What Is Private Label? And Why Are Some Products Superior Than the Others

Private label products are manufactured by 3rd parties and packaged by them to be sold under retailer’s brand names. A lot of e-commerce that you see today is simply private labeling. Many stores and brands often only come up with the product idea, theme, design etc and do not really go into the details of actually manufacturing a product.

Since there’s almost always a 3rd party manufacturer available that aces at manufacturing a certain kind of product, it’s often easier, better and cheaper to source and PL the products by them instead of getting into the manufacturing business. The store can then simply sell the product that they only had to design, or in some cases only had to design the packaging for.

A few days ago, I went to the barber. He was quite disappointed with the state of the health of my hair and so he began the process to up-sell his hair oil product that he had private labelled.

He started by asking me how often do I use an oiling product for my hair. He then asked me if I can do it more often; daily for a week. Until this point he hadn’t introduced his product to me. He went further on, and showed me this perfect product that isn’t available for sale in the market. It’s a private product that can do wonders, he said. He then opened the bottle and made me smell it; it smelled incredible. From his perspective, everything was going great. But he messed up.

The bottle label sticker was a bit blurry. The printing quality wasn’t up to the mark. And so he lost my interest. I instantly decided that he is just selling this normal oil with a heavy markup by private labelling it that you can get from anywhere. But, could he have kept my interest intact if the label had better printing quality? I think he could have had my attention for slightly longer.

In fact, if the bottle was made of glass, appeared like a perfume more than the bottle of a hair oil, had super high quality label sticker, I might have paid twice the amount than the one he was looking to get from me. Because I may have led into believing that this actually is a really high quality product that is not available in regular supermarket.

In this day and age, there are products for every problem there is. There are products for potential problems, that could be. And there are also products marketing the solution by forcing you to believe that there is a problem, while there isn’t any. What sets you apart is how you private label, package and market one of these products. It is what gives you that leverage to charge that extraordinary markup.

They say don’t judge a book by it’s cover. But they said that because that is exactly what an average human does.

Not Killing A Dying Product In E-Commerce

When scaling a dropshipping Facebook campaign, you will feel at some point that despite all your optimizations, your cost per purchase is now more than what you can afford to pay to run your ads profitably.

Most people at this point believe that the product has saturated. That the product has already been sold, profitably, to most potential buyers and reaching out more potential buyers will not happen profitably.

I believe that more than product saturation, the cause of higher CPP and decline in sales is ad fatigue. Hence, my first course of action in this situation is to create and try more creatives.

Before the buyer has received the product, the product is only as good as it’s creative. Hence changing creative can reduce some of the ad fatigue and may revive the life of your product. It’s not often product saturation, it’s the creative saturation.

The second course of section, after the first one stops working, is to scale down the campaigns and ad-sets. You might want to see what will happen if you consumed lesser budget, and hence lost more bids. By losing more bids, you can have a winning campaign.

Once the scale down stops working too, and you’re sure it’s time to kill your dying product, you can consider moving to manual bids with accelerated delivery.

You can set the maximum amount you’re willing to pay per purchase. If Facebook is unable to get you a sale under that price, no budget will be spent. By enabling accelerated delivery, you’re asking Facebook to spend your budget ASAP as long as it can do so by maintaining the manual bid. This ensures that as soon as there are cheap bids available in the auction, you want to spend all your budget to get them.

If you’re unable to spend any budget at all on manual bids either, you might consider killing your dying product.

I’m interested to know if there are other, smarter ways to delay the death of a dying product. Please let me know in the comments.

What I Learnt From Accelerator’s Rejection

In 2013, I and Saad were invited to the bay area by a large seed accelerator. The business was doing great. We were posting not only insane revenues, but equally great profits. We were also posting decent growth month over month. In a way, we didn’t need the seed funding. But we did need the acceleration. And our goal was to get the right mentorship to grow our business beyond what we were doing already.

But we were rejected. They said no and we didn’t understand why. This is the email they sent us

I’m sorry to say we decided not to fund you guys. We were very impressed by your numbers so far. But what deterred us was that this is basically an arbitrage business. You don’t have users in the sense that e.g. Dropbox has, and thus no lock-in with them. Which means you make money for a while, perhaps a lot of money for a long while, but then conditions change and your revenues dry up.

Over the next few years, it started to make more sense to me. As the business did go down, the revenues actually did dry up, and I tried to see the things that they had said.

They were right and I was wrong and unless I acknowledge that, I can not be right in the future. I learnt a great deal from this experience. I understood the importance of having a lock-in with users as opposed to simply having users. With this knowledge, I can finally build businesses that will last longer.