Sourcing 101 - The Difference Between Private Label and White Label
When it comes to selling products, companies today have many choices. Two popular methods for selling products to customers are private labeling and white labeling. Before choosing if one of these options is right for you, it's important to understand the many processes available and how they differ from one another. In this article, we define private and white labeling, compare both to existing products, and provide examples of each.
Private labeling and white labeling can be very lucrative e-commerce strategies — but first, you have to learn how to tell them apart! Often used interchangeably (though not correctly), private label products and white label products both refer to rebranding pre-made products for one’s own brand. You can sell virtually anything as your own to coincide with whatever branding and marketing strategies you have lined up.1
What is Private Label
A private label is a business model where you, as the retailer, contract a manufacturer to create merchandise based on your specifications. You can then market and resell the products under your brand. It's called a private label because the manufacturers can only make the product exclusively for you. They can't sell it to another reseller.
This business model benefits both retailers and private label manufacturers because it reduces costs. It also allows both businesses to specialize in one area. The manufacturers earn revenue from selling to retailers and retailers take care of branding and getting the products to end consumers.
Small business owners use the private label model to compete with more recognizable national brands. They do this by creating a lower-priced product that has the same features but unique characteristics. The use of private label brands is widespread in the beauty, clothing, and household item industries, as well as other types of physical products.
Examples of private label products in the market include Costco's Kirkland brand. Costco does not produce its inventory itself, but many of the behind-the-scenes companies are popular brands. Thus, customers don't need to worry about the quality. For instance, Costco's Espresso Blend is made by Starbucks, and their Supreme diapers are contracted from Kimberly-Clark, maker of Huggies.2
- Benefits of Private Label
- You can make changes to the product as a way to differentiate your brand from other goods in the market
- You collaborate with the manufacturer to create a unique product with your choice of ingredients, packaging, features, etc.
- You can generate income as a wholesaler by selling your products for other retailers to carry
- Drawbacks of Private Label
- You risk losing capital and carrying inventory you can't dispose of if your product idea does not sell
- You may need to come up with a significant amount of money to cover minimum order requirements by manufacturers
What is White Label
White label refers to the practice of buying unbranded goods from manufacturers, rebranding them, and reselling them as your own. In general, white labeling involves less customization and the only difference between products in the market is the retailer's branding and marketing. White label brands are used for both physical products and services. In the technology industry, a retailer buys generic services or white label solutions and resells them under their e-commerce brand name.
The white label concept is based on anonymity. The white label manufacturer's identity is not advertised and the brands take the products as if they've produced them themselves.
The term "white label" came from the music industry during the vinyl records era. When artists or recording studios want to promote a record, they will send copies of records without artwork or labels to radio stations. The purpose of the white sleeves or white labels is for the competitors or DJs not to know where the music came from.3
- Benefits of White Label
- You can offer white label products without spending capital on product development
- You can offer a wide range of products with slight variations at different price points to appeal to both cost-conscious shoppers and premium-product consumers
- Drawbacks of White Label
- You may need an established brand to benefit from using white label services
Differences Between White Label and Private Label Manufacturing
While both white label and private label manufacturing involve a retailer or reseller engaging with a manufacturing company to create a product for sale by the retailer, there are several differences to note.
The biggest difference is that under white label agreements, manufacturers sell generic products to retailers and can sell that same generic product to multiple retailers, while under private label manufacturing, the arrangement is exclusive with one retailer. The other key difference involves the degree of customization that is permissible. White label manufacturing offers virtually no control over the product details by the retailer, so in essence, they must accept the manufacturer’s generic product. Private label products offer a greater degree of customization and partnering between manufacturer and retailer to create a product that is more unique and faces less direct competition in the marketplace.
The table below provides a summary of the similarities and differences between these two forms of manufacturing.4
Whether you are still in the planning phase of your company or in the expansion phase, utilizing either white label or private label products can offer great business opportunities. Through these methods, you can expand your offerings or enter new markets with a new product idea.
If you're looking to add ready-for-market goods and services to your product line, white labeling would be the easier method to leverage. If you want to create your own products and build brand recognition, private labeling is the better route for you. Ultimately, choose the model that fits your brand, resources, and business goals.
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About Exporta Technologies
Exporta Wholesale is the largest marketplace connecting suppliers in Latin America with buyers in North America. Today, we have a network of over 5,000 Latin American suppliers serving a variety of consumer goods and product categories in the United States.
Exporta’s marketplace offers buyers a full service experience in the origination, sourcing and managing of products. The platform was founded on the idea that curation and service are the most important elements in the buyer’s journey. Exporta’s marketplace is building technology that addresses the pains of sourcing products internationally at attractive prices.