If you own a business or are an entrepreneur, private label products can grow sales and significantly improve brand awareness. That is, if you choose a quality product, create a brand that appeals to your target audience, and can enjoy healthy margins by getting competitive wholesale pricing.
5 Main Steps for How Private Label Works
- Step 1 Choose a product that you want to sell under your own brand name
- Step 2 Find a manufacturer of that product that meets your standards for quality, pricing, and location
- Step 3 Determine your costs and margins
- Step 4 Create your brand (label design and marketing)
- Step 5 Get your product manufactured and shipped for distribution
What is the Difference Between Private Label and White Label?
Before we get into exploring the details of each of those five main steps, let’s define some related terms. “Private label” and “white label” are interchangeable terms that both mean hiring a manufacturer to produce a branded product for retail sale; they both mean the same thing. “Private label” means a unique label created for a specific company, and is therefore a “private” business venture. The term “white label” comes from the idea that the product has a blank or white label, ready to receive a custom label. And there is a similar term called “name drop.”
“Name drop” labeling is very similar to private label manufacturing or white label, but is less personalized, or less custom, for your specific business. Name drop means there are pre-determined templates for labels and packaging, and your brand name is placed or “dropped” into that template. This means it is possible for another brand to be selling the exact same product with the exact same label and packaging, but with their brand name instead of yours. Why would anyone choose name dropping instead of private label? Depending on the manufacturer, it may cost less to choose a templated option and it may take less time to get the product in hand since it is a turnkey process. Businesses with only a few locations in a small market may be happy with a name drop label if it’s a little faster and cheaper. But if you search enough, you may find a manufacturer who will help you create a unique private label at a very similar price point. And that takes us right into private label product design.
Private Label Product Design
There are 2 Ways to Create Design
- Have your own design team create the label and any other branding such as marketing and website content.
- Have the manufacturer’s design team create the label (this service may be complimentary or cost extra depending on the manufacturer). It is not likely the manufacturer will create any marketing materials or digital content (such as a website) so you may still need a design team for additional marketing initiatives if you feel that is necessary.
What is a Private Label Brand Example?
We see this question a lot. Any product you see in-store that has the store’s name on it, or is a brand exclusively carried by that store, is probably private label. Grocery stores, like Publix, are know for carrying their own brands including Publix brand and GreenWise. Costco’s private label is called Kirkland Signature.
Some brands use private label products to drive brand loyalty through a wide variety of items, like Buc-ee’s convenience stores. And some brands use it help make their brand experience more fun or more pleasurable, like Carnival’s product line called Adventures, which is available for purchase in the gift shop on the cruise ship.
Now that we’ve covered the basics, let’s dive in to the 5 main stages for how private label works.
Step 1) Choose a product you want to sell under your own brand name.
There are a lot of philosophies and tools for finding the right type of product to sell. “How to Identify Highly Profitable Products for your Private-Label Amazon Business” may be of some help. If you’re looking for A to Z assistance in planning and launching your private label brand, you might find helpful direction from BusinessTown.com and their article, “How to Start a Private Label Business with $5,000.” If you already have an idea of what you’d like to sell as a private label product, check out the Beginner’s Guide to Finding Private Label Manufacturers.
Step 2) Find a manufacturer that meets your standards for quality, pricing, and location.
In most cases, repeat business and perceived brand quality matter, and it’s going to take some research to find a manufacturer who holds to a high standard. Why? There’s a huge price war out there for the cheapest version of a product, but finding a quality product at a competitive price is more challenging. Getting wholesale pricing for private label products is a must to get your bottom line where it needs to be for profitability.
[Note: I’ve also noticed in my research that there are apparently a lot of Google searches for “what is white label pricing?” White label pricing is usually a form of wholesale pricing which is tiered, based on how many units you buy from the manufacturer.]
And then there’s the location of your manufacturer. Many businesses source through major marketplaces like Alibaba and JD.com to find the product they are looking for, and many of those manufacturers come out of China and the greater Asia area. That translates into long shipping wait times, possible issues with US Customs, language barrier challenges, and the cost of getting your product halfway around the world. As a result, US-based brands often try to find a US-based private label manufacturer. Having a private label made in the USA usually means a much faster delivery of finished product and significant savings on shipping. With today’s US economy and technological advancements, United States private label suppliers are in higher demand than ever.
Learn more about best practices for choosing a China-based manufacturer by reading “Buying Product Samples from China: A Complete Guide” at ChinaImportal.com.
Step 3) Determine your costs and margins.
Getting truly competitive wholesale private label opportunities makes all the difference when you are at this stage of determining your retail price. Once you have chosen an actual manufacturer and nailed down the pricing for your product to be produced and shipped, you can begin to calculate what your retail price needs to be in order to make your private label profitable. Also, keep in mind, if you plan to sell this product online, you may want to offer free shipping and you may have to charge tax on your product depending on where your business is located (state and federal tax laws). Those factors will affect your bottom line.
If Internet sales are going to be a part of your private label brand, you might want to consult “The Ultimate Guide to States with Laws Requiring Collection of Internet Sales Tax” to help you calculate costs.
Step 4) Create your private label design.
By this point, you have a specific product chosen, a private label manufacturer, your costs are established, and now you need to design your label and plan for marketing. As mentioned above, you may have to hire your own team (designer, graphic designer, copywriter, web designer, etc) to design your product’s label, as well as any other marketing and advertising materials to drive awareness. Some manufacturers may offer complimentary label design services, but in many cases you’ll need to either hire freelance talent or an advertising agency to handle this important step.
It is critical that you understand who your target audience is and design a product that will be appealing to them. You’ll want to consider age, gender, lifestyle, income, region, trends, and other important demographics to create your private label’s brand image.
Step 5) Get your product manufactured and shipped for distribution.
The private label manufacturing process usually involves receiving a sample of your product before your custom label is applied, and then another sample of the finished product with your label on it. Some China-based and Asia-based manufacturers might make it cost-prohibitive to get samples. Just know you are taking a risk of having lower quality than expected or other issues if you don’t get samples.
Turnaround time may be in a few days or a few months depending on your manufacturer, so make sure you ask before you get too far into the manufacturing process. And don’t forget to ask how long it will take to manufacture and ship a re-order.
3 Important Things to Look for with a Private Label Manufacturer
If you’re wondering how does private label work, or what is the difference between private label and white label, we hope you’ll find this article helpful. And if I may, after explaining how it works, I’d like to suggest some key takeaways. As you search for a private label manufacturer, try to find one that has all of the following features.
1) Find a US based private label manufacturer.
Doing this will give you a lot of control over your product quality, shipping cost, delivery time, and re-order time. Made in the USA private label products are also a popular feature that your customers may appreciate.
2) Look for a private label manufacturer who has a reputation for quality products in the category you have chosen, and who has a list of clients you recognize.
Especially if you’re getting into the private label game for the first time, you don’t want your manufacturer to be in it for the first time too. Go with a company that has significant experience in your product category and has proven to produce high quality products for recognized name brands.
Finding competitive pricing for your product is also an important factor. It is more likely that a private label manufacturer who specializes in your category will be able to offer you competitive prices because of their ability to buy the product you want in bulk for you and other clients, thus bringing the cost down for you both.
3) Try to get your label designed by the manufacturer’s design team if you can.
This will save you money by not having to hire a designer or graphic designer to create your label. This will also allow you to get to market more quickly with your product because there will fewer steps to final design approval.
Are you just planning to sell your product on the shelf in retail stores? You may not require a marketing campaign or website. So if you’re on a tight budget, letting the manufacturer’s design team create your label could be the fastest way to get your private label on the shelf and in your customers’ hands.
About Worthy Promotional Products
As a family owned business located in the US, Worthy Promotional Products, also known as Worthy Promo, has grown to become the nation’s largest manufacturer of sports licensed personal care products for the NCAA, NFL, NHL, NBA, MLB and more. In addition to sports licensed products, Worthy Promo manufactures private label products for recognized brand names including Carnival cruise lines, Buc-ee’s and Refuel convenience store chains. Other clients include Bed Bath & Beyond, Dollar General, Cracker Barrel, and Aflac, just to name a few.
Worthy is a US based private label manufacturer, and provides products that are proudly made in the USA. They are committed to quality products and personal customer service. Turnaround time is faster than the industry standard, and therefore shipping time is extremely fast as well. Worthy is known for low minimums–attracting small businesses, entrepreneurs and fundraisers who normally could not afford the industry standard minimum orders.
At Worthy, free design assistance is included with every order. Clients get access to an experienced design team who can create unique private label products. To learn more about Worthy Promo, visit CustomWorthyPromo.com.