When starting a small-scale selling business, many don’t have the capital to set up the infrastructure necessary for manufacturing. For most, a small business begins with comparing white-label vs private-label manufacturing methods, each of which gives entrepreneurs access to products ready for sale, albeit in unique ways.
With almost half of North American citizens with a side hustle and 1.1 million Amazon sellers in the US, there’s never been a hotter time to become an online entrepreneur – but it’s not as easy as just sourcing some sub-standard goods and sending them off
White Label vs Private Label: The Basics
White-label and private-label manufacturing styles are essentially two sides of the same coin – they both involve outsourcing manufacturing to sites with the necessary equipment and infrastructure to produce products and then selling them under specific branding. The difference is that white-label products are generic, meaning anyone can order them, while private-label goods are tailor-made by manufacturers for the businesses ordering them.
This blog will break down private-label vs white-label manufacturing principles in more detail, so anyone focused on scaling a small business can feel more confident about making the right choices.
Understanding White Label vs Private Label
To best understand which approach is right for you, it’s important properly understand each form of outsourced manufacturing in its own right.
Definition of Private Label Products
Private-label products are manufactured in a specific warehouse or facility and sold under another company’s brand name. These partnerships are generally exclusive, with the retailer or reseller controlling aspects of the branding, packaging, and marketing. However, while private-label products will be exclusive to each seller, one manufacturer can make private-label goods for multiple clients.
Key Characteristics:
- Collaborative Approach: The development process of these products tends to be more collaborative between the seller and the manufacturer, and can take longer.
- Full Customization: Private-label goods can be fully customized in every aspect from branding to the product features themselves.
- Significant Investment: Even when outsourcing manufacturing, bringing a brand new product onto market requires a significant investment of time and money,
Definition of White Label Products
White-label goods are generic, unbranded products, made by manufacturers and then sold to any companies that order them, to then be rebranded and resold with new branding. In these partnerships, there’s essentially no exclusivity, with the manufacturer an anonymous supplier of simple products ready to be customized.
Key Characteristics:
- Quick Time-to-Market: As white-label goods are already in production, sellers can get them from manufacturers, into the branding stage, and onto the market much quicker.
- Limited Customization: Sellers that make orders of white-label products are essentially only able to customize them with branding, with no say in product features.
- Lower Investment: White-label products are generally quite cheap, allowing a low-investment entry point for new sellers.
By developing an understanding of each manufacturing style, sellers can better prepare themselves to interpret the advantages and disadvantages of both.
Pros and Cons of White Labeling
Advantages of White Labeling
Lower Initial Investment: As touched on, white-label goods generally require a lower initial investment as sellers don’t need to spend any money on product development. This allows brands to put more time, effort, and money into market research, branding design, and promotion.
Faster Time to Market: With products ready to go, orders can be made and products can sent to sellers in no time, ready to be branded and resold. This also allows business owners to make faster short-term decisions, capitalizing on consumer demand and changing trends.
Access to Established Supply Chains: White-label product manufacturers use pre-built production processes and generally operate within established supply chains. This helps to streamline the procurement process, with a reduced chance of lacking quality or availability.
Disadvantages of White Labeling
Limited Customization Options: As white-label products are already produced, there’s very little space for the sellers to customize the products themselves. The extent of the customization is essentially based on order size, followed by the branding which can be handled in-house.
Reduced Impact Potential: With a generic product, it can be harder to make an impact on the market as there will be less to differentiate the product from competitors. This means investment in marketing and branding will likely need to be increased.
Lower Profit Margins: Selling white-label goods means entering into a space with significantly more competition, meaning you might have to price your products more attractively to secure loyal customers. This can result in thinner profit margins.
It’s important to remember that while white-labeling offers a more affordable, reliable way to source products, it also requires a reasonable appetite for competition and a willingness to sacrifice control. The process also calls for significant investment into branding and marketing, ensuring that a product can stand out in a crowded space.
Pros and Cons of Private Labeling
Advantages of Private Labeling
Customization and Branding Control: Because private-label products are made for specific purposes, they can be custom-made from start to finish for specific markets. Creating a more specific product allows for tailored branding and marketing, making it easier to make a market impact.
Higher Profit Margins: With more to differentiate your product from competitor goods, selling private label goods can result in higher profit margins. You’ll still have to compete within the wider field, but at least it won’t be with identical products.
Flexible Pricing Models: The added control that private-labeling offers allows businesses to be more flexible in their pricing models, with more ability to adapt stock and selling to market fluctuations. Exclusive partnerships with manufacturers can also result in more tailored deals or arrangements.
Disadvantages of Private Labeling
Higher Initial Investment: As we’ve noted, building a product from scratch is an expensive venture, even if cheaper than in-house manufacturing. Private-labeling isn’t the kind of thing that someone without easy access to funding can pull off, while it still carries significant risks.
Brand Recognition Challenges: It takes a lot to achieve brand recognition, regardless of whether a product is unique. Spreading the word about the product will still require significant investment in marketing campaigns and branding.
Dependency on Singular Suppliers: Unlike white-label goods, which are generic and relatively easy to replace, private-label brands rely on singular suppliers. This means strong supplier relationships are essential, with contingency plans necessary in case of supply chain issues.
Private labeling offers space for differentiation, customization, and flexibility, along with the potential for larger profit margins, but it’s important to remember that you’re still entering a competitive marketplace. Serious investment is required to ensure the product is exceptional, with marketing and branding equally important.
Comparing White Label vs Private Label Strategies
So, with everything we know. How do the two strategies compare to one another?
Cost Considerations: In terms of costs, both ventures will constitute a long-term investment in terms of branding materials and promotion, but white-label manufacturing will undoubtedly cost less initially. This could make it an easier entry point into online selling.
Branding and Customization Options: Regardless of your branding, a white-label product is still a generic good, with little room for customization. Private labeling offers enhanced capacity for manufacturing customization, allowing for a more specific brand identity to be built around the product.
Market Positioning and Competition: To stand out from the crowded competition with a white-label product requires a considerate promotional approach. Private-label goods also need intelligent branding, as more than customization is needed for true differentiation in many cases.
It’s clear that white-label goods are a cheaper, more streamlined pathway into the online selling space, but they also lack the distinction or exclusivity that private-label products do. In terms of branding and promotion, while it might be easier to create a distinct approach with private labeling, both approaches call for ongoing time, effort, and money to result in success.
Conclusion: Choosing the Right Labeling Approach
So which manufacturing approach is the right one for you? It eventually boils down to understanding your business goals and objectives. Both manufacturing styles can be the driving force behind scaling a business, it’s just vital to be realistic about the operation you plan to run.
Assessing Your Business Goals
White Label Selling: If planning to sell white-label goods, it’s important to understand that you might be entering a competitive, even crowded marketplace with a product that’s not innately unique. You can establish a sustainable, growing business, but it requires the right branding, competitive pricing, and a strong marketing strategy. Selling white-label products is also less likely to generate name-brand recognition, being more suited to selling on platforms like Amazon or Walmart Marketplace.
Private Label Selling: Private-label goods are more suited for entrepreneurs looking to establish a unique value offering with their business, while still requiring some appetite for competition. If you collaborate with a private-label manufacturer, work hard on a coherent brand identity, and promote the product sufficiently, you can build a recognizable brand. While private-label goods can still do well on third-party platforms, this approach offers more potential for independent success.
As you can see, both approaches to entrepreneurship have plenty of profit potential, while also having challenges. To decide on the approach for your business goals, assess your willingness to compete, your capacity for initial investment, and your flexibility in terms of supply chain management. And remember, you can always integrate both methods into your business plan – many manufacturing facilities offer both white and private-label services.
If you’re eager to start your journey, expand your product portfolio, find the best digital business tools, or meet fulfillment experts, take a trip to this year’s White Label World Expo! This event is a convergence of the world’s finest white and private-label manufacturers and sellers, with hundreds of exhibiting businesses, thousands of networking visitors, and an impressive lineup of speakers from some of the industry’s most established brands.
Register for your tickets today and secure your place at the industry event of the year.