Private label products
A private label is a product manufactured by a third-party supplier and sold exclusively under a retailer’s brand.
Not every business is able to produce the products they sell on their own.
Think of a growing fashion brand. They might design their garments and specify what materials they should be made from, but they’re unlikely to own a factory or employ staff to make their clothes. Instead, they turn to third-party manufacturers. These manufacturers have the necessary equipment and workforce to produce garments and sell their services to retailers. The fashion brand can then sell the products they’ve designed exclusively - without having to invest setting up their own manufacturing operation.
From small, growing companies to giants like Amazon, you’ll find private label brands across almost all sectors of the ecommerce industry.
Private label vs. white label - what’s the difference?
The two terms are easily confused as they both involve brands selling products which they haven’t produced themselves.
But there’s a key difference. With private labelling, the product is designed specifically for the company who will sell the product. The retailer will often be heavily involved in the manufacturing process, deciding on the materials, colours and quality of the product with the manufacturer. And it’s also exclusive to that brand - you won’t be able to buy the product from any other company.
A white label product isn’t exclusive to any one retailer like a private label product is. For white label products, the packaging and brand name might be different across the retailers selling it, but the product remains the same. A good example of this happening is in the supermarket industry, where supermarkets work with white label manufacturers on their ‘own brand’ range.
What are the advantages of private labelling?
As you’d expect for a practice that’s prevalent across the ecommerce industry, there can be major benefits of private labelling to your business. Here’s a few:
Profit margins - The profit margins for private label products are usually higher than if you were to produce the product yourself. That’s because a lot of the cost for creating a product, from sourcing materials to actually making it, is absorbed by your contracted manufacturer.
Less investment needed - The above point leads us nicely to this advantage, too. Because you don’t need to rent a factory, build a supply chain from scratch or hire a manufacturing workforce, you can reduce the costs involved in creating your product. This makes it cheaper to get going - and also frees up more budget for your marketing spend.
Quicker to get going - Using a third-party manufacturer means you’re able to make use of their expertise, established supply chain and existing set-up. This means it’s faster to get your product into production than if you were to build out all of that yourself.
More control than white label products - As the product will be created exclusively for your brand, most private-labelling manufacturers will work collaboratively with you on the materials, product quality and design features. This is a big draw over white labelling, where the only customisation options available happen in post-production when you repackage and brand your product.
What are the disadvantages of private labelling?
There’s also drawbacks to private labelling which are worth noting before you get going.
Slower than white label products - If speed is critical, you might want to consider your options. While private label products are quicker to produce than products you’d create yourself, they’re slower to create than white label goods. After all, white label products are pre-made and ready for you to sell.
Dependency on manufacturer - This can be a drawback to outsourcing any aspect of your business. By using a third-party manufacturer, you’re reliant on them for the production of your goods. That means if they were to suffer logistical issues or (in the worst case) go into administration, the supply of your product could be severely affected. You might want to counteract this by using a few different manufacturers for various products to lessen your risk.
Ethical considerations - You’re placing a good deal of trust in your manufacturer that their business practices are above-board and aligned with your brand’s ethics. This could be an important part of your consideration process as you decide which supplier to go with.
Less control than self-made products - Private labelling won’t ever give you as much control over production as creating your own product will. That might not be important to your brand right now, but as you grow you might want to take some manufacturing processes in-house.
How do I get started with private label manufacturers?
If you’re interested in setting up an agreement with a private label business, here’s some steps you could follow:
- Be sure on what you want to create - Start at the beginning. Before you bring any manufacturer on board, you should be confident on the product you want to produce. You’ll already be experts in your particular industry, so start thinking. What problems do your customers face? What potential gaps in the market are there? What niche product could you create which would meet those requirements and suit your brand?
- Create a list of potential vendors - Once you’re clear on the above, you can start creating a list of potential private label suppliers to get in touch with. This might be where you turn to your search engine of your choice. But it could be more effective if you use your network and see if other brands are using vendors they’d be happy to recommend.
- Decide which vendor to sign - Now the vetting process begins. When having conversations with private label manufacturers, ask them to talk you through their production process, ethical standards and pricing agreements.
- Make sure you’re happy with samples - With a supplier on board, the exciting part can begin! When you’ve agreed on the design and materials (or ingredients) of your product, have your manufacturer send you samples before they go into production. This way you can do your own quality control and correct any mistakes before they get too costly to fix.
- Start on your marketing strategy - At this point, you should know roughly when you can expect stocks of your product to become available. This is a good time to start planning your marketing campaign and building hype around your new product launch. Consider everything, from your go-to-market strategy to your product photography.
- Add products to your selling channels - And the final step before launch - get your product out to your online sales channels! This might be ecommerce marketplaces you’re active on, like Amazon, or your own online store.