White and private labeling are popular business models used by modern eCommerce businesses and business owners.
This post highlights everything you would ever need to know about both models, including the key similarities and differences between them and the pros and cons of each business model.
目录
The Key Differences Between White Label & Private Label
Here is the main difference between a white and private label:
“White labeling involves multiple retailers selling the same product produced by a manufacturer under their unique brand name —essentially, they slap their label on a ready product without changing anything about it.
On the other hand, in private labeling, individual retailers can customize products produced by a third-party manufacturer, including packaging, formula, etc., before selling to consumers.”
Other key differences between these business models are:
| Criteria | White Labeling | Private Labeling |
| Product customization | NO: White label products are generic and therefore not customizable. You can only slap your label on the product | YES: You can customize every element of your private label, including changing product specifications, packaging, and just about everything else |
| Retailer exclusivity | NO: White labeling doesn’t offer retailer exclusivity; after all, you’re selling the same products sold by other retailers, albeit under your brand | YES: Private labeling offers retailer exclusivity because you can customize private label products, making them exclusive to your brand |
| Speed to market | Faster: Because all you have to do is “slap” a label on a generic product, it takes less time to take white label products to market | Slower: Because of the customization involved, it can take a while to take a private label product to market, especially if the customization process calls for a lot of back and forth between retailer and third-party manufacturer |
| Start-up investment costs | Lower: Since the third-party manufacturer has the product ready for your “slap on” brand name, start-up costs are generally lower for white label brands, with most white label manufacturers having low MOQ | Higher: Because of the customization involved, private labeling usually has higher start-up costs, with many third-party manufacturers asking for down payments |
| Types of Products | Mostly software and non-perishables | Mostly physical products and consumables |
| Consumer prices | Lower: Since white label manufacturers have the product ready for a “slap-on” brand name, they can offer retailers friendly prices, and retailers can pass this one to consumers. Additionally, different retailers selling the same product under unique brand names can drive down costs | Higher: Because of the exclusivity of a private label brand and the involved customization, private labels generally retail at higher consumers prices, more so when the product has unique features not offered by other market brands |
Although they are different, white labels and private labels —white and private labeling—also have some similarities:
The Similarities of White Label & Private Label
| Criteria | White Label | Private Label |
| Business model | B2B: Business to Business | B2B: Business to Business |
| Manufacturing model | Third-party manufacturing | Third-party manufacturing |
| Marketing | Retailer controlled | Retailer controlled |
| Branding | Retailer controlled | Retailer controlled |
| Packaging control | Retailer controlled | Retailer controlled |
| Manufacturing control | Third-party manufacturer | Third-party manufacturer |
| Trademarks | No third-party manufacturer trademarks | No third-party manufacturer trademarks |
Having defined white and private labels and discussed the key differences and similarities between them, let’s focus on the pros and cons of each business model:
The Pros and Cons of White Label
White labeling has its fair share of pros and cons:
| White Labeling: Pros and Cons | |
| Pros | Cons |
| Saves time and money: White labeling saves time and money because you don’t have to spend much time on product design and customization. | Lack of production control: In a white labeling business model, the white label manufacturer controls every aspect of the product production |
| Minimal customization options: A white label is a generic product created by a third-party manufacturer for multiple retailers to sell under their brand. Because of this, it offers very limited customization. The branding/brand name is the only thing retailers can customize. | |
| Start-up friendly: Because of the uninvolved customization —you only need a brand label/logo— white label products are very start-up friendly, especially because white label manufacturers often have low minimum order quantities, making white labeling ideal for lean start-ups | |
| Competition: Because the same product will be available to multiple retailers, the white label market is highly competitive, with retailers going above and beyond to remain competitive, creating a race to the bottom where retailers try to outdo each others’ prices. | |
| Lower Risk: Because there are no production costs involved, white labeling offers business owners minimal riskEasier to get to market: Thanks to the generic-ness of white label products and the fact that they’re usually ready for “slap-on” branding, it is easier and faster to take white label products to market. | |
| Quality control issues: Quality is one of the main concerns related to white labeling. The main cause of this issue is mass-produced products to keep up with retailers’ demand. You can avoid this issue by working with reliable white label manufacturers with a tried and tested formula and record. | |
| Third-party manufacturing expertise: Working with a third-party manufacturer can give you access to technical knowledge. This knowledge can come in handy when you want to set up and run a successful production line later when your label becomes a successful household name. | |
| Copycatting: Uniqueness makes a brand memorable. Unfortunately, brand copycatting is very common with white label products, with different retailers using similar packaging, making it more difficult for brands to differentiate themselves in the market. |
The Pros and Cons of Private Labeling
Like white labeling, private labeling also has pros and cons:
| Private Labeling: Pros and Cons | |
| Pros | Cons |
| Customization: Private labeling gives you a degree of customization not available with white labeling. For example, you can customize different aspects of the final product, including specifications, formula, packaging designs, etc. | Third-party manufacturer dependency: Private labels depend on contract manufacturers for their production needs. This dependency can be detrimental, especially when a contract manufacturer works with different brands and has a production backlog. |
| More pricing control: Unlike white label brands where multiple retailers sell the same products but under different brand names, creating massive competition, private labeling gives you more control over product pricing. Because you control production parameters and cost, you can price your products at a price that gives you the best profitability per product sold. | |
| Longer to-market times: Compared to white labeling, it may take longer to get private label products to the market, usually because of the customization involved with private labeling. | |
| Production Delays: Sometimes, third-party manufacturers may have a backlog that causes production delays for private label brands | |
| Higher down payments/capital requirements: Again, because of the level of product/brand customization inherent to private labeling, private label manufacturers may ask for higher down payments —higher than what you’d pay for a white label. These higher payments can complicate the getting-started process, especially for lean start-ups and solopreneurs. | |
| Lower operating costs: Private labeling lowers operating costs because private label brands don’t deal with manufacturing. They leave that to their contract manufacturers. | |
| Better focus on branding and marketing: Since private labels don’t handle production, they can focus more on marketing, branding, and delivering the value promised to consumers. | |
| Inventory/procurement challenges: The contract you sign with a private label manufacturer will have defined metrics like MOQ, backorders, and inventory turnovers you will need to maintain month-to-month. If you fail to keep a close eye on this, you can over or under-purchase, thereby compromising your business stability. |
Having covered everything you need to know about white and private labels, let’s cover some key things to keep in mind to ensure you choose the right model for your business brand:
When to Choose One White or Private Labeling
Although white and private labeling are both great business models with advantages and disadvantages, there are instances where choosing one over the other will be better for your business.
Choose white labeling when:
White labeling will be your best bet when:
- You have a lean budget
- You want to get a product to market faster
- You don’t want to wait for research and development
- You have a popular brand you can capitalize on by offering another product category/line
- You are not too particular about product design, specifications, or customization
- You find high-quality white label products that will meet and fulfill your customers’ needs.
On the other hand:
Choose private labeling when:
Private labeling will be your best bet when:
- You want to create a custom brand product
- You can dedicate time and resources to research and development, even when your preferred third-party manufacturer offers end-to-end third party manufacturing that includes product design
- You have designed a product and are just looking for a manufacturer who’ll handle the production
- Your designed product is superior to or unique from any other white label product in the market
- You have plans of setting up an in-house manufacturing process in the future and would like to learn as much as possible about manufacturing your branded products before then
- You have low volume demands, and it doesn’t make sense to set up a production unit for your private label brand
Key Tips to Keep In Mind When Choosing A White or Private Label Manufacturer
White labels and private labels rely on third-party manufacturing. Irrespective of which business model you choose, keeping the following super tips in mind will help ensure that you choose the best third-party manufacturer:
- Clearly define what you want: The most fundamental thing you need to keep in mind when choosing a compatible label manufacturer is that most white label and private label manufacturers specialize in a specific product category. For example, some white and private label manufacturers specialize in beauty products, gym clothes, software, etc. Defining your exact needs will make it easier to narrow down your list and find a white or private label manufacturer who can meet your requirements.
- Capability: Only work with a third-party manufacturer who can maintain consistent production. You don’t want to work with a white or private label manufacturer who, after getting your branded products to market and marketing them to viral popularity, fails to meet your production needs, prompting you to look for another manufacturer.
- Quality above everything: Whether you’ve chosen to use white or private labeling, quality is not something you should willingly compromise. Remember that high-quality brands/products create loyal customers and brand ambassadors. If you work with a white or private labeler who compromises quality, you’re doing nothing short of shooting yourself in the foot as a business owner.
- Regulatory compliance: It’s very important that you only work with white and private label manufacturers who fulfill all regulatory requirements in their base country —and your target marketing locations. Know all the compliance standards for the products you want to market and only work with a third-party manufacturer who meets these standards. For example, ensure that your chosen white or private labeler has ethical sourcing processes and adheres to industry and country-specific standards.
- Consider MOQs: White and private label manufacturers usually have minimum order quantities, the minimum units of one product you can purchase; some manufacturers have high, while others have low minimum order quantities. Before settling on a specific white or private label manufacturer, inquire about MOQs to ensure you have the budget to match. Ideally, work with a label manufacturer who doesn’t have unmanageable MOQs.
- Ask about all label fees: White and private label manufacturers have varying label fees terms. For example, some will ask you to pay label fees for each order, while others will only need you to pay one-off label fees for a minimum order quantity batch. Asking about label fees beforehand will make you more aware of how much you’ll pay in label fees for each order, which will help you avoid hidden costs and price your products accordingly to remain profitable.
Conclusion
White and private labels have advantages and disadvantages for retailers and business owners.
This article has highlighted each business model, its advantages and disadvantages, the similarities and differences between white and private labels, and when to choose one model over the other.
We have also discussed some key tips to consider when deciding which third-party white or private label manufacturer to work with for your white or private label brand needs.
