Some of the biggest brands in the world sell things that may not be as different as you think. It is an outside company that manufactures their branded products and sells them under other names. This well-known business model is called white label and is used in many types of consumer products.
What is a white label?
White labeling is a process by which third-party manufacturers produce different types of products that many retailers sell under different brand names. These white goods undergo various stages before being sold to consumers. This includes using different brand names, different packaging, and even different prices.
White label manufacturers can offer discounts for bulk orders, so some retailers order in bulk from white labels. Other retailers do not have shelves or warehouses, so they offer white label products on demand, and manufacturers ship the product directly to customers as soon as it is ordered. This is called dropshipping. In these cases, it is the brand’s responsibility to establish new markets, improve the customer experience, and build strong relationships. It is the responsibility of the white label manufacturers to actually manufacture and ship the product.
A white label example
The coffee industry provides a clear example of a white label. Many large coffee producers grind the beans in factories and shiploads of these beans, each containing a single product, are sold. Some of these vendors sell them through online businesses. Others grind and chew beans in local cafes. Coffee is offered to consumers as a customized product, but in reality, everything comes from the same white label producer.
You can find a variety of white labels at many different companies. T-shirts, jewelry, metal water bottles, bags, flashlights, batteries and glasses are some of the products that major manufacturers sell under the white label. There is white label software, where companies add their own branding to software developed by third party programmers. In most cases, the seller adds their own markup at the last minute.
What are the benefits of white labelling?
White labeling provides both manufacturers and end sellers. Everyone can focus on their area of expertise while outsourcing to other service partners. Specific benefits include:
- Lowering barriers to entry. Marketers benefit from the ability to enter new markets without learning the intricacies of product development. All they need is a product concept based on branding and marketing.
- Make the market different. Markets benefit from completely new products, but they also benefit from differences in existing products. Maybe the existing product works well but it can’t be seen. White labeling can solve this problem by adding standardized packaging to manufactured products.
- Provides economic efficiency. Manufactured products generate high profit margins and are produced in large quantities. A white goods manufacturer can reduce the unit cost of a large production run of a single item and sell batches of that item to multiple retailers.
What are the disadvantages of whitelisting?
Being white comes with many drawbacks. You must respect the restrictions set by the white label suppliers, which restrict your opportunity to properly process your products. You may find yourself competing with other manufacturers selling the same product under a different name and price. You are also subject to the wishes of your supplier regarding compliance. If things go well in their factory, or if the shipping time does not come, you have very few options. In the worst case, you can change providers.
White Label vs Private Label: Similarities and Differences
Private label manufacturing is a cousin to white label manufacturing. They follow similar processes, with a few key points.
What is the similarity?
Basically, private label and white label use the same business model. A third-party manufacturer produces a quality product for a retailer, which sells it to the customer under its own unique brand. Sometimes, the broker also uses the actual indexing system. In other cases, the manufacturer supplies the product with the label requested by the seller. Private label companies and white-label companies can focus entirely on product development, while retailers can focus entirely on branding and customer relations.
What’s the difference?
The difference between private labels and white goods comes down to personal preference. Traditionally, a white label manufactures the same product for all its customers. The difference comes in branding, branding, package size and price. On the other hand, private labels customize their products for retailers. These customized products may not be available elsewhere. Trader Joe’s Grocery provides a popular example of a private label. Most of the grocery store’s products are sold under the Trader Joe’s brand, but the company does not manufacture food and consumer products. Instead, it works with private label companies to produce customized products for sale using the Trader Joe’s brand. In most cases, you cannot find an exact facsimile of these products in other stores.