose isn’t good for the gander, and will leave the gander in debt with boxes of unmoved inventory.

We mentioned that private label selling follows different rules than traditional retail. Branding and originality are huge for private-label sellers — two areas that can’t just be copied from someone else’s model.

To run a successful private label business, you need to set yourself apart from the competition, not follow behind them. You can learn from the market leaders, but at some point you’ll have to take a divergent path to stand out.

 

5. Not Enough Market Research

While some industries are more forgiving of passion projects, private label sellers make better decisions with empirical data. You need to research openings in the market, product demands, sales channel performance, seasonal trends, and gains-losses comparisons, among other areas.

You want to gamble as little as possible when it comes to product selection. Try to stick to sure-things and proven best-sellers (as much as possible — “sure-things” don’t really exist). If you have a hunch about a more experimental product, try hedging your bets by complementing it with another, “safer” product.

 

6. Inadequate Outreach

You could sell the best version of a product at the best possible price, but if no one knows about it, you still won’t get a sale. As important as market research and product positioning are, so too is customer outreach: marketing, branding, and advertising.

It’s not always price that convinces the seller to buy; often it’s the brand identity. Customers prefer products that they associate with — happy and carefree consumers will think twice about buying a product from a formal and serious brand. From the start, make sure your brand identity matches your target audience.

After branding, you also want to publicize your products so people know where to find them. An active social media account and content strategy can help you both attract new customers and announce product deals.

 

7. Giving Up Too Soon

Running a retail business is hard, private label or not. If you fail to reach your initial goals, that doesn’t mean your entire business is doomed. Give yourself the freedom to refine your business model and experiment with new strategies. No one gets everything right their first time.

Private label selling requires trial and error. It takes time to develop those “seller instincts” to know which products will sell, how to market them, what price to set them at, etc. If you give up too soon, you never give yourself the chance to learn the ropes. Try changing up your strategies before cutting your losses — you may find a small change leads to a big turnaround.

 

Conclusion

Even if you’re a seasoned retailer, selling private label products will be a new experience. There’s more emphasis on branding, market positioning, and product selection, so you may need to master those skills. But if you can build a sustainable base, it’s a fruitful endeavor: more control, more flexibility, and more personal relationships with customers through better branding.

Interested in selling a private label product, but just don’t know where to start? Check out this list of trending private label products.

Related

FREE GUIDE:
Ecommerce Product Sourcing Strategies for Every Business Model
FREE GUIDE:
Ecommerce Product Sourcing Strategies for Every Business Model

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