When it comes to starting a business from scratch, product manufacturing and supplying are the two most crucial aspects that directly impact a business’s success. In most cases, brands usually rely on third-party providers and lose their flexibility over product customization.
But what if we tell you that you can fully control product customization even if you rely on a third-party firm?
Yes! This is where Private Labeling comes into existence. Want to know more about it? You have to stick with us.
This Article Will Walk You Through:
- What is a Private Label?
- Pros & Cons of Private Labeling
- 5 exclusive strategies to succeed in Private Labeling
- Some profitable private-label product recommendations
So, let’s dive in!
Private Label: What Is It?
Simply put, Private Label refers to selling a product/products made by a third-party provider but branded and sold to customers by another retailer. In this process, the third-party firm takes care of the whole product manufacturing activities, from production and testing to packaging, and the retailer takes care of the branding, pricing, and selling parts.
However, the moment the private label manufacturer sells the product to a private label seller, he no longer owns the product. The customers know only about the private label seller.
For example, a private label business sells beauty products. Now, they would hand over the whole responsibility of manufacturing to another liable third-party firm. Once the products are ready, the producer would sell the product to the former company, and they would promote and sell the product under its brand name.
Many brands have adopted this private-labeling strategy and expanded their business to the next level. To name a few – Kirkland Signature, Morphe, Trader Joe’s, etc.
Then What’s The Difference Between A Private Label And A White Label?
Most people get confused between Private Label products and White Label products. Well, to some extent, they are similar, but the difference lies in the customization process. In private labeling, you’ve full freedom over the customization of the product, meaning that you can instruct private-label manufacturers how they’ll produce the product and what the ingredients would be.
On the other hand, you won’t have this freedom with white labeling, and chances are high that you would end up selling the same product as other retailers but under a different brand name. In private labeling, your product would be unique and specially designed only for you.
Private Label: Pros & Cons
Like other strategies, private labeling also has its own advantages and disadvantages. Let’s check them.
Pros
- Enhances brand authority
Customers are always up to trying new products. And you can fully utilize this chance through private labeling. When you put your unique ideas into implementation, it not only attracts your customers but also accelerates brand authority by establishing a full-proof USP.
- Eliminates the extra burden of product manufacturing
Private labeling takes away all the extra hassles of product manufacturing, Including production, packaging, etc., and as a private label seller, you can solely focus on brand promotion and customer acquisition.
- Boosts profitability
Private label sellers generate huge profits in most cases.
If you have a brand, you must be familiar with the branding costs – how huge they are. Fortunately, with private labeling, you can avoid the branding cost and only pay for manufacturing. This would help you maximize your profit rates to the next level.
- Gives control over product quality and customization
As a private label entrepreneur, you’ve full control over product quality and customization. You can directly contact the private label manufacturer and customize them in your own ways.
- Gives flexibility in changes
If you are in a product-based business, you know how much effort and time it takes to manufacture a product. And after launching, if any changes are needed based on customer reviews, it takes months or years to cover it up.
But in private labeling, you have full flexibility over changing. You can communicate with your manufacturer, adjust the loopholes, and speeds up the next launch.
Cons
- High Competition
No matter what strategy you apply, you have to face competition. The same is true with private labeling. Here, you often have to compete with giant national and multinational brands. Thus, it gets difficult and time-consuming to establish a new brand in the same niche.
But that doesn’t mean that it’s impossible. If you aim for generic yet low-competitive niches, chances are high that you will succeed in the long run.
- Reliance on manufacturer
In Private Labeling, though you have full control over customization, you have less flexibility with product manufacturing time. If the producer delays the process, you have to comprise and postpone the product launch.
Thus, do extensive research and find the best liable manufacturers to partner with.
5 Tips To Take Your Private Label Business To The Next Level
No matter what niche you have chosen, if you blindly opt for private labels without any strategy, your brand won’t survive. You need proper planning and strategies to make it a success. With this being said, here are 5 exclusive strategies you can consider to succeed in private labeling.
- Choose Your Private Label Manufacturers Wisely
Manufacturers play the most crucial roles in private label success. Thus, be conscious of who you are trusting. Make sure the private label manufacturers are responsible and flexible and let you control the product quality. Talk with them clearly before contracting. Otherwise, you have to suffer in the future.
- Demand For The Best Quality Products
When you focus on the best quality products and liable manufacturers, chances are high that they would charge a bit extra than other manufacturers in the market. Most of the time, retailers choose the cheap option to generate higher profit margins and end up losing customer trust. Thus, we recommend going for the best manufacturers by spending some extra cost. It’d help you build a good bond with both your customers and manufacturers. And from the next time, you can contact the producers and negotiate the pricing.
- Focus On Top-Notch Packaging
People now often compare private-labeled products with national brands. Thus, take some extra care of packaging too. For example, if you are trying to sell a high-end luxurious product, ensure the packaging is also exclusive. It’ll cost you extra, but it would be worth it.
- Keep An Eye On Your Competitors
As you are selling private label goods, it doesn’t mean you won’t have to face competitors. They’ll continuously keep an eye on you and try to beat you in every way possible.
So, stop shooting arrows in the dark. Before promoting and selling the products, make sure you have a clear idea of who your target customers are, who your competitors are, and how you can set your brand apart from the rest. This might seem daunting, but this is how things work.
- Strategize Product Pricing
You need to revamp your pricing strategy to stay in demand and beat your competitors. Consider customer needs, test the product pricing ( you can take technology help), and restrategize it to stay on top of the customer’s mind.
Some Profitable Private-Label Products You Must Consider Selling
Private-label goods somewhere rule both online and offline marketplaces. Here are some high-potential private-label products you should consider selling in the upcoming years:
- Water Bottles
- Nail Extensions
- Ring lights & Tripods
- Cloths
- Hair Extensions
- Pet Foods
- Skincare brands
- Packaged foods
- Protein supplements
Final Thoughts: What Is Private Label (2023)
Private labeling is one of the best strategies brands are adopting lately. Not only for eCommerce businesses, even if you run a brick-and-mortar shop, you can also opt for private labeling to stand out among the crowd.
Though, in most cases, private label sellers fully rely on manufacturers. Still, we recommend you to keep an eye on the manufacturing process to get the best products and win customers’ trust.
However, if you have further doubts regarding product labeling, do let us know.
FAQs
Despite having some disadvantages, private labeling is a great strategy for newbies and growing businesses. It reduces the extra headache of product manufacturing and lets you focus on brand promotion. So, if you have patience and are ready to work hard, private labeling is surely a great option for you.
According to a study, private labeling generates a 25% higher profit margin for retailers. So, private labeling is still profitable and in high demand.
In private labels, manufacturers no longer own the product after selling it to retailers. The retailer promotes it under his brand name and sells it to consumers.
