The opportunities for own label sourcing.

Why?

In recent years the own brand, or private label, phenomenon has been making big headlines.

In grocery Aldi and Lidl continue to make huge strides with their combination of a small targeted number of branded products sitting alongside their own private label offerings.

In the outdoor sector many retailers have embraced a similar philosophy.

Consumers demand brands for the quality assurance and emotional satisfaction, however it is becoming ever more apparent in the outdoor goods market that these brands do not have to be manufacturer brands.

Indeed there are many pros and cons of undertaking your own private label strategy and perhaps this is the starting point for any discussion;

Pros & Cons

The pros of private label products:
-They are usually lower in price than branded products.
-Multiple private-label product manufacturers will compete with each other to earn a retailer’s business, giving the retailer the opportunity to provide the best balance of quality and price for their customers.
-The product quality is generally good (better than most people anticipate when thinking of private label products).

The cons of private label products:
-Some are just plain low quality offerings made at the lowest price point. These are the things that people will refer to when they say “you get what you pay for.”
-Retailers lack direct control over the manufacturers of their private label products, which can slow responsiveness to changes in the market.
-Private label products tend to be “me to” goods that are trying to match branded product performance. They are rarely innovative. Innovations and product improvements will usually be led by branded products.
-Customers are tied to a retailer to get private label products that they like. You can get branded products almost anywhere.

If you run a successful outdoor outlet then your business is likely to be driven by a combination of “must have” sellers – I.e brands/products that are requested directly by the customer and “sell themselves” and those items that you can influence directly.

It is this latter category where one is most likely to find a private label opportunity for one to source directly.

The good news is that, as a starting point, you will already have an understanding of the potential volume of goods that you can sell and therefore but able to react to any manufacturers MOQ (Minimum Order Quantity).

However, don’t just consider the sales opportunity that may exist for these goods in one channel.

Do some research. Does the opportunity exist online? What about ebay or Amazon?

Many successful sellers find an Amazon niche, source goods and then use FBA (fulfilled by Amazon – effectively the amazon warehouse) to establish a very solid business base.

Looking at these wider opportunities may further assist in assessing the product opportunity.

The next step is how do I source these goods.

How

There are several options available but, thankfully, the process (in theory) is much easier than it was some years ago thanks to the internet.

I) Trade Show

Traditionally the most effective sourcing route was to attend trade shows. Most notably ISPO where the many sourcing halls allow direct access to manufacturers from nations such as China, India and Pakistan.

A combination of the wide variety of goods on show, the opportunity to talk directly to the manufacturer and the chance to “shop around” means that this is still an excellent place to start and one that comes highly recommended.

ii) Alibaba.com

Failing that the next port of call is Alibaba.com. Founded in 1999 by Jack Ma, Alibaba is a business-to-business portal that connects Chinese manufacturers with overseas buyers. In 2012, two of Alibaba’s portals handled 1.1 trillion yuan ($170 billion) in sales with suppliers from other countries now supported.

Think of a combination between amazon, the Yellow Pages Business Directory and a dynamic search engine and you have some idea of the power of the site.

An advanced search engine allows you (in my experience anyway) to literally find any item that you are looking to source.

For reassurance there is a rating system, simple messaging systems and even “off the shelf” products that can be sourced at aggressive prices.

Iii) Sourcing Agent

The third option is to use a sourcing agent. Often specialising in bringing in goods from specific nations or factories many agents focus on specialised areas and become the “go to” resource in their field.

Without doubt they will ensure that the sourcing process is (relatively) pain free and will (usually) find an excellent solution, however this will mean that (since they usually get paid by commission) that the goods will (probably) be more expensive than if you were to source the goods yourself.

The pitfalls

Having found a solution and a manufacturer the next step is to get the product produced.

Invariably, particular with a first time, or small, order this will mean payment up front.

Often this will mean FOB (freight on board or free on board) price (usually quoted on US$) .

In a simple FOB origin arrangement, the seller agrees to pay all expenses related to the transportation of the freight to a specific point. Once the freight reaches that point, the seller’s responsibility ends, and the freight becomes the property and responsibility of the buyer.

Note that this therefore does not include any duty or other fees that may be due.

My advice, before even starting the import process, would be to visit the Government Website www.gov.uk and search “importing goods”. This will provide a solid overview of the processes involved and any additional costs.

Do not calculate your profit based on the FOB as there are other costs to take into account (shipping, duty, customs clearance etc) but these depend on the item being imported and the list would be too onerous to list here.

Once your comfortable with all the implications here its time to place that order.

The end result

So you’ve made it!

Don’t forget the lead time -it can take 6-8 weeks to arrive by sea from the Far East and perhaps 4 weeks to manufacture an item so it is prudent to allow 14-16 weeks.

Don’t forget the design, the packaging, bar codes etc as these also add to the cost and lead times.

But get all these factors right and you could end up with a private label product(s) that fills a niche, provides excellent margin and are a perfect compliment to the branded goods within your store.

There is no doubt that, done correctly, the sourcing of ones own products can be a positive contributor to any business but the additional margin rewards will inevitably come with additional work and responsibility.

Good luck!

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