In the first part of this three-part series, we took a look at the growing trend of direct to consumer and private label retail — this time we’ll discuss how to lay the foundation for a strong business based around these opportunities.
D2C and private label sales are forecast to become even more dominant in the retail market, so it’s a prime time for businesses using this approach with Shopify.
However, private label and direct to consumer sales have their own set of challenges and factors to consider:
- Value proposition: Lower price points are one component that can make private label direct to consumer products appealing to customers since there’s no wholesale step or third-party to eat into the product cost. However, keep in mind that consumers are becoming more savvy and may not appreciate low-quality and low prices. That said, in some verticals, consumers may be more open to accepting lower quality in exchange for lower prices.
- Quality: In most cases, private label products still need to be of significant quality in order to succeed. There are, of course, often ways to reduce the cost of production and passing those savings along, but selling a product that’s extremely low-quality typically isn’t a good strategy for any store.
- Premium and luxury goods: On the other hand, value is often based on perception. Creating a brand that conveys premium or luxury quality at higher price points can be another good strategy — as long as the product’s quality merits it.
- Branding: Most successful private label D2C products are well branded with high-quality or unique logos, brand standards and packaging. To compete against larger brands, you’ll need to invest in high-quality photography, graphic design and content.
- Unique selling point: The visual language established by branding strategies should reflect what’s unique about the private label product. Marketing and advertising also need to clearly communicate these concepts.
- Manufacturing and fulfillment: You’ll need to find a way to manufacture private label products unless you plan on making them yourself. This can involve a myriad of considerations and challenges. Manufacturing and fulfillment is typically more complex with offering personalized or configurable products.
- Compliance and legal: Depending on where your company is based and where you sell, your products may be subject to regulatory guidelines. For example, food, health and beauty as well as children and baby products often come with strict manufacturing, labeling and packaging rules that you’ll need to research extensively.
Positioning a D2C and private label business
Developing a strong position for your private label products is vital since your products will likely have (or will have in the future) competitors that are remarkably similar to what you have to offer.
There are numerous ways to position your private label products in the marketplace. This often involves targeting specific lifestyles, demographics or preferences:
- Affordable but high-quality.
- “Generic on purpose” or “no name” products that represent high value.
- Exclusive products backed by a brand with “attitude” that appeals to specific demographics.
- Organic, non-GMO, vegan or cruelty-free.
- “Green,” environmentally friendly or “clean.”
- Super premium quality or luxury.
- Socially responsible production.
- Customized to specific needs, measurements or requirements.
- “Buy one, give one” models that support charities or other efforts.
Once you’ve established your product strategy, it will be vital to find ways to express those via branding.
D2C and dropshipping
While dropshipping can be a good strategy if you have a manufacturing or fulfillment partner who’s willing and able to handle it, keep in mind that, by definition, private label products can’t follow the more traditional dropshipping strategy of simply reselling mass produced products direct from the manufacturer.
That said, working with a manufacturer will be key for many private label stores, and often creates an opportunity to start with a “base” product that’s already being made and customize it to be unique to your store.
In these cases, you’ll also want to ensure that manufacturers agree that the specific formulation, configuration or packaging of your product is proprietary and can’t be sold to anyone else.
A strong foundation
At the end of the day, it’s tough to create a truly unique product that no one else can mimic or outright replicate.
However, when products are carefully positioned and branded, you’re laying the groundwork for a more solid business that is both viable and profitable.
In the next installment of this three-part series, you’ll learn more about the importance of building a brand around your D2C store.
