Private Label Partnership: What You Need to Know
In this episode, we discuss what a Private Label Partnership means and what you should consider when forming one. Whether you love them or hate them or never thought about it before, Andy Slamans shares his experience with partnerships. This is a companion episode to our previous Wholesaling Your Private Label Products to Other Amazon Sellers.
The following list will help you gauge the benefits of forming a Private Label Partnership:
If you have low capital, or if you are inexperienced with launching your first product.
For the most part, buying a product and shipping it from overseas requires a much larger initial capital investment than domestic purchases. It can be unsettling to put forth all that money if you are not sure what you are doing. The best way to get your foot in the door with the PL process is to seek out someone who has launched their first successful product. Forming a Private Label partnership can help calm your fears about parting with so much cash, and can ease you into the process. Consider cutting your purchasing costs in half by asking to share the cost of the initial purchase with a trusted partner.
Another aspect of launching your first product is understanding the MOQ process–or Minimum Order Quantity. Most sellers starting out struggle with meeting this amount because they’re short on cash. They may also be timid about negotiating for a lower price per piece. A partnership not only gives you more capital to meet the MOQ, it gives you the “muscle” that shows the supplier you’re a serious buyer.
If you struggle with the prepping and shipping process.
Buying, selling, prepping, shipping, it can all become overwhelming, even for veteran sellers. Partnerships are designed to build on one another’s strengths. Consider using a partner if you do not have the space in your home, or a warehouse to store huge amounts of inventory. Some Amazon sellers have hired workers who help with the process of bundling items. Other sellers own warehouses, so you can avoid high storage fees when the inventory is too much to handle. If you are fronting most of the capital, a good trade-off with a partner is to hand off the storage details and packaging to them.
If you are unsure about your ability to speak with a foreign supplier.
Let’s face it, learning the art of negotiating with a supplier is not a high priority for some sellers. However, some sellers really do have the gift of connecting with manufacturers and trade agents overseas. For an Amazon seller, the value of importing really is priceless. It opens your world to the global marketplace and gives you almost limitless opportunities. Just because you don’t know how to speak to a foreign supplier doesn’t mean you can never do business overseas. Network with those you know who have accomplished this and leverage a partnership with them to handle the foreign market.
If you are OK with sharing the listing.
Forming a Private Label partnership might mean sharing the listing with another seller. Sharing the listing means both of you are selling the ASIN. With Amazon sharing the buy-box, the sales come out pretty even in the long run. It is a unique relationship in that you and your partner will be able to help one another research the niche a bit more. Adding accessories and bundling ideas may come through a partnership relationship as well.
If you know your partner is willing to hustle.
Sometimes a partnership may not mean going 50-50 on upfront costs. There are times when a partner may have the time and energy to create the listing, vet the sample process and create the logo if you front all of the capital. Then, out of their sales, the partner can you back. In this way the partnership really is in the form of an investment for you.
There are times when you should think about whether to avoid a partnership with someone. If you are unsure, we suggest you heed the following warnings:
If you don’t trust your partner, do not go into business with them.
One of the #1 complaints that business partners have is dealing with the break up of a partnership. You need to have the interest of your partner and trust that the partner has your best interest, too. Anything less than that, or a relationship that causes you doubt may prove to be a recipe for disaster later on.
If you don’t meet face-to-face initially, it may mean trouble later.
Just because you have an online business, which primarily takes place behind the scenes, this leaves no excuse for not meeting face to face, at least initially. These meetings can help lay out the expected results from the partnership and to iron out the details. Avoiding this crucial first step opens the relationship to potential miscommunication later. Remember that ground rules and guidelines really help. Such as: 1) each of you selling from your own account 2) establishing how long the partnership will go on, etc. 3) when to form a formal LLC, (which we recommend should not be done until your product begins to make some serious noise).
If you are pressured to become a partner out of desperation.
Avoid the kind of Private Label partnership that is built on the other person’s fears. If a partner shares that they will fail in the business without your help kindly decline the offer of doing business with them. You deserve a confident partner who is OK with walking away if things go sour. Partners who manipulate or guilt you into the relationship is not someone you want to be in business dealings with. These types of businessmen and women tend to become negative after things don’t go their way.
If you cannot be honest up front about the good, bad and ugly of business.
The initial conversations you have with your partner should be what decisions should be made 3 months, 6 months or 1-year down the road. It is necessary to play out possible scenarios of your business just so both parties are aware of when decisions need to be made. Discuss the variables that would cause you to agree on the final order placed (perhaps when the product is losing steam). Another possibility is to talk about how the partnership looks if the product skyrockets. Obviously, also set clear communication guidelines that capitalize on your strengths.
If you’re not willing to partner on a hand-shake.
Some small business owners want the freedom to function differently than large business owners. What makes small business practices such a positive experience is that owners can set the terms the way they wish. Not everything has to be put in writing. Some partners work best from a simple hand-shake and a smile. Until serious money begins changing hands, decide up front that verbal agreements are appropriate, then stick to your word.
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