Beginner’s Guide to Private Labeling and White Labeling

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Private label and white label are two such terms that are used synonymously. However, there is a subtle difference between both the labels which relates to the manner of sale of products. In this article, we will discuss the meaning of white label & private label, and the similarities & differences between them.

What does a white label mean?

A generic product produced by manufacturers for sale is termed as a white label product. Retailers are permitted to resell products under their brand names. A white label product permits the retailer to charge a premium by associating their brand name.

White label manufacturing or white labeling is a process wherein a retailer signs a contract with a manufacturer for the rebranding of a product via the retailer’s packaging designs and brand value. Under this white label contract:

• The manufacturer of the product has control over the product’s ingredients, components, and characteristics
• The retailer has no say in making variations to the product since they are just accepting a generic product from the manufacturer
• The retailer has full control over the product’s branding and packaging
• Manufacturers are free to sell their products to multiple retailers. This causes a greater risk of competition between retailers when employing white labeling.
• The manufacturer in the case of white labeling has no ownership of the trademarks associated with their products

What is a white label example?

For example, let us picture a retailer who wishes to sell a generic pain relief medication. The retailer will uniquely brand this generic product by employing packaging design, logo, style, and color scheme. To receive such a generic product, the retailer will have to contact a white label product, a pharmaceutical manufacturer. The retailers will then take a generic pain relief medication such as ibuprofen and rebrand it, to sell it to customers. The manufacturers do not have to change their product at all, since the only change is in the packaging of the final product.

In a few cases, there is a reseller present in between the value chain, who takes the generic product from manufacturers and rebrands it. This final product is then sold to customers. If the retailer is a huge organization then they can omit the reseller completely, and work directly with the generic product manufacturer.

The origins of the term white label can be traced back to the record industry. Before the advent of the digital age, vinyl records were being sold in retail stores. In that era, before mass-producing records of new music, manufacturers used to create promotional records of the new music. These promotional copies were then delivered in sleeves with white labels on the records, to nightclubs, disc jockeys, and radio stations. This was done to gauge the interest of the audience in the new recording. Such a practice assisted record manufacturing companies to arrive at an estimate of the number of records to be pressed, based on the popularity of the white label promotional records.

White label products have also found popularity in technology companies. White labeling has allowed technology platforms to be reused. These platforms are developed by one company and packaged by a third party. Numerous applications sold under the model of Software-As-A-Service (SAAS) are perceived as a form of white labeling.

What is a private label?

Private label or private label manufacturing is very similar in approach or process to white label manufacturing. The key difference is that in private label manufacturing, the product is sold exclusively by the manufacturer to a single retailer. The product being private labeled, cannot be sold to multiple retailers. Under this private label contract:

• The retailer in the case of private label defines the product characteristics. The retailer can prescribe variations in the generic product manufactured by the manufacturer.
• Manufacturers have to produce products by taking the customizations asked by the retailer into consideration. This customization may include variations in package quantity, composition, and ingredients.
• The retailer has full control over the product’s branding and packaging
• Manufacturers have full control over the production process of private label products. However, manufacturers cannot sell the same product to multiple retailers. This makes private label products unique and less prone to competition in the industry.
• The manufacturer in the case of private labeling has no ownership of the trademarks or identity associated with their products

What is a private label example?

For example, let us consider a scenario wherein a retailer wishes to sell a household product like a scented candle, under a private brand. The retailer will have to approach a private label manufacturer and describe its requirements to make the product unique. In the case of a scented candle, the variations can be made in size, scent, color, and shape, to help the product stand out in the marketplace. The private label manufacturers then, consider these specifications and begin the manufacturing process.

Should I private label my product?

Private labels are well-known and permit retailers to offer a product of specific characteristics under a private brand. A private label product can be customized by the retailer to stand out in the hyper-competitive marketplace and thus gain a competitive advantage. There are numerous private label manufacturers for an array of product types, such as:

• Water
• Vitamins & supplements
• Sweeteners
• Pet supplies
• Pharmaceuticals
• Personal care products
• Pens
• Paint
• Foods
• Cosmetics
• Clothing
• Chemicals
• Candles
• Beverages
• Adhesives

If you are a retailer and require a product, which has a competitive advantage in the market, then you should opt for private label products. This will assist you in increasing your sales and generate greater profits. You will also be able to make customizations to the product along the process to make your product unique.

White Label vs Private Label: How to Choose?

While there are similarities between white labeling and private labeling and their engagement with manufacturers to produce a product which is then sold by the retailer, there are differences between them.

The most significant difference is that under the agreement in white labeling, manufacturers are permitted to create a generic product, which they can sell to multiple retailers. Whereas, the agreement under private labeling, restricts the manufacturers from selling the product to multiple retailers. Under private labeling, the product is exclusive to just one retailer.

Another key difference between white and private label is the permissible degree of customization. In white labeling, retailers have no control over the details of the product, and thus have to accept the generic product manufactured by the manufacturer. In private labeling, the retailer has a greater degree of control over the product’s composition and customization, to create a product, which is unique to the marketplace and has a competitive edge over its competitors.

It all comes down to gauging what is more important to you as the reseller or retailer while choosing between white label and private label. The private label approach requires a higher investment of financial resources, research, and time, but gives greater control over creating a unique product and its customizability. The higher investment helps the retailers to eventually gain higher margins on the sale of the products, as opposed to white label products.

The white-label approach requires a lower investment of financial resources and time as compared to the private label approach. A white label approach with a generic product helps to gain a faster entry to the market, but the retailer in this case will face stiff competition in the market. The margins earned on the sale of the products will also be lower and thus the retailer might find themselves in a price war with competitors.

In both the cases of white label and private label, the retailers are benefitted from their partnership with manufacturers. This is so, because, retailers can offload the details of production to the manufacturers and move their primary focus on the sales and marketing aspects of the product. From the standpoint of customers, the product has the branding of their preferred retailer and hence there is no perception of the manufacturer.