i A PRACTICAL GUIDE TO STARTING AND GROWING A PRIVATE LABEL AMAZON BUSINESS A ...

155 Pages·2016·2.25 MB·English

i

A PRACTICAL GUIDE TO STARTING AND GROWING

A PRIVATE LABEL AMAZON BUSINESS

A University Thesis Presented to the Faculty

of

California State University, East Bay

In Partial Fulfillment

of the Requirements for the Degree

Master of Science in Engineering Management

By

Gerrit D. Maess

August 2016
Copyright © 2016 by Gerrit D. Maess
ALL RIGHTS RESERVED

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Table of Contents
List of Figures…………………………………………………………………......…viii
List of Tables………………………………………………………………………......ix
1 INTRODUCTION ........................................................................................... 1
1.1 Scope of the thesis .................................................................................. 1
1.2 Reasons for choosing Amazon as a seller platform ................................ 2
1.3 Preparations for the first product launch .................................................. 5
1.4 Reasons for becoming a private label seller ............................................ 7
2 LAUNCH PROCESS ..................................................................................... 8
2.1 Niche product identification ..................................................................... 8
2.1.1 An important product criterion ........................................................... 9
2.1.2 Generating ideas for private label products .................................... 10
2.1.3 Supply and demand assessment .................................................... 11
2.2 Product sourcing ................................................................................... 17
2.2.1 Domestic vs. international product sourcing ................................... 17
2.2.2 Supplier quotations ......................................................................... 21
2.2.3 Profitability evaluation ..................................................................... 22
2.2.4 Sample ordering and testing ........................................................... 28
2.3 Building a premium brand ...................................................................... 29
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2.3.1 Reasons for choosing a premium branding strategy ....................... 29
2.3.2 Selecting a brand name .................................................................. 31
2.3.3 Designing product packaging .......................................................... 33
2.4 Product page setup ............................................................................... 34
2.4.1 Product images ............................................................................... 35
2.4.2 Sales copy ...................................................................................... 37
2.5 Product launch ...................................................................................... 39
2.5.1 Order placing and production .......................................................... 39
2.5.2 Shipment to seller and quality inspection ........................................ 40
2.5.3 Shipment to warehouse and processing ......................................... 41
3 CUSTOMER RELATIONSHIP MANAGEMENT .......................................... 43
3.1 Customer support .................................................................................. 44
3.2 Business intelligence ............................................................................. 46
3.2.1 ASC reports .................................................................................... 47
3.2.2 Other data sources ......................................................................... 48
3.3 Marketing and promotions ..................................................................... 49
3.3.1 PPC advertising .............................................................................. 49
3.3.2 Email marketing .............................................................................. 53
3.3.3 Social media marketing ................................................................... 55
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3.3.4 Review management ...................................................................... 57
4 PRODUCT MAINTENANCE ........................................................................ 62
4.1 Performance monitoring and optimization ............................................. 62
4.2 Quality management ............................................................................. 69
4.3 Inventory management .......................................................................... 72
5 BUSINESS MANAGEMENT ........................................................................ 77
5.1 Business model canvas ......................................................................... 77
5.2 Business systems .................................................................................. 83
5.2.1 Launch process flow chart .............................................................. 83
5.2.2 Launch process system simulation ................................................. 86
5.2.3 Operations flow chart ...................................................................... 97
5.3 Business growth and development ...................................................... 100
5.4 Exit strategies ...................................................................................... 104
6 CONCLUSION ........................................................................................... 107
6.1 Summary ............................................................................................. 107
6.2 Outlook ................................................................................................ 108
6.3 Closing remarks .................................................................................. 109
7 REFERENCES .......................................................................................... 111
7.1 Books .................................................................................................. 111
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7.2 Journal articles .................................................................................... 112
7.3 Technical and research reports ........................................................... 112
7.4 Blog posts ............................................................................................ 113
7.5 Websites with no author or date of publication .................................... 117
8 APPENDIX ................................................................................................. 122
Appendix A: Simulation Model Parameters – Locations ................................ 122
Appendix B: Simulation Model Parameters – Entities ................................... 124
Appendix C: Simulation Model Parameters – Arrivals ................................... 125
Appendix D: Simulation Model Parameters – Attributes ................................ 126
Appendix E: Simulation Model Parameters – Variables (global) ................... 127
Appendix F: Simulation Model Parameters – Processing.............................. 129
Appendix G: Time distributions of launch process steps (extended) ............. 137
Appendix H: Simulation results – Location Summary .................................... 140
Appendix I: Simulation results – Location States .......................................... 142
Appendix J: Simulation results – Entity Summary ......................................... 143
Appendix K: Simulation results – Entity States .............................................. 144
Appendix L: Simulation results – Variable Summary ..................................... 145

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List of Figures
Figure 1: Flow chart on fulfillment by Amazon ...................................................... 4
Figure 2: JungleScout application screenshot .................................................... 15
Figure 3: The Seven Criteria for a Good Name .................................................. 32
Figure 4: Bar graph displaying effects of reviews on buying decision ................. 57
Figure 5: BSR cycle ............................................................................................ 67
Figure 6: Quality management system ............................................................... 69
Figure 7: Time series chart of financial projections (before pivot) ....................... 80
Figure 8: Time series chart of financial projections (after pivot).......................... 82
Figure 9: Flow chart of the launch process ......................................................... 84
Figure 10: Graphical simulation model of launch process .................................. 90
Figure 11: Bar graph displaying entities at different simulation stages ............... 95
Figure 12: Time series chart displaying entities at different simulation stages ... 96
Figure 13: Flow Chart of the operations system ................................................. 98
Figure 14: Growth-share matrix ........................................................................ 101

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List of Tables

Table 1: Product idea rating chart ....................................................................... 12
Table 2: Product sourcing through a domestic supplier ...................................... 18
Table 3: Product sourcing through an international supplier ............................... 19
Table 4: Questions for a supplier quotation request ........................................... 21
Table 5: Market analysis results ......................................................................... 23
Table 6: Inventory cost ....................................................................................... 24
Table 7: Brand building cost ............................................................................... 24
Table 8: FBA fees ............................................................................................... 25
Table 9: Cost of sales ......................................................................................... 25
Table 10: Product-related cost ............................................................................ 26
Table 11: Operating cost / month ....................................................................... 26
Table 12: Key performance measures / month ................................................... 27
Table 13: Product packaging information ........................................................... 33
Table 14: Conversion rate factors ....................................................................... 65
Table 15: Relevancy factors ............................................................................... 66
Table 16: Table of financial projections (before pivot) ........................................ 80
Table 17: Table of financial projections (after pivot) ........................................... 82
Table 18: Time distributions of launch process steps ......................................... 87
Table 19: Decision probabilities of launch process steps ................................... 88
Table 20: Launch process simulation - discarded entities .................................. 92
Table 21: Growth-share matrix - Portfolio quadrants and recommendations .... 101
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1

1 INTRODUCTION

“Most people miss opportunity
because it is dressed in overalls and looks like work.”
– Thomas A. Edison, Entrepreneur (inc.com [1], 2015)

1.1 Scope of the thesis
This thesis offers guidance to anyone interested in starting an Amazon
business, as well as existing Amazon sellers who are looking to gain a deeper
understanding of their inner business processes.
The core of this thesis incorporates the following four chapters: launch
process (Chapter 2), Customer Relationship Management (Chapter 3), product
maintenance (Chapter 4), and business management (Chapter 5). While the
chapter on the “launch process” describes the initiation period of a new product,
Customer Relationship Management and product maintenance are about the on-
going operation processes that take place following a product launch.
In the launch process chapter, there is a detailed introduction to identifying
undersupplied products with high demand, sourcing products from suppliers,
building premium brands, setting up a product on Amazon and then successfully