White Label vs Private Label: Which Approach Is Best For Your Business?

White Label vs Private Label: Which Approach Is Best For Your Business?

March 2, 2023

Dropshippers are often confused with White Label vs Private Label. White label products are generic items. Several resellers rebrand and sell them as their own. But private-label products can be changed according to the demand of the seller. The manufacturer agrees to be exclusive to one retailer only.

White Label

White labelsinclude productsmade in one company but sold under another company’s name. This is common in many industries, including technology and consumer goods. Many products in China are sold under white label nowadays. It gives sellers access to cheaper products without the hassle of managing operations.

Advantages of White Label Products

Lower costs

White label products are mass-produced. It means that the costs of production are lower. This can allow sellers to make better profits. This can also be beneficial for companies that want to compete with low-priced competitors.

Established Brand

These are usually made by companies that are already known. This means that the products are good quality and have been successful.

Quick To Market

White labelling business make products in bulk. So companies can start selling them right away. They don’t have to spend time and money making the product themselves. This can be beneficial for companies that want to get a product to market quickly. It also maintains a steady supply of the product.

Flexibility

Flexibility is one of the best advantages of white label products in Australia. White label products can have different names on them. This can be helpful for companies that want to sell the same product with different brand names. You may change the product’s name to your brand name without legal consequences.

Reduced Risk

Reselling companies can try the products out before marketing them to their customers. This reduces the risk and lets sellers see if the product fits their brand.

Less Competition

White label products are usually sold to many different companies. This lowers the competition and can make it easier for a company to sell the product and make money.

Disadvantages

Limited Customization

White label products cannot be changed to fit the needs of a company due to prior manufacturing. This can make it hard for a company to make its product different from others and unique. The lack of customization gives it a generic feel, and you might not stand out.

Branding Limitations

White labelling businesses sell products to multiple sellers under different names. This can make it difficult for companies to build a strong brand identity.

Less Control Over Product Quality

White label products are mass-produced. This creates a difficult situation for companies to maintain consistent quality control. If a product is not of good quality, it can impact the reputation of the company selling it. So, you must be more vigilant when sourcing white label products.

Less Profit Margin

Many companies often sell the same products due to mass availability. The competition can make it harder for a company to make money or charge more for the product.

Less Control Over The Supply Chain

As another company makes the product, this forces the company selling the product to have less control over the supply chain. It may make it difficult to manage inventory and ensure that products are always in stock.

Limited Control Over Pricing

White label products are already made, and the maker sets the price. The company selling it can’t change the price; they have limited control over it.

Examples

An example of a white labelling business is:

A company produces printers in bulk and sells them to other companies. The second company puts its brand name on it and sells it as its product. This way, a brand can offer a product to its customers without having to manufacture it. They don’t have to spend money on researching and developing the product.

Here’s another example of white labeling:

A food company makes a basic product like crackers and sells it to a grocery store. The store puts its name on it and sells it as its brand. This way, the store can offer customers a similar product for a lower price than researching and producing it.

White labeling is also common in the service industry when talking of private label vs white label. For instance, a company can offer a service to another company and allow them to market it under its brand. This is a common way of doing business in the technology industry. A software company can make a program and sell it to other businesses. The other businesses can sell it to customers as their own.

Private label

Private label products are made by one company but sold under another company’s brand name. This is common in many industries, including beauty, fashion, and food.

Advantages

Customization

Businesses can customize private label vs white label products to a company’s specific needs. This can be beneficial for companies that want to offer a unique product.

Branding

Private label products are private to a company. Thus the company only sells them under its name. This can help a company build a strong brand identity and make customers want to stick with the brand.

Quality Control

Private manufacturing allows better quality control. The sellers ensure the quality of each product according to quality standards. This helps to ensure consistent quality control for all products.

Greater Profit Margin

Private label products are exclusive to a single company. It means that there is less competition, and the company can charge a higher price for the product. This will result in a higher profit margin for the organization. Also, you can make better money if you are the only leader in your private label product category.

Control Over The Supply Chain

When a company manufactures white label products, it controls the supply chain. They can decide the flow of the products and decide the production. It also ensures better inventory management without depending on mass production. This makes it easier for the company to have products in stock.

Control Over Pricing

Private label products are only sold by one company, so that company has more control over how much they charge. They can change the price depending on how the market is doing.

A Way ToDifferentiate

Private vs white label enables companies to differentiate their products from others. This can attract new customers and increase the market share of the company.

Disadvantages

Higher costs

Private label products are customized to the specific needs of a company. This makes the costs of production go higher. It can be a disadvantage for companies that want to offer products at a lower cost.

Longer time to market

These products are manufactured from scratch and take longer to reach the market. Meanwhile, white label products are readily available under different labels.

Risk of poor quality

The risk of losing customers increases when you opt for private label products instead of white label.Product quality can go down if proper quality control measures are not taken. Thus, it is important to care for quality when preparing and sourcing private label products.

Limited exposure

Private label vs white labelproducts is exclusive to a single company, which means that the exposure of the product is limited to the company’s customer base. Companies might often find it difficult to reach the target audience in a short time.

Dependence on a single supplier

Mostly a single manufacturer handles a particular private label product for a company. So, there is a risk of supply chain disruption if the supplier fails to deliver on time.

Example

One example of private labelling is:

When a beauty company works with a manufacturer to create a unique formula for a face cream. It is made specifically for their customers’ skin types. The company can then put its brand name on the product and sell it to its customers.

Another examle of private labeling is:

When a grocery store creates its line of food products, like cereal or pasta sauce, it puts its own store brand name on it. This allows the store to offer their customers a similar product at a lower price than the brand

private labeling also works in the fashion industry. A clothing company might work with manufacturers to create designs and branding. This allows the company to offer its customers a unique and exclusive product.

White Label vs Private Label Similarities and Differences

Similarities

Beneficial for Manufacturers and Retailers

Both Manufacturers and retailers can benefit from white-label or private-label products. They can sell products without spending money on creating their brand. Instead, they can use a known and trustedmanufacturer. This can save them money and make it easier to sell the products.

Besides, retailers can modify popular products and sell them at a lower price. This attracts customers and increases their sales. Retailers can also sell their private-label products online toboost their online sales and reach a larger audience.

Creation of Small Businesses

Both types of products allow the creation of small businesses. Working in both mediums is very easy as there are only a few barriers. This convenience in work allows small businesses to grow.

Offers Diversity

White Label and Private Labelare similar in terms of the range of products to companies. This allows them to choose freely between products from a wide choice. With this option, companies can easily opt for products with bigger margins.

Dropshipping

White labeling and private labeling manufacturers do not put their trademarks on their products. So, customers won’t be able to tell if the product was made by a company other than the one listed on the packaging.Dropshipping is legal for both private and white label. This allows the companies to dropship White label products from Australia to any other country in the world.

Differences

Product Customization

White label products are already made and just have the brand name changed. They can’t be changed a lot.

Private label products can be changed to be more specific to the company buying them. They work with the manufacturer to make a unique product that is only for their brand. This means the product is different and made just for them.

White Label products are pre-made, and only the name changes. Private Label products are made special for a specific company.

Exclusiveness

Various companies sell white label products under different brands. This means that you can find the same product under different brand names. They’re not exclusive to one company.

Private label products are exclusive to one company. The company works with the manufacturer to create a unique product specific to the brand. So, it is not sold to other companies under different branding. This means that the product is only available from that one company.

Profit Generation

In profit generation, both White label vs private label products depends on several factors, such as:

  • Cost of production
  • Price of the product
  • Target market
  • Competition

White label products have lower production costs because they are produced in bulk and sold to many companies. This means that the profit margin for white label products is usually lower as compared to private label products.

On the other hand, private label products are exclusive to one company. The cost of production is higher because of the customization. Since the product is exclusive, the company can charge a higher price. This will result in a higher profit margin. Additionally, between private vs white labelproducts, private label products have less competition. This makes it easier for the company to sell and make a better profit.

Industries

Private label products are used in industries such as:

  • Retail
  • Grocery
  • Consumer goods

Companies want to offer products that are special and only for them. For example, a store might make its own products that can only be bought at that store and not any other store.

On the other hand, white label products are more found in industries such as:

  • Electronics
  • Software
  • Other technology-related industries

These products are often sold to many companies and can be found under different brand names. They might be used as components of other products or as finished goods sold under different brands.

Final Thoughts

White label vs Private label has their unique advantages and disadvantages. White-label products can be used by different types of companies. In contrast, private label products are for specific types of companies and can be customized as per the demand of the buyer. White label products take less time to produce but have high competition. Meanwhile, the latter offers better profit margins with less competition. Choose the one that suits your needs the best!

 

shailesh is a Design Founder & Advisor, Berlin School of Creative Leadership Executive MBA participant, Zippie advisor, Wolt co-founder, and Nordic Rose stakeholder.

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