Jan 01 , 2020
What is the Difference Between White Label and Private Label?
When investing in the cannabis industry, or any market, businesses must consider their unique approach to drive sales and generate profits.
Some businesses choose the white label approach, while many others opt for private label manufacturing. What is the difference?
Explore the major differences between private label and white label and which process might be a more suitable venture for your business.
- For faster service, use white label manufacturing, as private label can take longer, adding to overall costs but contributing to unique product branding.
- For a unique branding experience with more options for customization, private label products are superior in exclusivity to white label ones, but with strategic marketing strategies, any business can efficiently take advantage of white label product’s lower costs and generate a greater profit margin.
White label products are manufactured by a third party, but resold to one or multiple retailers who add their own branding and logo on the product. So the purchasing company can then replace the white label of the manufacturer with marketing or branding that fits their product line. You can see this when a white label product like acetaminophen (or formally Tylenol) is sold by different brands on the same packaging, while private label is slightly different.
While also manufactured by a third party, private label products often feature an exclusive contract between the manufacturer and retailer. Private label products are crafted and customized according to that retailer’s particular specifications. What results is a customized product sold only to that brand or business, like Target’s Market Pantry brand, which is found only in Target retailers.
When referring to white labeling, this often now refers to featured services. For example, when major retailers require banking operations for their own branded credit cards, most outsource the service to companies like American Express, who handle the rest for them. Brands like Macy’s feature their own credit cards using white label services.
Reliant on manufacturer
Whether you are choosing private label or white label manufacturing, you are still rebranding the item produced by the manufacturer. The fate of your product success lies in the hands of the company providing the ingredients, facility, and workers.
As such, you should make sure that this producer has been carefully monitored, lives up to industry standards, and has been third-party tested. This way, you can ensure your products will be reliably made and convey your brand’s image as promised.
Most large manufacturers already have these testing standards in place. Ensuring your products are manufactured at a high quality facility is of utmost importance, as it establishes your credibility with your customers. A good product that is of consistent quality will establish a repeat customer and promote profit stability.
Seller controls the marketing process, relying on strong advertising
Product manufacturers go through the same process for both white labeling and private labeling, in that the producer is supplying the retailer or wholesaler with a blank label item, either customized and/or rebranded, but the rest is handled by the retailer.
Whether a company is using a private label or a white label, that company is now ultimately responsible for handling the marketing, and thus, the overall marketing success or failure.
White and private labeling allow manufacturers to focus on production, while the sole responsibility of the marketing falls on the shoulders of the retailer. Therefore, the gain or loss will be determined by the effectiveness of the marketing campaign.
Branding the products
Whether purchasing from a private label or white label manufacturer, it is possible and important to customize the products with a new logo, branding, and identity. The depth of this customization will depend on whether the company has chosen private label manufacturing, which allows for the retailer to provide individual product specifications to the manufacturer.
This often creates a private trademark for that item, ensuring that it will not be reproduced in any similar form for other retailers, giving that retailer exclusivity. Although white labeling might not offer the amount of customization as private labeling, it does offer the ability to craft a unique label and packaging to meet the needs of the individual retailer.
Producers do not have a trademark on the products
When manufacturers function with white label or private label processes, they have the ability to focus exclusively on what they do best – producing. As such, their efforts go into the ingredients, quality, packaging, and shipping, and the retailers can then customize the products at whatever level is most cost effective and time efficient.
Eliminates extra costs for warehousing, stocking, and hiring
Both private label and white label solutions allow businesses of any size to explore the market without having to invest large sums of money. How?
By placing the brunt of the work on the manufacturer, this eliminates the need for renting brick and mortar store locations and warehouses, stocking loads of inventory before orders are even placed, and hiring extra employees to manage the details. Companies big and small can invest in opportunities without having to commit to huge infrastructure changes or financial burdens.
Time to Market
- These products often have shorter lead times – the product already exists and has been thoroughly evaluated, so businesses can save time (and money) without the R&D and testing phases. This leaves the remaining steps of branding, packaging, and marketing, some of which might even be handled by the manufacturer, depending on the arrangement.
- For small businesses, this provides quick turnaround times and turnkey products ready for rebranding. Smaller businesses or startups might not have the investment capital that a large company would have in order to spend time drawing up designs, consulting their own marketing firm or outsourcing to a separate firm, testing packaging ideas, and a number of other complicated processes and challenges that take time, and well, money.
- For this reason, being able to quickly jump on the opportunity of investing in a larger manufacturer with a successful, tested product design that only requires a new logo and branding slapped onto it… is an easy choice.
- Don’t have the capital to start a new product from scratch? A white label option seems logical for those without the time to truly craft a new packaging design.
- These products often have longer times to market, as this process involves the retailer providing specifications to the manufacturer. Customizations require more time on the back end, including many decisions on the design and packaging fronts, but these can often be more profitable long term.
- By customizing private label products, the retailer sets a brand apart from other competing brands. Despite the extended time frame, this will often boost the overall profit margin increase.
- By going with a white label product that is often distributed to multiple retailers, the history and reputation of companies is often already vetted for you. Without having to conduct any of the research and development, design process, and building your own solutions and tools, you can focus on the marketing aspects. So in addition to being a cost effective solution, it helps keep the process streamlined and lets the manufacturers do their job.
- Additionally, although it may seem limiting, going with white label products drastically reduces the work to be done to the branding, packaging, and marketing, instead of a business handling every single aspect of design and production.
- Timelines for private label products are a bit lengthier, as they require all aspects of the design process in addition to the customization, branding, packaging, and marketing processes. If a company has a unique product that will do better in a niche market, private label may work better.
- However, as it requires more research and development, this also requires more involvement from the team or even consulting an external firm. For smaller firms, this may create a problem that white labeling might solve.
- As white label products are the same physical product offered by other retailers, they cost less and can be marketed efficiently with better sales and coupons. By offering the same, or often superior ingredients, retailers can save money by offering discounted prices compared to national brands.
- When making a purchase, customers often consider both white label brands and national brands for ingredients, opting for the more cost effective one, which tends to be the white label option.
- As the process required from concept to execution can be longer with private label products, the cost for design and customization is also higher. However, going straight to the manufacturer also helps to cut out the middle man. Manufacturers often handle many aspects of the process in-house or offer their own marketing solutions which cuts out production costs, as the only investments made are manufacturing costs.
- If the product is well designed and marketed, it can generate more profit when sold at an elevated price point, based on its unique nature.
- When purchasing white label products, you are purchasing from a manufacturer who is also distributing these products to other retailers. As such, your branding is what will set you apart from others with similar product containers or variants. The product itself will not be as unique, so this places a ton of importance on creating a competitive edge for your brand’s approach to generating sales. You do not have exclusive rights to a unique product, so it is important to craft a unique image for your company, which works well for companies with strong brand identities and thorough marketing departments.
- Although this process does indeed take longer, it offers a more couture version of product creation, allowing for the retailer or wholesaler to provide the individual specifications for their desired product. After it is produced, the manufacturer typically establishes a trademark for this product, which creates exclusivity and a niche product with no similar variants. For companies with unique items that would benefit from showcasing enhanced design and customizations, private labeling will work well.
- Private label arrangements are typically set up with an exclusive contract so it is more stable for the client. Retailers like Target feature exclusive private label products in their Market Pantry line.
- High quality products create repeat customers. White label products are tested and distributed to many retailers on a larger scale, so manufacturers are more likely to have implemented third-party testing on their ingredients and vetted their products for quality assurance.
- As white label companies are much larger in distributing to multiple retailers, they often feature more diverse product lines that give businesses the opportunity to grow their brand collections, allowing for more targeted marketing approaches with your customer base. White label manufacturers have the ability to branch out and do the R&D required for successful packaging for a wider range of items than any small business – or one without a ton of time to get their products to market – might ever be able to generate on their own.
- These products feature more flexibility in establishing unique product offerings unavailable anywhere else. With an exclusive trademark typically established in a private label design, these private label retailers feature products unique to their brand. These products will not be seen as generic as other offerings, in addition to being often exclusive to big chain retailers like Walmart with its Equate line, sold exclusively in their stores.
- Designing private label products gives companies the option of using different ingredients, formulations, packaging, and even SKUs. If differentiating your brand in every way is the goal, private labeling is for you.
- If small businesses offer unique products, private labeling allows for more exploration and differentiation. Research and development into a brand’s unique identity can be valuable financially in the long run.
As manufacturers offer stable contracts with multiple retailers and wholesalers, anyone can launch new businesses without huge financial investments in inventory and services. The flexibility means that you can invest a little or a lot, depending on your business needs and available capital.
- With less customization options available than private label, there is only control over the packaging, branding, and marketing. However, if you have an in-house marketing team, this is an easy way to spice up the product. Take a basic product and showcase your firm’s skills in making your product stand apart from the rest.
- Without having to spend additional valuable time on the design process for the product itself, your firm and marketing team can focus on what it does best: selling your product or service in a way unique to your brand. If your marketing department can really deliver results, then the money and time saved from the design process should generate more of a profit. So, if your team can find a way to set you apart from the competition, this option is an incredibly easy one that can ultimately save you time and money.
- Because of the same product packaging being used across white label retailers, more thought needs to be put into marketing strategies. As such, copycat brands can exist, so it is important to create a unique brand identity separate from national brands and competitors.
- Private label products feature the option for retailers or wholesalers to submit their own specifications, allowing greater product customization. This differentiates private label products far more than white label products.
- With the proper team and tools in place, private label products can be incredibly lucrative, but it does take a longer time to get to market, so this should be considered before making that decision.
Both white labeling and private labeling provide wonderful opportunities for launching or expanding a business, large or small, without having to reinvent the wheel to do so. As these options are both manufacturer-centered, they allow for the heavy lifting to be done at the production level.
One thing is clear though: Using a vetted manufacturer ensures that product quality stays at the heart of your business, which will help generate sales and retain loyal customers.
White labeling offers faster time to market in prepackaged options leaving only the labeling, packaging, and marketing to retailers and wholesalers, but some manufacturers offer these services to help streamline the process.
Private labeling features a more exclusive product designed to specifications, which takes a longer time to get to market but offers a unique product separate from other variants.
Whether adding products to a collection or starting from scratch, an investor would be wise to explore the range of options available in white labeling and private labeling services. The right manufacturer can help streamline your idea into a beautiful and profitable reality.