Private labeling entails crafting an exclusive, custom product formulation that is unique to your brand, which often comes at a cost. Expect to spend between $1,000 and $15,000 for each product line you wish to private label.
In addition to the manufacturing and shipping cost, private labeling requires you to spend much more. However, most of the costs associated with private labeling are one-time, making it a worthy investment in the long run.
Throughout this guide, you will get a thorough breakdown of the various private labeling costs you will incur.
|Product Research Tool
|Listing Optimization Service
|Logo Design Cost
Table of Contents
1. Product Cost (Landing Cost)
This refers to the manufacturing costs associated with the production of your items. It includes such costs as materials and associated labor costs. The landing cost for each product line varies from one product to another.
Depending on the nature, size, and complexity of the item being produced, you should expect to spend between $500 and $1,500. The production time, fees, and filling procedures involved will also determine your landing cost.
When choosing a private label manufacturer, it is advisable to consider the production cost. In this regard, try to keep the landing costs between 20% and 30% of the selling price. To do this, you should negotiate for better rates and minimum order quantities (MOQs) with your preferred manufacturer.
2. Shipping Cost
Shipping cost often depends on the size and weight of the product(s) as well as the mode of transport used to ship it. Shipping your products by air is the fastest mode of transportation, but often the most expensive.
On average, the shipping and freight forwarding costs will be about 30% of the product cost. In most cases, your manufacturer’s quoted cost does not include the transportation and shipping costs. Most manufacturers will give you the FOB pricing.
This means that the manufacturer will only pay to transport the product(s) to the nearest port. In such a case, you will need to pay the required shipping costs from this port to your warehouse. Basically, the shipping cost for your product(s) will depend on:
- Weight of the products
- Product dimensions
- Customs duty rate for the items
To get an accurate estimate of the freight forwarding and customs duty costs, you need to hire a customs agent and freight forwarder. This will cost you an additional $400 or so.
Note: Shipping costs fluctuate from time to time and could vary significantly.
3. Barcode Purchase
If you intend to sell your private label products through Amazon seller central, you will need to create an Amazon listing. A GS1 barcode that bears your brand name is also required on Walmart and Target retail platforms.
In this case, you will need a GS1 barcode, which could cost you between $5 and $250 depending on what you are selling. If you will only be retailing your private label items on Amazon, you could opt for cheaper barcode alternatives.
To evaluate the quality and overall functionality of your preferred private label manufacturer, you may need to order samples beforehand. Some suppliers can send you samples at no cost, but others may charge you a small fee for the same.
The cost of your product samples varies considerably depending on the type of product you sell. Much of the sample cost has to do with the shipping. On average, you could spend $30 to $100 for quick delivery by air.
It is advisable to ask for a sample when testing the manufacturer’s capacity and quality. You also need to ask for a sample once all the relevant customization, brand labeling, and logo engraving have been done on the product.
5. Product Research Tool
This is probably the very first cost you will incur when researching for the best niche products to private label. To find a lucrative niche product that will contribute to your eCommerce success, you should consider investing in a good product research tool.
With such a tool, it is easier to find product ideas that have a high sales potential and probably less competition. Some of the advanced product research tools will also give you a detailed competition comparison for your desired product.
Some of the commonly used product research tools are the Jungle Scout and Viral Launch. Such tools often require users to pay a monthly subscription fee—say $25 to $100 depending on the complexity of the tool you choose.
Unless you can take pro-quality pictures, you should consider outsourcing your product photos. Eye-catching photos are known to attract more potential buyers and drive sales on eCommerce platforms. You could hire a professional photographer through sites like Fiverr for $25 to $80 per photo.
7. Listing optimization service/tool
This is another private labeling area that requires professionalism. To drive more potential buyers to your store, you need to have a fully optimized product listing. Proper optimization makes it more likely for the listing to rank higher, hence driving more traffic to your store.
A professional listing optimization service will cost you about $500.
8. Design And Customization
Designing your private label products is key to success for your brand. Design and customization cost includes everything from logo design to packaging styling and labeling. Applying creativity to your brand design and customization can deliver the desired image to your buyers and boost sales.
Essentially, brand design and customization have to do with product logo labeling and packaging. First, find out what your preferred manufacturer is offering to this end. Some private label manufacturers offer various product and packaging customization services.
In either case, these are the design and customization cost factors you should consider:
a) Product Logo
If you do not have one already, you need to design a unique logo that reflects your brand. In addition to the product labeling and packaging, you will also be using the logo in your correspondence. You could hire a professional designer to craft the most appropriate logo for your brand.
Depending on the complexity of your logo, a professional graphic designer will charge you $15 to $100 to design it. This professional could also help you decide on a proper package design for your products.
b) Product Label
Some private labeling manufacturers may also handle the designing of your packaging and labels. In such a case, you only need to send the manufacturer your logo and pay the customization fee. The first task here would be to choose a brand name—ensure that the brand name is available for use as a website and company name.
If you do not have the required skills, hire a professional graphic designer to craft your logo and packaging. Your brand label will dictate how the packaging and/or boxing of your products will appear. Depending on the complexity of the project, expect to spend $500 to $2000 on your product labeling.
Both factory and product inspections are important before you make any long-term commitment with a private label manufacturer. To ascertain the manufacturer’s sustainability and quality, you need to inspect the factory and product samples in person.
You also need to check whether the final product(s) is up to your required standards before shipping. This could be impossible when the products are being manufactured in a foreign country. In such a case, it will be cheaper and more convenient for you to hire trustworthy agents like Bestfulfill.
An unbiased inspector will evaluate the manufacturing process and the finished products on your behalf at a fee. The much you end up paying mainly depends on the scope of the inspection but is often between $100 and $400.
According to survey findings by McKinsey, about 40% of online buyers tried a new product and/or brand during the COVID-19 crisis. This trend is projected to continue in the coming years. This is to say that a considerable number of your potential buyers are willing to try out a new brand/product(s).
However, they cannot try a product they are not aware of. This is where effective branding and marketing comes in. To exploit the full potential of your private label brand, leverage different marketing strategies—especially the ones designed to drive awareness, trial, and brand loyalty.
The cost of marketing for startup brands varies from one business to another—ranging from hundreds to thousands of dollars. Most businesses spend 7% to 10% of their revenue on marketing, but the cost depends on numerous factors as illustrated below:
|$20/month with web tablets
|Social Media Marketing
a. Web Design
A website should be at the center of your online presence. It needs to be accurate of what you are offering—letting potential buyers know exactly why they should choose your products over your competitors. If your marketing budget is limited, you should work with websites that offer pre-built website tablets like Squarespace.
Although such websites allow for minimal customization, they will save you money in website building and domain costs. In such a case, expect to spend $10 to $30 per month for the website and about $20 per year for the domain name.
You may as well hire a UX designer to design and build a website for your business from scratch if your budget allows it. If you choose to hire a website designer, it will be a one-time cost of $6,000 to $100,000. The much you spend will depend on several factors, including:
- Website Functionality
- Number of webpages
- Whether a database is to be integrated
- The CMS to be used.
b. Search Engine Optimization (SEO)
Much needs to be done to help your business rank higher in search engine results. You need to invest in such SEO aspects as on-page optimization, keyword research, copy additions & updates, analytics setup & reporting, and link building.
Much of this work has to be outsourced to a professional. On average, this will cost you $600 to $5000 per month.
c. Pay-Per-Click (PPC) Advertising
PPC is a great way to complement your SEO efforts and attract traffic to your online store. Most PPC campaigns work on an auction system. As such, you will always know what you are supposed to pay beforehand. If you will be using PPC to market your private label brand, you will end up paying between $2,500 and $50,000 per month.
d. Content Marketing
This mainly involves publishing videos, text, downloads, and graphics on your website to draw in interested readers. It entails the research and development of content ideas, link building, content creation as well as content distribution & promotion.
Depending on how you approach it, content marketing will cost you $2,000 to $10,000 a month.
e. Social Media Marketing
As far as social media advertising is concerned, many brand owners prefer the DIY approach. This may be a great way to save money on marketing costs, but it has become increasingly difficult to reach customers and stand out on social media platforms.
This, alongside Facebook’s dismal organic reach, makes it necessary for you to hire social media management professional. If you choose to take this approach, social media marketing will cost you $500 to $3,000 per month.
Social media marketing cost often depends on:
- Your social media marketing goals
- How active your social media audience is
- The number of social media platforms you would like to advertise on
f. Email Marketing
Email is still one of the most effective marketing channels for almost any type of business. This may be attributed to its relatively low cost and high return on investment (ROI). Email marketing often requires strategy development, copywriting, template design as well as landing page creation, and testing.
If you will be hiring a professional for this task, expect to spend up to $3,000 on email marketing.
Creating a private label brand from nothing requires a considerable investment—in terms of money and time. If done properly, it could transform you from a mare online seller to an eCommerce giant.
First, your budget should factor in the various costs associated with private labeling—right from the landing cost to advertising costs. For the long-term success of your brand, you should be willing to spend the appropriate amount for each stage, from design and packaging to marketing.
Q: How do I Set up the Initial Price for my Product(s)?
Before ordering your stock, it is advisable to have a rough idea of private labeling costs as well as the price you need to sell the item to generate a fair return. First, you should account for the shipping fees, manufacturing costs as well as expenses associated with selling the product.
These include website development, payment processing, and marketing costs. Thereafter, you should do the following:
i. Find Out the Market Average Price
Research the market to find out what your competitors are charging for the product(s) you intend to offer. You could start with a keyword search on the leading eCommerce platforms, such as Amazon. A simple search should display a number of similar items for comparison.
Having checked the price range for items that are already on offer makes it much easier for you to make an accurate appraisal. You may also use the relevant software to analyze the prevailing market prices for the item. For a more accurate analysis, check the price range on multiple eCommerce platforms
What will set your private label items apart from your competitors’ merchandise? To find out, compare your product to what your competitors are offering. What their products lack could be the perfect market opportunity for you.
Well, it does not have to be a huge difference for it to be a significant differentiator. Once you find it, focus on the differentiator and make it the basis for your brand to thrive. For instance, you could use pricing as your differentiator.
In this regard, offering luxury or premium products could give you access to a unique market and audience.
Q: When Should You Alter Your Price?
The timing and reason behind price changes mainly depend on the pricing strategy you are using. It will also depend on the growth stage your brand is at. While there are no steadfast rules to price changes, here are some indicators as to when you should alter your pricing:
- Your competitors are charging more money for low quality products
- Your sales have increased drastically and are gaining new customers faster than your business can handle.
- Your sales have increased by volume, but your profits haven’t
- When your customer retention rates start to decline.