Profit in Private Label: An Entrepreneur Talks Shop

When entrepreneur Sandy Abrams started her glove and sock company “Moisture Jamzz” out of her one-bedroom apartment, she knew her product was great. What she didn’t know was that other companies would want to purchase it and put their own brand-stamp on it.

Called “private label” sales, Moisture Jamzz makes the gloves, but other companies give the product their own packaging and design. Today, customized bulk orders account for 40% to 70% of Abrams' business annually.

By cold-calling beauty companies like Estee Lauder (NYSE:EL) and Bath and Body Works, Abrams was able to generate interest in her moisture gloves for private label sales — enough interest that she counts those companies as clients today. Other companies including Bloomingdales, Linens ‘n Things, and Bed, Bath, & Beyond (NASDAQ:BBBY) are some of Abrams' larger clients for private-label. How did she do it? And what advice does she have for other entrepreneurs looking to get into private label?

FOX Business: Where do you sell your products?

Moisture Jamzz: We started in Bed, Bath and Beyond. Now, between 40% and 70% of our business in a given year is in private label products for companies like Estee Lauder, Bath and Body Works, Crabtree & Evelyn and we sell it to spas, skincare salons, and beauty supply stores. We do a good bit of international business, and we sell direct to consumer via our website.

FOX Business:  Can you tell us why private label is the way to go? How did you get into it?

Moisture Jamzz: Well, our gloves work well with any company’s moisturizer, lotion, or body oil, so I approached companies to put our products in their stores. I would contact their buyer or someone in their new business development department and I would send them a care package with our products in it. I would say in a note something like, “Our products have a great synergy, they are very complimentary, and I’d like to chat.” I didn’t know what I was doing, but it worked!  I targeted companies that don’t make the hard goods, like gloves, but that make all the lotions and potions that go with them.

FOX Business:  Why work with private label? Is it cost-effective?

Moisture Jamzz: I would say that private label sales are lucrative and very easy. Selling in bulk makes it easier. The larger companies order in greater quantity, and then they will do all the advertising, all the promotion-it’s nice.

You don’t have to worry about return orders because you know the company has exactly what they want, and sometimes we’ll do a project like a gift basket type thing. It’s all based on the volume that you do.

FOX Business:  How did you find out what kind of design the companies wanted on their private-label products?

Moisture Jamzz: We discuss the specifics of what each company wants with their design department. Then we discussed the exact colors with our design team, which logos to use, etc. Really, it’s the same thing we were always making, but the packaging has a different company’s brand on it. We essentially serve as a middle man with our printer, because the designs on the gloves and socks are ours. Some companies like Aveda will sometimes provide us with already printed packaging, and we will just fill them with the product.

FOX Business:  What are the pitfalls?

Moisture Jamzz: Well, larger businesses and larger quantity doesn’t always mean more profit. You have to analyze whether or not you are set up to produce in large quantities. If your manufacturer isn’t going to give you a discount for quantity, then it may not be the best option for you.

FOX Business:  How did you know private-label would be cost effective for you?

Moisture Jamzz: Well, all our gloves and socks are made in the USA, so we just spoke to our fabric house in the Midwest and on the West Coast, and they said they would work with us on a bulk discount.

FOX Business:  What would your advice be to a small business looking to get into private label?

Moisture Jamzz: I would send a care package and a note, but the most important thing is to have the correct contact. It’s difficult these days to have the right person at these big companies you never know where your stuff is going to go. I like to contact them on the phone and gauge their interest before I send the product. After you speak on the phone, start an e-mail dialogue and find out what products the company is interested in specifically.

Also, you need to make sure your idea or your product is protected before you send an idea to a big company. You never really know if they are going to rip off your idea, but the fact is that I don’t believe that Estee Lauder is going to go into manufacturing in the garment industry. I don’t think any beauty company is going to take on the headache of manufacturing gloves. However, if you are approaching a nail company to sell them a new color of nail polish, you need to have a patent and make sure they aren’t just going to add your new color to their product line.

FOX Business: Why are sales better in the private label arena? Why do companies like to have their own stamp on something?

Moisture Jamzz: Branding and customer loyalty. I think companies love to have their name and logo on things that are gift items. Our product is certainly found in gift baskets and is often given as part of a bath and beauty set. It’s important to companies to get their name out there in such a way. The person purchasing the product may know all about the company and what it offers, but the person receiving the item as a gift also needs to be touched by the brand.