Starting a business is hard work. It can feel like there's a never-ending to-do list, from building a website and hiring employees to managing inventory and producing products.
With competitive price and timely delivery, Gofar sincerely hope to be your supplier and partner.
But what if you could outsource that last step to a supplier that&#;s already set up to create your products? In fact, this is what many retailers do&#;in a type of supplier relationship called private labeling.
Private-label products are produced by a third-party manufacturer based on specifications provided by the retailer, who then markets and sells those products under their own brand.
Read on to to learn what private labeling is and how to create a private-label line of products for your own store.
Private label refers to a product manufactured by one company and sold under another company&#;s brand name. Retailers often use private-labeling to offer exclusive items, expand their catalogs, and undercut competitor pricing.
Private-label products can be similar to items that already exist on store shelves, but the exact manufacturing formula of the product must be original. For example, if a private-label business sells a box of chocolate chip cookies, the precise recipe won&#;t be found under any other label. The same applies to private-label brands selling goods like consumer electronics, jewelry, or clothing.
The private-label business model involves two types of companies:
A reliable private-label manufacturer helps ensure a profitable pricing model.
Private-label goods are often confused with white-label goods. White-labeling also involves a third-party manufacturer making a product on behalf of a retailer. However, white-label products are not custom-designed for a seller.
A white-label manufacturer makes large amounts of generic product, then sells it to individual retailers. Each retailer sells those products to consumers under a brand name.
In other words, private-label product lines are unique and sold exclusively through a single retailer (think: Costco&#;s Kirkland Signature or Amazon&#;s Amazon Basics collection). White-label products are generic and sold under the brands of multiple retailers.
The private-label business model offers advantages to both manufacturers and retailers. These benefits include increased profit margins and control over branding, as well as:
Private labelers get to design and sell their own, distinct products that are different from established brands, store brands, or other private-label brands. As a private-label entrepreneur, you can develop original product ideas and become known for a signature item.
Some (often larger) retailers use private labeling to create value product ranges and undercut competitor pricing. However, smaller businesses may choose private labeling to develop premium products that they wouldn&#;t be able to produce alone.
Private-label products often have higher profit margins than resale products. Retailers may choose to set a high price point for their unique private-label products&#;or leverage their existing brand power to cut marketing costs for private-label product lines.
Depending on the type and quantity of items produced, as well as the level of customization, manufacturers may be able to offer private-label products for less than resale products.
Private-label sellers and producers can tweak manufacturing costs and price points on their product lines. They can experiment with different pricing strategies to maximize profit margins.
As a private-label retailer, you can choose the marketing campaigns you use to promote your branded products. You don&#;t have to adhere to the campaigns run by national brands.
It can take months or years for an established brand to change its product formula, pricing, or marketing strategy. Private-label sellers, on the other hand, can pivot quickly. They can respond to negative reviews or low sales and adjust to make the best product for the best price.
Despite the benefits, private labeling also has its drawbacks. There's the possibility of product inconsistencies, less flexibility for innovation, and the challenge of building a brand from scratch.
One of the main drawbacks of private labeling is the dependence on third-party manufacturers. If the manufacturer runs into problems, such as production delays or quality issues, it can directly impact the private-label seller. This can lead to stock shortages, customer dissatisfaction, and potential damage to the brand&#;s reputation.
When you&#;re working with private-labeling services, there may be limits to the level of product customization available. Depending on suppliers and product categories, retailers won&#;t always have as much control over the product design process as they may want.
However, issues with product design can be mitigated by developing a close working relationship with your manufacturer, which opens the possibility for bespoke research and development.
Browse this extensive list of private-label products and learn more about the popular private label business model.
You may be surprised to discover how many consumer products and national brands are made by private-label manufacturers. In fact, the private label model exists across most product categories, both in online and brick-and-mortar stores.
Store brand private-label products are an increasingly popular approach to private labeling. WSL retailPrivate-label coffee has exploded on the internet. Many of these coffee brands use coffee dropshippers that send out batches to customers as soon as they&#;re ordered.
Many pet stores sell private-label pet foods made by big manufacturers that serve many clients. This is particularly common with online pet stores.
Online marketplaces are filled with private-label LED lights, each with a slightly different design but sourced from a few manufacturers.
Chances are the third-party accessories you buy for your &#;chargers, cases, etc.&#;were made by a private-label manufacturer and sold under another company&#;s brand name.
Many online clothing retailers use private-label garment manufacturers for shirts, dresses, skirts, shoes, handbags, and more. These clothing manufacturers can print custom designs on apparel. They may also offer custom tailoring and leatherworking.
Lots of personal care products, from mouthwash to makeup, come from manufacturers that serve private-label sellers. The formulas for these products will be customized for specific clients, but they&#;re produced on the same assembly lines.
Here are three examples of large retailers that have launched successful private-label brands.
(It&#;s worth noting that you don&#;t necessarily need to offer private labels under a separate brand. Smaller businesses may choose to incorporate private-label products as part of their existing product line.)
Launched in , Kirkland Signature is Costco&#;s private-label brand. It includes a wide range of products produced by various national manufacturers, and is known for offering impressive value for money to customers.
Take Kirkland Signature vodka, for example, which has been compared favorably to high-end brands like Grey Goose. Or Kirkland Signature extra virgin olive oil, which is USDA-certified organic.
Kirkland is an example of a private-label product line that has grown to national status and become synonymous with its retailer. As of , sales of Kirkland products account for 23% of Costco&#;s total revenue.
Amazon Basics launched in and allows Amazon to compete for sales with other retailers on its own marketplace.
The private-label line under its own brand name offers electronics, home goods, pet supplies, and other affordable items&#;often at the lowest price points in a product category.
Some of the most popular Amazon Basics products are device charging cables. These cables are praised for affordability compared to those from official manufacturers such as Apple, which place high profit margins on their accessories.
Another well-known Amazon Basics private-label product is the Microfiber Sheet Set, which has been reviewed by customers more than 380,000 times.
Unlike Amazon Basics and Kirkland Signature, which harness private labeling to lower consumer prices, luxury UK department store Harrods uses its private-label brand to offer a range of premium goods.
The company is the world’s best Private Label Sneaker Manufacturers supplier. We are your one-stop shop for all needs. Our staff are highly-specialized and will help you find the product you need.
Harrods&#; own brand covers a range of products, including gourmet food and beverages, plus high-end fashion, accessories, and home goods.
Its selection of teas, for example, is sourced from around the world, packaged in distinctive Harrods-branded tins, and sold for higher prices than similar products from other retailers.
A private label is a branding arrangement where one company manufactures a product and a different company brands, markets, and sells that product. The private-label seller designs, markets, and prices the product, but it&#;s the manufacturer who produces it and ensures quality control.
A traditional branded product is one in which a company manufactures the products it sells. These companies often spend years cultivating a strong brand identity, and their products must meet their established standards. By contrast, the private label business model involves one company making a product and a different company branding and selling it. These products may not inspire the same brand identity and loyalty.
Many stores turn to private labels to focus on retailing and branding while avoiding the complexities of manufacturing. For example, many of the most profitable products that grocery stores sell are private-label goods, from pasta to jelly to eggs, all under the same store brand. The store isn&#;t burdened with operating a wheat refinery, jelly factory, and hen house. Instead, different suppliers provide the goods while the retailer concentrates on sales and marketing to generate bigger profit margins.
The Costco house brand Kirkland Signature has become a world-renowned private label. Costco offers various items of similar quality to competitors for lower prices. For example, Kirkland&#;s diaper is made by the same company that makes Huggies diapers.
Starting a private label begins with brainstorming private-label product ideas. Once you&#;ve found a promising product category, you&#;ll need to research private-label manufacturers in that sector. Contact manufacturers directly, learn about their pricing and manufacturing processes, and determine whether you&#;ve found a fit. You&#;ll handle branding and marketing separately, either on your own or with the help of a professional who specializes in this aspect of the private-label economy. With your manufacturing and branding teams in place, you&#;re ready to launch your own private-label products.
If your company is considering selling products under its name or adding new products to its current lineup, private labeling may be a good option for you. Private labeling allows you to outsource the manufacturing, sourcing, importing, shipping and other aspects of the supply chain to another company. Private labeling can help you gain access to the whole supply chain without requiring you to build your own networks. Before you move forward with private labeling, however, it is important to learn more about how it works, as well as its advantages and disadvantages.
Private labeling allows brands to outsource product sourcing and manufacturing to a third party. With private labeling, you apply the brand to the packaging only when it is time to sell the product. Although many consumers are unaware of the prevalence of this practice, it is common in today&#;s shopping environment.
For instance, if you&#;ve been to Costco, you may be familiar with the Kirkland brand, which includes items ranging from clothes to food. Kirkland Signature generates about one-quarter of Costco Wholesale&#;s sales and is known as a private-label brand. Amazon also has private-label brands you might never have realized existed.
According to the Private Label Manufacturers Association, &#;Store brands accounted for nearly 30 percent of all new dollar sales flowing into the U.S. retailing industry last year.&#;
Private labeling is a great way for businesses to get their products into people&#;s hands, said Sara Nesbitt, CEO of Coastal Carolina Soap Co.
&#;For the business carrying these products, private labeling allows them to sell products they have no way of manufacturing themselves with their unique brand on them,&#; Nesbitt said.
Private labeling can also describe the practice of taking an ingredient or component supplied and produced by a secondary company and using it to benefit another brand&#;s product, often without explicit attribution, said Rob Terenzi, co-founder of Vega Coffee.
Tip
Bottom linePrivate labeling is the practice of applying a brand to a product that&#;s made by another company.
Private-label manufacturers secure deals with individuals or brands to sell their products under the manufacturer&#;s name with no attribution. The products can be sold independently or in support of other products.
For example, Vega Coffee is purchased by ice cream manufacturers as an ingredient and by other coffee brands to be sold in their marketing and packaging materials. Even though the brand doesn&#;t receive recognition, it experiences increased sales volume, helping it lower costs across consumer-facing product lines and paying its farmers for their contributions, Terenzi said.
He added that this is a mutually beneficial agreement as the distributing business can leverage the social impact of Vega Coffee. &#;In other words, while XYZ brand of coffee may not mention Vega Coffee in their marketing, they will say that their coffee benefits farmers in Latin America, thereby driving more sales through their built-in audience.&#;
Private labeling works best for products that improve the value of other products, such as Vega Coffee does for its ice cream manufacturer.
If you want to start selling a recent product but have no prior experience, private labeling is a great way to start. Consumers will be more willing to purchase your merchandise through larger manufacturers than through a business that has made no previous transactions. However, your product must be able to sell itself without special promotions or brand advertising.
Tip
Bottom lineIf you&#;re looking to build your brand , don&#;t rely on private labeling as you will not be credited for your products. The technique is better suited for individuals looking to experiment with production rather than building a well-known and respected business.
There are both advantages and disadvantages of private labeling for products that are developed and sold by the company that produces them. The advantages of private labeling may include the following:
FYI
Did you knowYou may be able to secure exclusivity for the product, depending on your sector and your arrangement with the brand.
There are some disadvantages of private labeling, but by planning ahead, you can usually avoid them.
Disadvantages of private labeling may include the following:
Before choosing a manufacturer, you should research your target customers so you&#;re familiar with their purchasing patterns and can form the best proposal for potential private-label brands. Attend networking events, trade shows and other events to improve your products, make contacts and gauge competition. You might also consider patenting your idea to prevent competitors from creating similar products.
Many companies or individuals choose Amazon as their private-label manufacturer, but you should also consider manufacturers specific to your products. For instance, Vega Coffee secured deals with ice cream manufacturers and other coffee brands rather than turning to a broad marketplace.
The Private Label Manufacturers Association hosts trade shows where you can find potential partners. Of course, you can find other options through a simple internet search.
Did You Know?
Did you knowPrivate label product sales grew 8.2 percent during compared to the same six-month period the previous year, according to Supermarket News
Nearly any product that is manufactured in bulk and is not protected by a patent can be private-labeled. Some examples include gaming chairs and headsets, home goods, clothing and consumer packaged goods, such as laundry detergent, processed food and beauty products.
Costco&#;s Kirkland Signature brand is one of the most well-known private brands. Likewise, Walmart&#;s private brand, Great Value, is popular because the company is such a huge retailer. Publix, a supermarket chain primarily in the southeastern United States, has two private label brands: the more generic-sounding Publix brand and its upscale private brand, GreenWise. Target has more than 45 different private labels in various product categories, including A New Day women&#;s apparel and accessories, All in Motion activewear, Boots & Barkley pet products, Casaluna bedding and Figment kitchenware.
Private label products are offered to consumers as cheaper alternatives to name-brand products. While the stores have similar manufacturing, packaging and ingredient costs as name brands, they spend less marketing dollars. That allows them to undercut the name brands on price. This makes sales of private label products much more profitable for the retailer and captures the sales of consumers for whom the name brand is too expensive. Customers are more likely to buy the private label product than the higher-priced, brand-name product, especially when economic downturns happen.
White labeling is when a manufacturer agrees to sell a product and package and label it under a different brand name according to the buyer&#;s specifications. Sometimes, a manufacturer has its own brand name that it produces and sells but also offers the same product marketed under different brand names. For example, Costco&#;s Kirkland white albacore tuna is processed and packaged by Bumble Bee and its Kirkland batteries are made by Duracell.
Jennifer Dublino &#;&#;contributed to this article. Source interviews were conducted for a previous version of this article.
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