When you're looking for a new product to sell, it's important to understand the difference between private label products and white label products. Both have their benefits, but which is right for you? In essence, both have the commonality of a product being manufactured by one company, and then re-branded, marketed and sold as their “own” product by a wholly different company.
However, they are several differences between the two types of labels and they have their advantages and disadvantages depending on the business case. Here's a breakdown of what each term means and the pros and cons of each option.
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What Are White-Label Products?
White labeling is a practice in which a manufacturer with factories, production lines etc. sell a generic product to retailers, without any manufacturing capacity, who then rebrands, markets and sells this product as their “own” product. To unsuspecting customers, that supermarket’s brand of toothpaste was not actually “made” by themselves but most likely by a huge industrial conglomerate!
Why Use White-Label?
For companies that don't have the production capacity to manufacture the product, this business model is a great way of focusing on branding, marketing and customer services. This can be an especially profitable route for well-known brands who want more exposure across different price brackets without having any large startup costs or responsibilities.
It's also perfect if you're just looking to launch your idea but need some help getting established first with an established generic product. The benefits are significant when going with new startups since they'll enjoy less risk involved in manufacturing operations.
What Are Private-Label Products?
Similarly to white label products, a manufacturer with factories, production lines etc. sells a product to retailers, without any manufacturing capacity, who then rebrands, markets and sells this product as their “own” product. However, this product has more uniqueness in that it has been customized to available specifications (or even designed) by that retailer and is only available exclusively to that retailer.
For a complete explanation check out our article on what are private label products? (A layman’s guide)
Why Use Private Label?
Again, just as for white-label products, this business model is a great way of focusing on branding, marketing and customer service. In addition, the product customisation allows the retailer to create something unique and attractive that stands out amongst the generic products, and a product that fits well with its established product ranges. Also, the product exclusivity means that the manufacturer cannot sell it to other retailing competitors.
Similarities Between White Label And Private Label Products
1. Outsourced Manufacture by Third-Parties
White Label and Private label products both use third-party manufacturers - an actual factory plant with manufacturing capacity produces the product off an assembly line.
Here is an article on how to find the best private label manufacturers
2. Branding and Marketing
Retailers are in control and can give a product any name or image they want to differentiate their product and attract consumers. This starts from how customers first perceive your brand as well marketing processes leading up until purchase decisions are made on the products at hand. This includes important aspects of customer service.
3. Retailers Own the Product’s Trademark
When a manufacturer of white and private label products sells their product to the retailer, they do not own the trademark of that final product. As far as the buying customer is concerned, that product was designed, developed and manufactured directly by you
Interested in outsourcing the manufacturing of your private label tool sets? Get in touch
Difference Between White Label And Private Label Products
Exclusive To One Retailer
Private label manufacturers are in charge of producing the private labelled product, but they cannot sell it to other retailers. Private label products are unique to a specific retailer, so there's little to no chance of them having any competition with similar items in a competing store nearby.
Customization by Retailers
Going private-label means you, as a retailer, will be specifying certain materials, features, customized designs not offered by competitors. White-Label means using a single generic product from the manufacturer also available to other retailers.
Development and Extra Costs Borne By Retailers
Private labelling is a great way for companies to put their own mark on something and take it from an average product, into one that people want. However, it incurs developing new designs and features based upon current market research trends, and expenditure in associated time and costs. In comparison, a white-label product is available off-the-shelf and most likely has proven itself in the market already.
Table of White and Private Label Products Differences
Comparison | White Label | Private Label |
Product Customization | No | Yes |
Unique Selling Points | Low | High |
Retailer Exclusive | No | Yes |
Investment of Time and Costs | Lower | Higher |
Speed To Market | Faster | Slower |
Examples Of Private Label And White Label Products
If you want to be successful in the private label business, it is important that your company not only has high quality products but also an attractive and resonant name. Many of today’s most well-known brands come from companies who use this model as they have been highly visible in their marketing and branding despite not being the actual manufacturer of said products!
White and Private Labels exist heavily in supermarket items including Personal Care, Beverages, Paper Products, Cleaning Products and even foods.
Typical White-Label Products
T-shirts and mugs are typical white-label products. One of the most popular product categories to sell, and it’s very convenient for businesses or individuals who want to create their own branded t-shirts but outsource production while focusing on branding and sales!
White label companies are the perfect solution for brands who want to focus on branding and sales while outsourcing production. One of these white-label products is T-shirts, which can be very popular among customers as they come in all shapes and sizes!
A great way to make your own branded shirts is by simply having them manufactured through an outsourcing partner.
Private-Label Products
Many big brick and mortar and online stores are also good examples of private label sellers. It turns out that the coffee you buy at your favorite warehouse store is not exactly what it seems.
The Kirkland brand, owned by Costco and producing products under their signature label "Kirkland Signature", has been sourcing beans from Starbucks for years now! And just recently they've started using words like “inspired” or even say things were 'custom roasted'.
Amazon Basics is private-label brand on Amazon Marketplace and it's one of the best sellers. They offer office supplies, tech accessories, as well home goods with prices that compete with other Amazon sellers. In fact, Amazon owns around 100 private label brands selling on the Amazon marketplace platform including Spotted Zebra (kids clothes), Good Brief (men’s underwear), Wag (dog food) and Rivet (home furnishings).
Related Article: 30 Best Private Label Products To Sell In 2022 and Beyond
Which Is Better Private Label Products Or White Label Products?
Private and white label products are two different ways to go about the business of selling products. With both, you don't have to spend your time working on manufacturing or the hard details of product development and design.
The upside? You can focus more fully on company resources towards running the “soft” business aspects such as branding, marketing, and sales. Additionally, the end customer is left with the impression that there are no differences between this product and other competing brands because it shares some features or possibly unique characteristics at a competitive price.
White Label
The white label option can give you a head start in the market with an already established generic product especially for those looking to start their own business and not have any technical knowledge. But it comes at higher risks because there are so many other similar options available. If done right this could lead to lower production costs which may make your pricing structure more competitive. Or if you have an established client base, then the only thing left for your business venture will be marketing and branding.
Private Label
Private-label products have the potential to be more profitable than white label ones because they can offer customization and higher margins. Private marketers invest time researching market needs, negotiating with manufacturers about product specifications that meet those criteria - which also ensure quality control over production processes. This approach has its drawbacks: it requires significantly greater financial resources upfront; you're investing before anything is made available for purchase or sale by your business. There will always remain uncertainty around revenue expectations should any issues arise during the manufacturing/distribution phase(s).
Conclusion
We’ve talked about the benefits of private labelling or white labelling products in your business. You may be wondering, which is best for my company? The answer to that question depends on what you are looking to do with your product ranges, how much time you have available to put into it, and ultimately your business aims.
It can be challenging to decide which is the best option for your business, but if you’re considering whether or not to invest in private label products and white label products you must do some research beforehand or reach out to expert companies. Ultimately, you have to weigh out what makes sense for your own business by looking into things like costs and benefits before deciding which direction would work better for you.
If you enjoyed this article then you will enjoy our article on: Top 5 Private Label Tool Suppliers and Manufacturers
Interested in outsourcing the manufacturing of your private label tool sets? Get in touch