The terms private label and white label are one of the most misused words in the commerce world. While they are often used interchangeably, private label and white label products are different. They both however, refer to rebranding premade products.
In this article, you will discover the difference between them. As well as, which model works best for your company, and how to use that knowledge to skyrocket your business. First things first, let’s discuss the definition of the two terms.
White Label; what is it?
The term white label refers to products that get created by manufacturers and sold by one or more retailers. Resellers are able to repackage and resell these products under their own brands.
White labeling has a lot of benefits! It allows companies to focus more on branding and marketing. Rather than manufacturing products from scratch. Interestingly, different retailers can sometimes charge different prices for the same product. It all depends on their position in the market. Thus, this business model works well for companies that have well-established brands. Moreover, it is beneficial for startups, since it doesn’t need huge investments or a lot of experience.
Private Label; what is it?
After clarifying the definition of a white label, it is time to answer the question “What is white labeling vs private labeling?” Private labeling is when exclsusive items get produced or manufactured for a company. Manufacturers create products following the resellers’ specifications. So the product gets customized even before it gets labeled.
Private labeling gets used in many industries. Such as beauty products, household items, clothing, and most types of physical items. Because it is often cheaper to get these products via private labeling, this business model has a lot of potential. Due to this, many retailers are now using private labeling to compete with well-known brands.
As illustrated, white label and private label concepts are somewhat similar. The mechanics of how both business models’ function are almost identical. Having identified these two terms, let’s discuss what is the difference between a white label and a private label?
Differences and Similarities
Both business models allow resellers to focus on sales and product development. Whereas manufacturers only deal with the production process. Thus, marketers do not have to worry about the technical part of the deal, saving a lot of time and money. But, with the white label business model, a product can be given to many resellers, each of whom rebrands it as their own. On the other hand, a private label allows for more customization, although in most cases it depends on the chosen vendor.
As soon as the deal gets closed, manufacturers have no trademark rights over the products that they sell. This goes for both white label or private label models. Both of these business models are B2B. Customers in both cases do not realize the product they bought was actually made by another company.
Full Control over the Marketing Strategy
Retailers have complete control over their sales strategy and the whole marketing process. That includes brand image, customer journey paths, and purchasing decisions. It is up to the retailer to determine the name and image of the product.
The Products get manufactured by Third Parties
In both cases, a third-party manufacturer produces the goods. And another company resells them with custom branding.
The main difference between white label and private label is the following feature. Private label products get made only for a specific retailer. So there are unlikely to be similar products at other stores.
White labeling also allows for similar products to get sold. Which means new companies in specialized industries enter the market with an easy solution. The uniqueness of the products gets determined by branding choices and customization abilities.
People identify the private label industry with cosmetics, clothing, etc… Small businesses tend to use this method to produce physical goods that don’t need great levels of complexity in production. Private labeling is especially common in the healthcare industry and consumable products such as food and beverages. In contrast, white label is popular within the technology sector, particularly in fields such as advertising, marketing, and IT. When we compare white label products against private label products, this scope is somewhat broader.
The business model behind private labeling implies that retailers send their specifications to manufacturers before the production of the items. So, private labeling by nature is more customizable. On the other hand, white labeling enables you to customize packaging, but the products are already produced by the time the deal closes. However, this does not mean that resellers of white label products cannot make changes. There are many white label manufacturers that offer flexible solutions which can get customized to meet clients’ needs.
Investment and ROI
Having a private label requires more investment since it compels the reseller to conduct research and develop products prior to the manufacturing process. It results in additional cost and human resources efforts, but the ROI will increase .
With a private label, you can sell unique products that consumers like and appreciate. Therefore, private labeling may be a more profitable option for companies that get interested in selling unique physical products. Nevertheless, white label products come with lower cost of production due to not having additional product customization that requires creation of new molds registered under the customer or company’s name.
When to Choose Private Label
The main advantage of a private label is its uniqueness. In addition to selling an exclusive product, merchandisers can worry less about competition when they use private labeling. Moreover, profit margins tend to exceed 60% if ROI is well measured over time, plus it is easier to start without huge investments, especially when the right niche gets selected. A private label is an excellent choice for businesses looking to target a specific group of consumers whilst having a proper market research.
When to Choose White Label
Since the product has already been developed and manufactured, the white label model is even easier and cheaper, and the retailer does not need to do any additional research. It gets even more lucrative if you already have an established client base, so all you need to worry about is a good marketing strategy, and the manufacturer handles the rest.
Both white label and private label models cut down on the time and effort resellers have to put into manufacturing. It is usually a manufacturer’s responsibility to design and create products, although a reseller may be able to add specific details or personalize products once they are made. Overall, both models allow you to focus on growing your business and while saving you time and money.