When designing, manufacturing, and selling your own products, especially on an eCommerce website, there are many things to consider and decisions to make to help make your brand successful. One of these considerations centers around sourcing products, including who will supply your products and how you want them, as well as how they will be sold.
Many manufacturing companies offer production services to eCommerce and other business owners, allowing them to quickly and affordably produce and/or access new products to sell. However, there are different ways sellers can go about this depending on the customization and control they want. These options are called “white label” or “private label.”
As a seller, one essential question you must ask yourself is should you go with white label or private label?
What Is White Label?
“White label” is the process of selling a generic product to multiple retailers who then brand and price the product for their own target market. The sellers who buy products from white-label manufacturers can’t influence how the products are produced because they are standardized, meaning all sellers get the same products, but they can add their own branding and packaging to make the product unique.
In general, these products are generic products sold under larger names. The products will include the retailer’s name and are generally less expensive than other brand products.
Benefits To White Labeling
White labeling has a number of benefits such as it:
- Doesn’t require a high initial investment.
- Has low development and marketing costs.
- Saves time on product development.
- Allows sellers to package their product as they see fit (once the production process is over).
- Allows sellers to start selling products quickly.
- Allows for the ability to monetize an influencer brand (like with merchandise) or create branded supplemental products.
Downsides To White Labeling
On the other hand, there are also some downsides to white labeling to consider:
- The landscape is highly competitive and lacks exclusivity.
- There is lack of control over product specifications or features.
- Pricing can depend on factors like brand recognition and competition, which can be difficult for sellers to profit on.
Examples Of White Labeling
- 365 Every Day Value (Whole Foods Market)
- Kendo Holdings (cosmetics for Fenty Beauty, Marc Jacobs, Bite Beauty, Lip Lab)
- Dripshipper (coffee)
White-label products can also be non-tangible products such as APIs.
Phone accessories, cosmetics, fitness clothing and accessories, coffee products, personal care, and bags are some common white-labeled products.
What Is Private Label?
Private labeling is when a product line is sold exclusively through one retailer. The supplier or manufacturer produces original products (or modifies an existing product) using the seller’s specifications. The goods are packaged, retailed, and sold exclusively by a third party.
The initial company profits by selling the goods to a third party, and the third-party profits by selling the products to consumers. This sometimes happens when wholesalers sell raw material inventory to a third party, which then sells it as merchandise inventory.
A “private label brand” is a business devoted to creating products that third parties can sell as their own and they don’t market, brand, or retail any of their own products. The brand is developed and managed by retailers, and the profit comes by selling the manufactured goods to other businesses. Typically, this case is business to business (B2B) sales.
Benefits To Private Labeling
The total retail sales for private label products in the U.S. reached $5.15 trillion in 2021, and is estimated to hit $5.35 trillion in 2025. Some benefits to private labeling include:
- Ensures customization – retailers send product requirements before the production process starts.
- Allows manufacturing companies to maximize profits without having to worry about marketing and retailing, instead selling to companies that are experts in these areas.
- Gives companies that don’t currently have a product inventory some products to sell.
- Allows businesses to retain key competitive advantages.
- Control over pricing.
Downsides To Private Labeling
There are a number of advantages to private labeling, but it’s important to also know of the disadvantages such as:
- Involves custom manufacturing, so it has a higher cost.
- Company must conduct market research and product development prior to taking the product to manufacturer in order to save time and money.
- Generally, more capital intensive.
- Challenging to build brand loyalty.
Examples Of Private Labeling
- Kirkland signature (Costco)
- Great Value (Walmart)
- Archer Farms (Target)
- AmazonBasics (Amazon)
Electronics, clothing, home décor, toys, games, and camping equipment are examples of private-label products that typically sell well.
White Label Vs. Private Label
|· Generic and sold to multiple retailers, who then brand and price the products based on their target market.||· Sold exclusively to one retailer; products are unique to them.|
|· Product sold as-is; can package product as seen fit once production process is over.||· Selling product created by a manufacturer for your brand; allows for more customization and uniqueness.|
|· Highly competitive and lacks exclusivity, so pricing depends on factors like brand recognition and competition.||· Pricing control; can be more profitable.|
|· Low development and marketing costs.||· More capital-intensive because involves custom manufacturing.|
|· Save time on product development.||· Easy to add to existing product lines.|
|· Expand into white-label markets||· Builds brand recognition|
|· Must conduct market research and product development before approaching a private-label manufacturer.|
Both White Label and Private Label
Both white label and private label allow brands to outsource production of goods to third-party manufacturers, so sellers don’t have to spend a lot of time on the manufacturing details. Both also give retailers control over the marketing strategy.
Is White Label or Private Label Better?
This strongly depends on your goals.
Consider choosing white label if you:
- Don’t have a unique product idea but want to start selling a product quickly.
- Want to start a business without high initial investment.
- Want to monetize your influencer brand or create branded supplemental products for your business.
- Want lower costs.
- Want to lean into the manufacturing company expertise vs. having your own.
- Need to boost your brand’s visibility.
- Don’t mind having lack of control over product specifications/features or working harder to stand out from other retailers.
Consider choosing private label if:
- You want to sell a specific product and have control over product quality and specifications.
- Uniqueness and differentiation are high priorities for your customers, and you want to be able to quickly respond to consumer needs and preferences.
- You want exclusivity.
- You want control over pricing (you own the products, so you set the pricing).
- You don’t mind facing the challenges of building brand loyalty when competing with larger, established brands.
Use Data to Make Business Decisions
QL2 can help you gather data you need to make real-time decisions, provide pricing and product insights, identify gaps and opportunities to maximize profit, match competitor comparables, and more. Get competitive intelligence for your specific needs – contact us today or schedule a demo to learn more.