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.
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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, clothing.
The private-label business model involves two types of companies:
A reliable private-label manufacturer will ensure 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 Basics range). 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 products that are distinct 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 used to promote your branded products. You don&#;t have to adhere to the sometimes stiff, outdated 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. These include the risk of inconsistent products 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, opening the possibility for bespoke research and development.
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.
Private-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.
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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.
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.
Private label clothing production gives retailers a chance to create their own brand without having to design a product from scratch. It offers the opportunity to grow as a business and allows for control over the look and style of the product; however it is not without risk.
By fully understanding the terms, processes, pitfalls and benefits you can better decide whether this is the route you wish to take.
Take a look at our short guide to private label clothing manufacturing and the benefits it could have in your business.
So, as mentioned above private labelling involves the manufacture of products by a company, that are then sold by another under the seller&#;s brand name. These products are often generic style items that can be easily modified with brand logos and label tags.
During the manufacturing process, your brand labels are added, and the items become part of your company brand. Essentially this is how big business works, but they often own and control the production factories. In private labelling, you are hiring the services of another firm, who make and deliver the clothes to you.
Developing a brand gives you weight as a seller, and your name becomes known and associated with the design of your garments. It enables you to stand apart from non-branded goods and potentially means that you can have your individual designs bought to life.
Some retailers sell third-party lines and have their own range, which naturally increases potential sales as you are offering a wider variety and, not everyone likes to own big label clothing for various reasons.
A major player in private label apparel is Amazon. It alone sold 5 million items in apparel on Prime Day in July and appeared to use its discounts to push private label offerings. Analysts also predict is set to become the largest apparel retailer by .
With insights on big players such as Amazon, quality private label clothing showcases that this manufacturing method is a viable option for businesses of all sizes.
There are quite a few benefits of private labelling, which is of course why the appeal is there. A labelled item will always sell for more money than a generic non-labelled piece, even if your brand is not well known. If you retail third-party goods, you will find they are still quite expensive to purchase, even for wholesalers so when you sell on the mark up is marginalised.
With private label products, once you have paid the manufacturing costs, the shelf prices are for you to decide and you will find generally this is a more significant profit margin. Branding is a huge benefit, it gives you an identity and scope for growth. All brands had to start small, but the ones that end up at the top have often used private labelling methods in the early stages.
A generic retailer will not find the same growth potential. You can add new garments to the range, but because they fall under your brand, they have more kudos than adding non-branded items.
The first risk to consider when looking at private labelling is the quality of the items being made on your behalf. You do not want to put your name to something that is frequently substandard, or that is of such poor quality it rips or tears.
To avoid this, you need to be sure you are working with someone who has a good reputation. Cheapest, of course, is not always the best. You need to look for reputation and testimonials.
Following on from this you want to have some guarantee of timescale, lead times and reliability before you commit. You do not want to work with someone who takes much longer than agreed to deliver or that disappears entirely. Again this is down to research to mitigate as much as possible.
When you brand an item, you take full responsibility for this. So if what you are selling is dangerous, substandard or otherwise faulty you are in the firing line. If you want to ensure liability sits with the manufacturer you need to have this signed in black and white before you even start.
Finally, you need to consider any legal obligations you have to fulfil. Trading rules, trademarks and patents are all complex worlds and not things you want to fall foul of. Even wording can be subject to copyright, and you need to take care when stepping on the toes of the bigger players. You have every right to trade, but if your items are too close for comfort, you could find they look to shut you down using legal loopholes.
With all that said, you might feel that the process of finding a private label manufacturer sounds daunting. However, it can be done, and the benefits are there to be utilised.
Firstly, start by finding a manufacturer with experience of your product. This might sound really obvious, but it matters. You want to see evidence they can make garments with correct sizing and to a high standard. Look for somewhere that offers a balance between high quality items and price , as you need to be able to mark up your products at a sensible profit margin.
With that in mind getting more than one manufacturer to quote for your work makes sense.
Be sure to discuss issues such as minimum order quantities , whether they offer any form of discount for bulk orders, what their shipping costs are and the problems above like timescales, liabilities and responsibilities.
Ask to see examples of quality and do some digging on the Internet, horror stories often get out, and you should be able to find positive reviews for suitable apparel manufacturers.
What you are looking for is a low defect rate, the odd issue will occur but do they offer any form of quality control or just label and ship, in which case you might need to check before the point of sale.
When it comes to shipping, you also need to check whether you have customs liabilities and where they ship too. Some offer door to door shipping others arrive at ports for collection.
To make the process easy, Sewport have an innovative filtering system that can help you find a private label manufacturer for your brand. Just sign up for an account and start reaching out to suitable producers based on your requirements. You can complete everything from initial enquiries through to orders, all on your personal dashboard. Sign up here and find a suitable private label clothing factory for your next project.
The bottom line is that private labelling offers a step up from reselling and gives you a chance to get your brand established. It has both benefits and pitfalls, and it is something that requires time and thought before commitment.
You need to do thorough research of all the issues mentioned and be sure that you have covered every risk. Mitigation, contingency and insurance might be your new best friends, but often the benefits do outweigh the risks so learn as much as you can, ask lots of questions and be sure to check the experiences of others when it comes to picking a manufacturer to work with.
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