The 2016 plan – Private Labeling

Introduction

I briefly mentioned this in my 2015 miles and points recap.  I realize now that 2015 was like a pendulum  for me going back and forth between MS and reselling.  I started the year doing heavy MS on my 5% card.  Then I got banned by eBay and continued doing MS.  Then when the Discover AP deal hit in Q4 and Redbird died, I put all of my efforts into reselling.  Now in Q1, I’ve slowed my reselling and gone back to MS.  I realize I just don’t have the capacity to do both at a high level -> I can’t drive around AND pack up boxes at the same exact time.

 

MS and Reselling isn’t scalable

Here’s the truth – MS and reselling isn’t scalable.  Not to the degree that I want.  It’s clear MS avenues have dried up over the past year.  No one can argue that.  And once you start ramping up your reselling, you’ll be banned from Kohl’s, Bloomingdale’s, Best Buy, Sears, and so on.  I think you can resell about 100K to 200K of gross sales per year (profit margin of X depending how good you are.)  You can’t scale past that with one address.  You’ll have to involve other addresses.  Even so, it’s time consuming to box up your items and ship them out.  It’s good side money, but not a career replacement.  Sure, you can find services to box your stuff to FBA, but that’ll cut into your margins.  The highest amount I’ve personally heard someone do was 600K a year gross, purely online arbitrage too.  But he has multiple addresses and he pays people to box and ship.  If you say, “Hey look, that IS scaling.”  Yea, sure, but what happens when he starts getting banned?  It’s inevitable.

 

Reselling is a $10 gig

Like I said, I’ve slowed my reselling lately.  I’m just trying to use up all my merchant gift cards now.  I come back to Matt’s post about turning a $10 gig to a $1000 gig.  I see reselling as a $10 gig.  I never did before, but I do now.  Some of you will agree with me.  Some won’t.  But let me explain.  You see, I have to put in time and effort into reselling, whether it’s researching what items to buys, boxing them up, shipping them out, worrying about reconciling returns and my COGS for each item.  That’s a large part of my time.  All for what?  Roughly 20% margin on goods that I can’t scale?  It’s not like I can buy a million iPads from Best Buy for $300 and flip on FBA for $400.  There is a limit to how many I can buy.  Then when that sale ends, I move on to the next product and start the cycle over again, eventually hitting the same limit again.  Due to these reselling “limits,” that’s why I classify reselling as a $10 gig and not a scalable $1,000 gig.

 

Financial Independence

I’ve often been asked what I would like to be doing in life.  The last answer I gave my buddy was – “I want to work the least amount of time for the most amount of money.”  I was expecting a Rock eyebrow or a laugh, but he shook his head approvingly.   This is the same buddy who wants to retire at 40 and manage investment money all day, so we both have the same end goal, just a different means to that end.

Here’s what I want my day to be like – wake up at 8am or so, eat breakfast, walk my dog, then “work” for 4 hours or so, then go garden or get my hair did and nails done, like a “Real Husbands of Hollywood.”  I want to be my own boss.  I don’t want to answer to anyone.  I want to hire employees to do the menial work.  And I want to make at least a sustained $150,000 a year (adjusted for Seattle cost of living) in doing so.  As you can see, I’m not asking for too much.  I didn’t write a million dollars.  The problem is that reselling and MS alone isn’t going to get me to that $150K goal.  I can probably do it for a year or two, but I don’t think it’s sustainable.  And sustainability is key.

 

Private Labeling

Now I thought about house flipping, but I’ve come to realize that those deals come and go.  Meaning, you might find a house every quarter and you could easily make $50K per house, but I think the stress of finding or not finding a house would get to me.  Plus, currently, I know nothing about fixing up a house.  I COULD learn, but it seems that market is very competitive, and the learning ramp is too high for me.  I wouldn’t rule it out down the road, but right now, I’m not there.

I thought about being a realtor, but then I’d have to work on weekends.  That’s no bueno.

And that’s where private labeling comes in.  What is private labeling you ask?  Essentially it’s importing a product from China and reselling the product on FBA/eBay/your own site.  It’s kind of like a mini “Shark Tank.”  People who invent stuff from scratch like the ridiculous Squatty Potty have made millions.  For me, my goal isn’t to make millions…right now.  I just need to find a product that’ll generate me hundreds of thousands of sales.  You guys have seen all those selfie sticks on Amazon…yeah, those are all private label products, and I can assure you those people made $$$$$.  Speed to market is the name of the game in private labeling.

I KNOW how to resell.  I’ve done it for over 20 years now.  Private labeling is just reselling an item you sourced from China.  Sure there are differences like no brand recognition and traffic ranking issues, but let’s just say I know more about private labeling than fixing a room, alright?  Plus, with all you MS’ers trying to move into reselling now, I need to get out of the peloton and move on to the next thing.

 

Where to start

The same reader who did $600K a year in reselling last year, who ironically also wanted to move into private labeling, pointed me to this website – Passion into Paychecks where he details all the steps he went through to private label his first product.  When I went onto his home page, it seems he sold the site for $35,000.  He’s like a mini-TPG but with private labeling instead of credit card affiliates.  Anyway, I’ve read through half of his 17 step process already.  The biggest hurdle with private labeling is finding the right product.  I keep thinking back on the amount of time I’ve wasted browsing Kohl’s, Sears, and Best Buy where I could have been browsing Amazon and Alibaba.  Whether you want to move into PL one day or not, you should give it a read this weekend.

 

Current status

So the 600K reseller and I have pushed each other to find a product to PL.  We both independently have thought about this for years, but I’d like to think our back-and-forth chats have pushed us to finally take the plunge.  The way I see it is – and the way my buddy who pushed me to flip my first house – “JUST DO IT!”  Even if I lose money on my first product, the lessons I learned will be invaluable and my next product may be more successful.  It’s one thing to WANT to do something, but it’s another thing to go out there and fail at it.  Who do you think wins in the long run?

Anyway, let me wrap up this introductory post.  I’ll chronicle my adventures for you guys going forward.  And by the way, as we speak, my 600K reseller is having his product manufactured and I’m waiting for a sample of my product.  Fun and exciting times indeed.