Back in 2012, after returning to work from my maternity leave – and being completely unable to continue working in product safety with a baby at home from a mental health perspective – my manager moved me into handling product compliance and quality for Amazon’s private brands.
In this photo, I’m in the Dawson building in South Lake Union, at a time when I managed the quality and performance for all of Amazon’s in house brands globally.
At the time, Amazon’s private brands were a scrappy startup inside of the mothership. So how did we do it?
A Modest Beginning
When I took over Private Brands compliance, there were four in house brands: Denali, AmazonBasics, Pinzon, and Strathwood.
Denali was home improvement/tools, AmazonBasics was Computer Electronics, Pinzon was indoor textiles, and Strathwood was outdoor furniture. A few experiments with Tom Douglas branded Amazon exclusives had been scrapped under the Pike Street brand right around when I joined.
We only had a few hundred active AmazonBasics items, a few dozen Denali, and about the same number of parent ASINs for Pinzon and Strathwood.
The guys who started Denali and AmazonBasics did so without senior leadership oversight, and it was a shoestring operation. I had to keep all of my purchase orders under $5k so that employees at L6 could approve them, since we didn’t have executive buy-in.
The talented women who led Pinzon and Strathwood sometimes bought only MOQ because they didn’t have the budget to take risks.
The first clothing brand, Ruby & Ro, was started without compliance involvement and while we tried to salvage the project, it ended up being a total loss for the company.
A lot of people have this idea that Amazon is some huge behemoth. But, it’s more like the concept of a bunch of nanobots coming together to form one big bot. Every middle management employee at Amazon is encouraged to be entrepreneurial and think big and come up with their own ideas and have ownership over them.
And that’s what they did, and that’s how Amazon’s private brands was created. Not as a top down executive driven initiative, but as a middle management initiative started in four individual departments: Consumer Electronics, Tools & Home Improvement, Home & Garden, and Clothing.
After I stopped supporting the program in mid 2014, it continued to grow aggressively, to over 1400 products a few years ago.
In the past two years, Amazon has been investigated for safety concerns on their private label brands. They even seem to be considering exiting the space except for a few areas.
But before things got too big to manage effectively, we were there, building it from scratch.
Fail fast, fail often
Amazon’s a great place for experimentation. You get to try things small and grow them big.
Unlike traditional product launches, you don’t have to put in tens of thousands of dollars into a national ad campaign to get your voice out there, to get your product out there – you just put in a small PO, whatever the minimum order quantity is, launch it and see where it goes.
We had a few dozen open launches at a time, all of them based on existing products already on Amazon. We would have a legal review to make sure there wasn’t a patent issue, and we’d change the colors or placement of features a bit, but otherwise, it was heavily inspired by whatever the top seller was that we were trying to displace.
Then we would develop the product, and send it off to Vine to fail or succeed on its own merits. If it got less than 3.75 stars, then it wasn’t reordered.
This model works exceptionally well for small scrappy startups launching on Amazon as well – just like we were back in 2012-2014.
I generally recommend that if a brand has a solid cashflow coming from a few winners that they have about 10 products in development at any given time.
Based on my experience, out of ten launches, if you do everything right, 1-2 will become heroes, 3-6 will become core products that can make a reasonable profit over time, 2-6 will be failures that you have to discount to sell or even scrap/liquidate to get out from under the failure.
That means if you always have ten projects going, you can get a few new heroes each year and have a stable of healthy products offsetting the costs of growth.
But fail fast, and fail often – when something isn’t working, don’t follow the sunk cost fallacy and keep throwing money at it.
Compliance Driven Development
My approach to product development is driven by quality assurance and compliance.
A quality program for product development starts with planning. Research what your customers want and set how you’re going to hit those objectives in production.
Do supplier audits! Know who you’re working with. Identify areas you can fail.
Then once production is underway, inspect and test the heck out of it! You can only get consistent 4+ star products by producing exactly what you mean to produce.
Then after launch, track complaints and follow up on them. Update your inspections plans. Investigate safety issues.
While these aren’t hard in theory, if you’ve never set your own inspection protocols up, or don’t know the difference between a factory audit and a product certification, then it can feel overwhelming and frustrating.
A big reason why a lot of AmazonBasics products were successful and we had so few failures is because when you follow this process, you generally weed out the failures long before launch.
Developing Your Own Brand
When you’re developing your own brand, you need to have sufficient cash flow to try out multiple products at a time to determine where to put your cash longer term.
My favorite approach for this is to talk to factories about what they have constantly in production, or what they have “leftovers” of.
In one case, the factory said yeah, we have these white ceramic items that we always have in production, we can sell you 300 of them.
In another case, the factory said, yup! A store that ordered 2000 flags ended up only taking 1500 and we have 500 left over, you want them?
Be careful of intellectual property! You need to relabel or resticker so that the trademark isn’t in violation, and make sure you’re not violating someone’s copyright or patent either, but otherwise, this is a great place to start.
Once you have a solid idea of what will sell, what the costs are, what the profitability ratios are, then you’re ready to start growing in that category.
You can also sell goods from distributors to test this, but that is in some ways more challenging now that there are so many limitations on selling on Amazon when you buy through distributors.
If you’re limited in funds ($50k or less), consider the whole first year as a test. Don’t expect to make any money and don’t quit your day job!
If you have a solid cashflow coming in from your current business, whether you’re selling wholesale or you have a service business you’re looking to add physical products to, then make sure you are aware of the startup costs involved.
If you already have a solid brand and you’re adding new products, budget for $20k per new product test. Some will be more, some will be less.
One example I’ll share below is made up but based on my experience with one of my product development coaching clients. She started on her own developing art products but the margin just wasn’t there. We then brainstormed and came up with an entirely new product line that was in line with her values and long term vision.
We tested 3 different types of products over the period of a year and found what worked and what didn’t. Then, we made tweaks to the product design and content to really nail down the customer and sold out of one design within about 6-8 weeks. We’re all set for Q4 after quite awhile of testing and planning and work to get her brand off the ground.
The same process works for brands with sufficient cashflow – you just move a lot faster!
I highly suggest using a project management tool like Asana or Teamwork to manage the complexities of new product development and launch.
Start with “leftovers” like the white plates to test cost, demand, and profitability. Then differentiate to grow your brand.
Focus on Your Zone of Genius
What makes you happy in the morning when you wake up? What is exciting to you?
That’s what you should be spending more of your time on.
Now, to be fair, there are plenty of times where you have to do things that you don’t like. But, what you should be thinking about is: Is 60 to 80% of my time spent on something that fuels me in some way?
And if not, how can I get to that point? What’s my game plan to where I don’t feel unhappy working?
Jeff Bezos says that work/life balance isn’t a reality. He said it’s “work life.” Complementary. It’s not work if you are getting something back from it and feel more energized. Work actually fuels your life — actually makes life more valuable to you. It isn’t like a “I’ll work and then play.” It’s figuring out what you’re good at, what you’re really awesome at that will really grow your business and try to find ways to not do the things that you’re really bad at or just really hate.
For example, I absolutely hate bookkeeping, I’m really bad at it. If you try to tell me to organize my T accounts — I really hate T accounts — I can read a P&L, I can read a balance sheet. I can tell you where we’re at in terms of profitability. But as far as the actual day to day handling of the bookkeeping, no.
At Amazon, I didn’t have to worry about accounting – we had support IT staff, we had support Finance staff, support Legal, and support maintenance.
As you’re building your business, you will generally find that one or two aspects of building your brand are the most invigorating. Working with sampling? Designing the product? Designing the packaging? Running the social campaigns?
Think about the things that you can streamline or outsource that aren’t in your zone of genius. What can you avoid? And, not just in your business: if you actually put off working because you have a messy house then try to find ways that you can get help there so that you can focus on the things that really matter for your business. Having a clean house can really help calm you and really open your mind to something new.
The below chart is a good breakdown of how to think of this.
I like to recommend that people use a time tracking tool like Toggl and track everything they do for a full week, no matter how small.
Then, categorize what they’re doing into various buckets – there are a few ways to do this. Things like operations, or sales, or keeping the lights on tasks.
Then, tag them into your zones of competence – what are your zones of genius? What are you excellent at but isn’t much fun? What can you do but isn’t really that unique to you? And what should you really not be doing?
For me, my zone of genius is in using data to inform product marketing. Whether it’s customer produced data or advertising data or other types of performance data, I like finding patterns in the data sources then coming up with action plans how to make the product or the marketing for the product better. I can spend hours doing this!
I am excellent at Amazon Compliance. I have been doing it for more than a decade in various capacities and I’m a recognized expert in this area and provide excellent service to clients. But it’s hard to feel energized by it.
I am competent at copywriting and SEO. I do a good job at it, but it’s not like someone else couldn’t do it just as well.
I am completely disinterested in bookkeeping and paperwork of almost all kinds. I routinely receive negative feedback – from peers, former business partners, employees, and even the governmental agencies to which I have submitted paperwork! It is absolutely worth it to me to pay someone else to do this type of work.
When you break down what you’re doing in your business, anything that is less than your zone of genius, you should eventually hire for or outsource.
We were able to be successful as a relatively small team – 5 compliance members, 6 sourcing agents in China, and 5 product managers – building a multi million dollar private label brand because we were all able to focus on what we were best at, and allowed our support teams to do their role and allowed us to do ours.
But, when it first started, it was one product manager/sourcing manager and one compliance person. If you only outsource one part of your private label development journey when you’re first starting out, it may help you to know that the first full time employee Amazon brought on after their product manager was a compliance manager, even before they started hiring dedicated sourcing managers in China.