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Planning to import private label (ODM) products from manufacturers in China? While it can definitely save time and money, private labeling also comes with intellectual property risks and potential quality issues.
Keep reading, and learn what importers and Amazon sellers must know before buying private label products from China.
This is covered
- What is private labeling?
- Examples of private label products
- Pros and cons of private labeling
- How to find private label factories
- Why most factories don’t offer ‘true’ private labeling
- Logo and labeling costs
- Printing specifications
- Product packaging
- Product safety, labeling, and compliance
Bonus: Selling Private Label Products on Amazon – Q&A with Rachel Greer
What is private labeling?
A private label product is manufactured by Company A, but with the brand name (e.g. logo) of Company B. In theory, Company A, the manufacturer, provides a ready-made ‘product-template’, to which other buyers can apply their own brands.
Another key criteria is that private label products are made using existing tooling, such as injection molds.
Examples of private label products
- Stainless steel moka pot with engraved logo
- Android tablet with printed logo
- Bluetooth speakers with printed logo
- Jewelry gift box with printed logo
The benefit of private labeling is that you can create a branded product, without investing in too much time and money in product development and tooling. Hence, you can launch a product much faster, and for a lower cost.
This makes sense if you intend to launch a ‘generic’ product that’s already on the market in some form. That said, you cannot make design changes to a private label product, which also makes it harder to break into an increasingly competitive e-commerce marketplace.
+ No mold or tooling costs
+ Faster sample production time
+ Makes sense for generic products
+ You can normally change materials and colors
– You may end up selling the same product as many other companies already do
– You cannot make changes to the design or dimensions
Some products are better suited for private labeling
Molded metal and plastic products are generally better suited for private labeling, as compared to non-molded products such as textiles and leather goods.
The reason for this being that, for example, textiles are cut according to sewing patterns and bill of materials – documents that you don’t have when sourcing private label products.
What is the difference between private label and off-shelf products?
Private label products are based on existing molds and tooling. However, such products are not necessarily mass-produced on a frequent basis or kept on the shelf by manufacturers.
Private label products normally only exist as a product listing on Alibaba.com, and will only enter production once a supplier receives an order from a customer.
What is the MOQ when importing private label products?
The minimum order quantity (MOQ) requirement is generally the same when buying private label products as when you buy a custom-designed product.
The MOQ is normally decided by the material suppliers, rather than the design type. The fact that you can use an existing mold doesn’t have any impact on the MOQ requirement in any meaningful way.
How do I find private label manufacturers?
You find private labeling manufacturers wherever you find factories of all sorts. As such, you can find them on Alibaba.com, Globalsources.com or at major trade shows such as the Canton Fair in Guangzhou.
Keep in mind that manufacturers rarely even use the term private labeling, as they don’t see themselves as such. From the factory perspective, it’s only a matter of whether you use existing tooling, or request a new mold to be produced.
How do I know if a supplier offers private labeling?
Private labeling was not invented in China. It has existed for decades in the food industry, for example. But, Chinese manufacturers have indeed widened the range of items available, for private labeling.
Our customers often ask us whether Chinese manufacturers ‘allow’ their products to be privately labeled, and the answer is almost always ‘yes’.
Chinese suppliers are in general very flexible, as they make products according to buyer specifications. The positive aspect of this is that you can essentially get any product out there private-labeled, as long as existing molds are in place.
Most manufacturers don’t offer ‘true’ private labeling
Manufacturers in China and other Asian countries are rarely specialized as private labeling manufacturers. They are still operating according to OEM ‘make to order principles’. In short, the OEM process can be broken down as follows:
1. The buyer provides design drawings, material specifications, reference samples, applicable safety standards, and labeling files
2. The supplier manufactures a product sample for two reasons: First, to learn how to produce the product, and to show the buyer that they have the expertise to do it.
3. Production begins. The supplier procures materials and components from its subcontractors. After this is done, assembly begins.
Private labeling is supposed to work as follows:
1. The buyer browses through catalogs and websites, picking out the products they want.
2. The buyer sends a logo file to the supplier, and they work out the rest.
3. The supplier starts production and manufactures the product according to an established set of quality standards and product specifications. The buyer can just sit back and wait for the next batch.
However, that’s not how things tend to work…
1. The suppliers most often do not have a ‘fixed’ product specification (e.g. design drawings and material specifications)
They still expect the buyer to provide explicit requirements for labeling, materials, design and product compliance. Yes, even if you intend to buy a private label product.
2. Most suppliers don’t develop their own products or even tooling
Supplier websites and product catalogs can be deceiving
Browing suppliers pages on Alibaba.com or at trade shows can give the impression that factories develop large product ranges, ready for anyone to order.
What you find in the supplier’s catalog are partly products they’ve done for other customers, partly products they want to show that they can manufacture (but never actually did produce, so far).
As mentioned, a product catalog is not much more than a reference point for what the supplier has produced before, and what they suggest they can make.
I have dealt with companies that have tooling for less than 50% of the products in their catalog. In these cases, there’s nothing but a 3D rendering. No molds, spec sheets or design drawings.
Further, even if they have the tooling, such as injection molds, they may (and should not) allow other buyers to use it given that someone else likely paid for it. I’m sure you would not be happy if your supplier allowed other importers to your injection molds or other tooling.
Why private labeling is not a shortcut for importers
Let’s look into what it actually takes to go down the private label path. First, you need to find out what sort of products the supplier has existing tooling for. Second, you need to get a list of product specifications.
However, as many suppliers lack both tooling and product specifications, you may need to both buy tooling, which sort of defeats the reason to buy a private label product and provide the supplier with a complete spec sheet (which completely makes it irrelevant).
Buyers often find themselves in situations where they must reverse engineer the ‘supplier product’. This can be far more time consuming than hiring a product design freelancer and pay for custom-designed product samples from the very start.
The problem is that the supplier still expects you to provide them with a ‘complementary’ product specification, even when buying a private label product.
If not, they’ll “fill in the gaps” for you, in a way that benefits them – meaning that they’ll use the cheapest materials and components available, to improve their own, meager, profit margin.
Consider private-label products as nothing more than product design templates. In the end, the process is still essentially the same as if you’d go for a custom-designed OEM product.
This is what you should ask your supplier before buying a private label product
1. Do you have design drawings?
2. Do you have a bill of materials (BoM)?
3. Do you have an overview of material options?
4. Do you have lab test reports?
5. Do you own the molds and tooling for this product?
quality control is a mandatory part of the importing process and must take place before the products depart from China.
Logo and labeling costs
Having a product branded is not expensive. The price difference between a private label product and a no-name product is usually very small.
Printing a logo on a product is most often not costing more than $0.2 to $0.4, per piece. In comparison to the added value (assuming you do it right), that is a very good return on investment.
However, the costs depend on many factors, including placement, the number of colors and logo size. In some cases, suppliers also charge an additional tooling fee (print card cost), ranging between $50 to $200.
Logo and printing specifications
Getting your products labeled is not rocket science, but things can still go horribly wrong. As said, Chinese suppliers are accustomed to a “make to order” approach. Thus, they expect you to provide every relevant specification, in this case relating to the private label itself.
The stakes are high, as the supplier will fill in the gaps if you would fail to provide one or more labeling specifications.
What makes things worse is that many Chinese suppliers will not alert you of mistakes or other issues (for example, incorrect font), even if something is obviously wrong.
Yet, many startups and small businesses fail to realize the importance of providing comprehensive labeling specifications to their suppliers, and instead think that the supplier “should know how to get it right”.
Yes, perhaps they should, but you are the one losing a ton of money when something goes wrong. First, make no assumptions, and second, nothing is too small or unimportant to be included in your labeling specification.
1. Print type
Your label can be printed, or affixed, to the product in various ways. There’s no right or wrong here, apart from the obvious fact that certain print types are not suitable for some products. Below follows an overview of various print types:
- Silkscreen print
- Heat-Transfer Printing
- Hot stamping
- Sublimation printing
- Inkjet printing
- IMD print
- Water transfer printing
Always refer to a Pantone or RAL color code, depending on which color matching system your supplier is using. Never refer RGB colors or other digital color systems.
3. Print Position
The supplier must know the exact position, on the product, where the logo shall be printed. Thus, you must provide reference measurements, based on the actual product dimensions.
The artwork must be based on actual product design. Thus, you must either draft an Artwork template yourself, based on a product sample or obtain one directly from the supplier. However, it’s quite common that Chinese suppliers either cannot or refuse to provide artwork templates.
Most suppliers prefer to work with the scalable vector file format, .eps (Encapsulated PostScript) or an Adobe Illustrator file (.ai). It’s critical that the files are set with the correct dimensions and resolution.
If you use a non-standard font, you must also provide the font file. Time and time again I see buyers making assumptions about these small things.
Most suppliers can offer a selection of standard packaging designs, that can be branded by with the customer’s logo. The main reason to choose standard packaging is the MOQ:
- Custom Design Packaging MOQ: 300o to 5000 pcs
- Private Label Packaging MOQ: 500 to 1000 pcs
Thus, buyer branded standard packaging is basically the only option for any company, looking to buy less than 3000 units.
So, how do you go about to find out which packaging a supplier can offer?
First, they rarely keep product catalogs, from which you can choose from. Instead, most factories rather have their customers send them a few photos of ‘similar’ packaging options, which they then forward to their packaging subcontractors.
Just keep in mind that you must make clear that you are only looking for standard packaging, not custom-designed packaging.
You must also instruct your supplier to confirm the price, dimensions, available colors and the MOQ.
As a Startup buyer, you should focus on getting a product out on a market. While a glossy custom-designed box can be a good long term investment, a private label packaging is faster and cheaper to get on the shelves.
Product safety, labeling, and compliance
Private label products are subject to the same safety standards and labeling requirements as all products. While most buyers understand this, many assume that ‘private label suppliers’ got them covered, when it comes to product compliance.
The idea is that a ‘private label product’ is developed by the supplier (which is not really the case), and therefore they should ensure that the product is fully compliant.
This is not the case.
At best, you can expect a supplier to send a few test reports. However, a test report is an indication of the suppliers ‘ability’ to manufacture a compliant product.
It is not, by any measure, a document that can be used to prove compliance for your product.
Ensuring compliance, which involves everything from creating the correct labels to lab testing, is the responsibility of the Importer.
Making design changes to private label products
The definition of a private label product is that of a factory standard design, with a custom buyer brand. You can, in some cases, make minor additional design changes:
With that being said, as soon as you make changes to the design, functionality or dimensions, you are no longer in ‘private label territory’, but have already stepped into the realm of OEM products.
Selling Private Label Products on Amazon: By Rachel Greer
Importing private label products from China, and selling on Amazon, enables startups and small businesses to rapidly bring products to an established market. While buying from Chinese suppliers is challenging enough as it is, selling on Amazon adds a whole new dimension of complexity.
To get things straightened out, we decided to ask an expert – Rachel Greer, of Cascadia Seller Solutions. With years of experience working for Amazon, before she founded her own firm – she is truly a leading expert and industry insider.
Keep reading, to learn more about compliance requirements, quality assurance, and intellectual property issues – when selling private label products on Amazon.com.
Rachel, tell us a bit about yourself and your work at Cascadia Seller Solutions
I founded Cascadia Seller Solutions last May after leaving Amazon – actually one day later! When I was at Amazon, I first worked in the Transaction Risk Management department (Seller Performance, Fraud, Claims, Chargebacks) as a law enforcement liaison for fraud cases involving customers and sellers.
I then moved to the Product Compliance team and managed Recalls, Product Safety, Private Brands Compliance, and Global Imports Compliance over the course of five years.
At Cascadia, I’ve assembled a team of former Amazonians who are uniquely well-positioned to help clients build their own brands on Amazon, in a safe, compliant, and Amazon-centric manner. Whenever there is a problem with the account, one of the consultants who is a former NA Seller Performance manager handles these complaints.
If there are struggles with Customer Service, our Customer Experience expert steps in to help clients create a blurb library and guidance on how to speak to customers effectively. Our whole firm is based around the Amazon ecosystem and thriving on Amazon.
In the last two to three years, we’ve seen a large increase of interest in selling Private label products on Amazon.com. Why do you think this is the case?
Amazon has some of the most amazing foot traffic in the business. Traffic is phenomenal, even for lower-performing products. Additionally, while conversion at typical e-commerce sites is around 1-2% at best, on Amazon, conversion starts around 5% and can be up to 50% for many products.
This is a very attractive platform for many sellers, where the revenue jump from being on Amazon is not just significant, it’s turned small businesses into $1M+ businesses in a couple of months.
The other reason private brands are appealing to sellers is that competing for the buy box is becoming more and more difficult, and relies on having strong suppliers, deep pockets, and excellent technology – or, a shopping cart in the clearance aisle.
This means a lot of midrange sellers are being priced out of the reselling game, either by the big wholesalers or Amazon or on the other end, small size arbitrage sellers buying on clearance and reselling online.
Amazon recently cracked down on sellers of non-compliant balance scooters. Should sellers start taking product testing and labeling seriously?
Sellers should, of course, be taking product testing and labeling seriously, for a variety of reasons. First is that the failure, in this case, burned down homes and injured people.
I know people want to be successful in growing their business and making money, but making money at the risk of someone dying because of you cutting corners is pretty dark stuff in terms of a strategy to get rich.
In more practical and less moralistic terms, the Fine Jewelry category used to be completely overwhelmed with garbage products that claimed to be gold and were not, and so on. So, they instituted a new QA program whereby everyone has to submit an application and have their products tested, and if they don’t pass, they can’t re-apply for a year.
In addition, they randomly test products in your catalog 2-3 times a year and boot you off the category if you fail.
I strongly suspect that this will happen in other categories, especially high-risk foods and supplements, toys, baby items, and plug-in electrical devices.
In terms of risk, anything ingestible, topical, electrical, or for children are going to be the riskiest. Of secondary risk are items that touch food in the normal course of use, and products explicitly regulated by the many government agencies in the US, like composite wood, Edison light bulbs, car parts, wireless devices, and more.
Does Amazon have any specific product compliance requirements for sellers?
The CPSC, FDA, FCC, and FTC are the most common agencies to encounter with any given product a seller may wish to sell in the US.
The CPSC regulates all consumer goods not regulated by another agency, and sometimes there is overlap.
The FDA regulates all produced food (milk and eggs are considered “produced”, the USDA governs agriculture and animals), drugs, cosmetics, and food contact products. The FCC regulates all communications devices.
The FTC regulates all labeling claims in “advertisements” (the detail page) at the point of sale, with specific regulations governing jewelry, made in the USA claims, furs and textiles.
The (Amazon) Terms of Service clearly state that the seller must be compliant. Amazon leaves this intentionally vague so that it can be enforced on however they see fit. To be truly certain of having no issues with Amazon, sellers should work with a qualified consulting firm like Cascadia, or directly with a lab, although the latter approach is often more expensive, but not always.
Amazon forced most Hoverboard sellers to provide the necessary compliance documents, including UL documents. Does Amazon normally check if the goods sold on its platform are compliant?
Amazon rarely checks for compliance documents, proactively. However, Amazon has been taking actions as it took with the Hoverboards since 2007. That issue just happened to be a very significant one, unlike the normal scope of the issue, which is limited to a few SKUs.
The team that handles these takedowns, the Product Safety team, typically takes action on products only, not on seller accounts. But for a private label seller, sometimes that is their best selling product, and in terms of the revenue impact, it may as well be like having the account suspended.
Having your ducks in a row for high priority items is always a good idea, and take EVERY customer complaint seriously.
It took Amazon weeks to take down the hoverboards after the first fire complaints started coming in; I would have advised a seller to price their product to move and not replenish inventory to try to get out from under that liability as quickly as possible.
Where do you predict Amazon will go with this in the future? Should sellers expect Amazon to enforce labeling and document requirements more strictly in the years to come?
I have no evidence to justify my opinion, but yes, I do believe that there will be more enforcement in future, and product testing is done by Amazon itself, and then enforcement action was taken on sellers.
It’s very simple to test plug safety or test for lead content. Sellers should make sure that every product they import and sell on Amazon is safe and compliant, as Amazon won’t tell you when they might start a program like this.
The Jewelry QA audits were performed on hundreds of sellers without their knowledge, and then they were booted out of fine jewelry with no warning at all.
You also do sourcing. A major challenge for overseas buyers is assessing a manufacturer’s capability to make ‘compliant goods’. How do you manage this, considering that many Asian suppliers don’t even know which standards are mandatory in the US?
When we start working with a new supplier, we provide the testing protocol and inspection checklist with the required AQL in the purchase order. If it’s a higher risk item, we will do an audit ($750 one day audit) to assess the factory’s capabilities and areas of weakness.
In this way, we have made it clear what our expectations are for our clients, and the factory has agreed to meet them. We have also evaluated where they may struggle to actually meet them. To help with this process, we may advise the client to perform raw materials inspections on incoming materials, particularly with children’s products.
For other highly regulated products, such as electrical products, we recommend during production inspections, where the inspector can provide feedback to the factory directly and they have the authority to stop production for the client if the issues are egregious.
Basically, we assume that the factory doesn’t know what compliant goods consist of, so we spell it out for them, and we assess, test, and re-assess their performance.
Product compliance is not the only risk that Amazon sellers must deal with. Is it correct that Amazon only allows a maximum defect rate of 1%?
The Order Defect Rate, or ODR, can be only 1%. This refers to the number of customers who either file an A-Z claim or who leave negative feedback, or who file a chargeback. It is possible to have a much higher product defect rate than this.
Often, FBA will shut down sellers in excess of 5-15% defect rate, because this is obviously costing the seller quite a lot of money to pay the FBA fees each time, but this isn’t performance-related. Keeping returns down helps to keep the ODR down, as typical customers who return items are returning them because something was wrong, and presumably, some of them will then file a negative review about the product.
But we’ve seen successful products with quite high defect rates in Clothing and Accessories, so the return rate is more of an indicator of where to look than a hard and fast rate.
What happens if a seller fails to keep the Order Defect Rate (ODR) below 1%?
When the ODR is above 1%, the seller is warned about this, and their funds are placed in reserve, typically for 30 days, to help Amazon cover any expenses related to those negative customer experiences.
Many Amazon sellers ship their cargo directly from the factory floor in Asia to an Amazon fulfillment center in the United States. How can these sellers prevent a large number of defective units from entering the market?
Quality control inspections are essential. This is actually a bigger concern in terms of enforcement in my opinion than ODR for private label sellers.
What I see seller’s doing on a regular basis is failing to package items properly, or evaluate items properly, so they arrive damaged or in poor condition, and the customer then complains in their feedback, product review, or returns annotation, and the Amazon Product Quality sends the dreaded, “We have taken down your listing due to a buyer complaint about the condition of your product.”
This could be used, sold as new, or not as described, or inauthentic – most of these describe the same issue, though, which is defective or damaged product arriving to the customer. This can be because of sloppy production and a lack of quality control inspection before shipment or due to poor packaging that allowed the product to become damaged after production in the shipment.
Without the quality control inspection, you won’t know which one it is, which makes fixing it on the next shipment even more difficult. We recommend using packaging that meets the ISTA 3A standard, which also is the standard used for Amazon’s Frustration-Free Packaging initiative.
Intellectual property is another issue that especially Private labelers must deal with. How do you go about to avoid selling a patented product on Amazon?
Typically, we recommend checking if the product you’re trying to sell is the only version of that product on the website, and if so, it’s probably patented.
As an example, there’s a car seat that uses heavy-duty suction cups to hang in a window. The suction cups are patented, and so no one else can copy that exact design – only Amazon and the original seller are listing that product for sale.
Sometimes you can also see when something is truly innovative that it is likely patented. There are many traditionally used products, or variations on the theme, that new Amazon sellers can use to build their brands, it’s not necessary to copy someone else’s brand or designs.
That being said, patent infringement is quite hard to prove on Amazon, and typically Amazon will require some sort of proof of successful legal proceeding. Where we see sellers get into trouble far more often is trademark and copyright infringement.
Sometimes, they’re using someone else’s name brand in their product description (never use the name Dr. Oz to promote your supplements!), or using someone else’s photo. Always try to have unique offerings and photos.
We also see a lot of our sellers targeted by nefarious sellers trying to take their market share by copying or hijacking their listings. We support our clients by doing test buys, reporting to Amazon, and filing detailed complaints of anti-competitive behavior like fake reviews.
Thank you. How can Cascadia Seller Solutions help companies looking to sell products on Amazon?
We are uniquely positioned to help brand owners because most of the company worked on Amazon’s own private brands, AmazonBasics and Pinzon (among others) when we were at Amazon.
We are the undisputed experts on how to do private brands, on Amazon. Each of us has our own specialty that we bring to the table, and I end up involved in pretty much every client interaction at some point!
These specialties include sourcing, testing compliance, audits, packaging, customer experience, US Customs/freight forwarding, and performance. Our goal is to help small to medium-sized enterprises grow from the ground up and to go global.
Some of our clients are just starting out, while some of our clients have solid US-based businesses, and they want to be compliant going into Canada, Mexico, the EU, Japan, or China.
We are also able to help our sellers with our years of insider knowledge in understanding exactly what Amazon is asking for in those vaguely worded performance emails asking for things like invoices or in explaining what exactly the meaning of a particular report is for a seller, or in how to achieve greater traffic and conversion and better reviews for your product.
For some of our larger clients, we engage in a shared risk model, rather than our typical fees for services model, where we work to build up the account and revenues in exchange for a fixed percentage of net receipts.
At the end of the day, our goal is to help our clients be successful on a truly remarkable platform, one not built on relationships or catering to buyers, but one based on data, sales, and understanding the pulleys and levers in the system. Happy Selling!
More About Rachel Greer
Rachel Greer spent over 7 years at Amazon in roles supporting the legal teams and private label/import compliance teams after previous roles outside of Amazon in legal firms and teaching abroad in Austria and Singapore.
While at Amazon, Rachel received her Masters in Business Administration from Seattle University, which can be seen either as a testimonial to hard work and perseverance or just being too stubborn to admit when one is in over one’s head!
Rachel is passionate about making complex and difficult aspects of product development and global launches like quality assurance and regulatory compliance understandable for young small to medium-sized enterprises.
Rachel founded Cascadia Seller Solutions primarily because she prefers to steer her own course. But she soon realized the market was so great she needed more help, and brought on some of the lovely women she worked with previously at Amazon to make a formidable branded product launch team for eCommerce sellers.
Rachel enjoys crafting and spending time outside in the beautiful often rainy Pacific Northwest, where she lives with her husband, two children, two cats, two parakeets, one dog, and a whole bunch of fish that her husband brought home one day.
She loves solving client problems and helping them achieve their dreams of financial independence and freedom from the grind of the 8 – 6 pm workday (let’s be real, it hasn’t been 9-5 for a long time), and enjoys working with people as passionate about making and selling great products as she is!
More About Cascadia Seller Solutions
Cascadia Seller Solutions is a boutique consulting firm based out of the Pacific Northwest that is dedicated to helping small to medium-sized businesses succeed with selling on Amazon. Our primary areas of competency are:
1) Amazon accounts management; a shared risk model in which we guide the company through the best ways to grow their Amazon selling business for a portion of the net receipts;
2) Building a brand from the ground up, inclusive of global sourcing, product testing and inspections, Customs/freight, and marketing; and
3) Expert advice on how to manage with seller performance enforcement contacts, such as performance warnings, and how to have stellar customer service on Amazon as a seller.
Do you want to launch your own private label or custom designed product?
It can be hard to go from a design drawing to finished product. To help you manage the entire process – from creating a specification to sampling and quality control – we created a Starter Package:
a. Private Label & OEM Product Manufacturer Lists
b. Product Specification Templates
c. Product Label Samples
d. Tutorials, Video Walkthroughs and Task Lists that guide you step-by-step through the entire process
In addition, you can also book quality inspections, lab testing and shipping directly from the platform. Click here to learn more.