Private label manufacturers take a product that is in current circulation and customize that product in some way to the specifications of the buyer. The buyer then designs a package for the product and sells the product under their name.
In private labeling, retailers have many options for their products. They can make changes, like color or size, that gives the business owner a great deal of autonomy with their products. Private labels are often cheaper than national brand products and do have an impressive profit margin if the business owner works hard.
A good way to see private label brands is for commercially available brands. Brands, such as specific store name brands like the Good Value line from Wal-Mart, are examples of common private business labels. Wal-Mart does not manufacture any of the Good Value product line but has a manufacturer do it on their behalf. It is very common for the national chains to make their own private label brands on high demand products. Private label brands are less expensive for the business to purchase but yield on average 10 percent better profit margins.
What are the advantages of private label
The biggest advantage is as the business owner, you have considerable control over the products. You are not tied to another’s quality controls, requirements and other terms from the brand.
Here is an example of how private label sales work for you as a business owner.
You have decided to source and sell picture frames on Amazon. There are plenty of picture frames already available, with plenty of sellers selling picture frames of the same price and slim profit margin. You could leverage this fact for yourself by creating a picture frame of your own personal brand with a logo or sticker on the outer wrapping as a part of the picture frame package. Now, you have your own, personal brand of picture frame available for customers.
The best part about the entire private label selling? You can be successful online without the competition of large, big name companies with large private brands.
Getting started in private labeling
Your decision to go into private labeling is a great decision for anyone with little to no sales experience. Customers are always more interested in making purchases with large manufacturers than new sellers with no transaction history, so it is vital that the products can stand out, sell themselves and do so without great marketing and advertising efforts. It is best, therefore, to have yourself established with a strong customer base with products to sell in some way before branching into private label manufacturing and sales.
Your private label product should be something close to one of your current private brands, business goal, model and level of attention to your current sales. After all, running any business is difficult work and requires time to be successful.
One of the great benefits about private label over white label products and sales is how you have options on any physical inventory on hand at any point. The options available to you include dropshipping and FBA, fulfilled by Amazon. This means you can have minimal inventory on hand if you choose to do so. It is a strong way to raise an income level without actively seeking new customers.
Private label manufacturers and products exist across the world and in any number of different products available. This includes brands like Louis Vuitton, Nike, Polo and more. One thing that the majority of all private label products have in common – they are all physical goods with very few people knowing the original manufacturer and origin of those products.
What is private label and what is white label ?
Many people hear private label and white label products and immediately assume the two are the same. This is not the case. Both are, however, highly lucrative when the correct techniques are used to develop both.
Sourcing Nova finds it important to share this information with you before getting into the majority of private label manufacturing and sales. After all, it is much easier to rebrand a product as your own rather than completely reinvent something using white labeling customers already want and need.
Private label or white label similarities
Both private and white label products are created by a manufacturer. The business owner has full control over marketing, advertising and renaming. Private label manufacturers do not have any trademark or trademark interest in the products – they only make the products on your behalf.
Private label or white label differences
The similarities pretty much end with the manufacturer and the product itself. There are more differences between the two than anything. Here are the primary differences between private and white labeling. We have selected a soft drink, one of the most popular products for private label manufacturers, as a product sold.
- Private label – You can customize your products even if the manufacturer sells the same product to another. The can size, color and package are yours to design as you will.
- White label – All you can customize is the packaging. The products are produced previously by the manufacturer. This is all the control you have.
- Private label – All elements of the product’s specifications are followed by the manufacturer. A private label manufacturer cannot make similar products for others. You are the only customer buying these soft drinks.
- White label – All products are available to any number of different businesses and customers. For example, a soft drink can in one store strongly resembles the same soft drink can in another.
Cost and profit
- Private label – You are expected to pay for several parts of your product – including the trademark, research, development and marketing. Your ROI is often exceptional. You, as the business owner, have a lock on the market with your specific soft drink.
- White label – There is heavy competition and lots of advertising is needed. The correct marketing can certainly provide exceptional income potential. There are many brands of a cola soft drink. You need to make yours stand out.
- Private label – These are typically physical items such as clothing, yard and gardening tools, perfumes and colognes and the like.
- White label – More and more white label products are things like services and software which are sold by the resellers under their name.
Common advantages between the two
The nice thing about private or white label product sales is there is no work associated with manufacturing. This means there is no investment in product design and creation – a huge saving of time and capital investment. You are allowed to focus on what is important as a seller – marketing and branding to your audience.
This lack of effort on the back end of establishing a business means it is ideal for several different e-commerce platforms and sale opportunities.
Advantages of a private label
Private label products offer lots of control to the e-commerce specialist over the white label products. This is only a part of the many advantages available. Here are the top ones that Sourcing Nova finds as important. If you compare private label shipping to other methods including wholesale and dropshipping, the advantages are unique to the system.
There is certainly a draw available to those who seek to be their own boss. The private label adds to that possibility in many ways. Being in control of the product is only one part of an overall aspect to private labels. Here are the others that many consider:
A private label brand is usually of a higher profit margin than a generic brand of the same, even though the two products may be exactly the same thing. There are a few reasons this is the case, above and beyond the customization.
- The brand can separate itself from its closest competition
- Low manufacturing costs compared to self manufacturings
- Psychological value for the customer who sees a brand name
- Better control over your prices and pricing
The more time and effort you use to find a quality private label manufacturer, the better your products, and profit margins, will be.
You are in full command of your products to sell. This means while a manufacturer may make several of the same product, you have the ability to make changes, subtle or significant, to these products. This makes the products made yours and yours alone. Additionally:
- You have the opportunity to secure a niche business
- Creates an identity for you and the business
- Could lead to other, profitable products you sell
- Build customer loyalty, trust and recognition
Market your products correctly with all of your best tools at your disposal, and you will become a sole source for your customer base.
Freedom to select suppliers and manufacturers
In China, there are lots of manufacturers who can make virtually any product you want. This gives you considerable freedom and leeway when you are looking for the best bang for your buck. This means you can:
- Order a variety of samples from various manufacturers
- Look for the best deals, MOQ, shipping and more
- Find a style that matches your vision
- No single commitment until you are ready
With your samples, you can compare and contrast what your customers like in the product. This means you can improve on the things they do not like and build on the things they do like.
Work within your business needs
Private labels means you also have considerable control when it comes to your products. With a bit of bookkeeping and market study, it is easy to:
- Order heavy before a particular season
- Cut back, or suspend orders during off season
- Market according to your needs, data and customer base
- Make changes to products as you grow and developed
Private labeling means you can begin upon receipt of your first shipment. The time spent for your products to arrive is the time you spend preparing your e-store, building marketing concepts, advertising and working details. The advantages are great:
- No trial and error on your product design
- What you want immediately in your store
- Opportunity of more than one location
- Build into a wholesale business for other retailers
Private label disadvantages
Clearly there are some great positives to private label. As much as Sourcing Nova would like to have you think, there are some drawbacks and disadvantages as well.
Dependent on manufacturers
Once you find a manufacturer you want to work with regularly, you are tied to their decisions when it comes to certain decisions. For example:
- Shut downs for various reasons
- Lack of successful labor
- Issues arise with raw materials
- Other situations outside of yours or any control (weather, natural disasters)
Customers are not going to start buying your products immediately. You will have to spend time to build a sense of brand loyalty and a customer base. This means:
- Spending time, money and resources
- Heavy marketing and advertising
- Potentially rough times waiting
The products themselves
You ordered samples and are satisfied with what you have. There is always the off chance of something happening outside of your control. This can be avoided with a pre-shipment inspection of your orders. Consider also:
- Perception of cheap and low quality
- Low customer base because of foreign made products
- Manufacturers can delay your order or give you the run around
- Variable profit margin
It is always wise to be sure that the samples you get are exactly what you want and are explicitly defined in a contract.
Even if you find a product you like and are able to get them, there are other issues with those products you will face or have to find a solution for. Issues like:
- MOQ – Minimum order quantity – some may or may not cooperate on a number to order
- Shipping, packaging and containers may have a small number of available choices
- Tied to the manufacturer – you have flexibility in the product as far as the manufacturer can manage
- Inventory overage – You stand a chance of warehousing products no one wants
You are dealing with overseas companies who may or may not have a command of your native language. Even those who may speak and understand your specific language may not understand subtle nuances and inferences in the language. This can cause a variety of issues.
- Slower response times
- Hard to form a positive relationship
- Miscommunication in all aspects of the process
- Errors in billing, shipping, product receipt and more
One of the other important elements of working with Chinese manufacturers is Guanxi. Sourcing Nova has an extended piece on this important element of Chinese business relationships.
Shipping and delivery
There is always a possibility of issues with shipping and delivery when ordering private label products from overseas. You have to consider:
- Higher expense on getting products to you
- Potentially higher costs to your customers to offset costs
- Necessity of rapid shipping in two days or less – can you guarantee this
- Potential damage and seizure in transit or arrival in customs
These are simply issues you will have to face and have contingency plans in place for not if but when it happens.
Legal and liability
This is a very important consideration. There are constant product recalls because of any number of potential issues that arise from manufacturing. There could be small issues such as breakage up to serious critical faults that can injure, or worse, your customer base. You need to be sure you are covered as well as you can be. Additionally:
- Civil lawsuits against you and your company because of damages
- Trademark/patent infringement lawsuits are common
- Trade regulations and requirements
- Competition with major corporations can be a serious problem
It is best to keep these issues from taking place by having any number of failsafes in place before hand. Specifically consulting an attorney specializing in private label and patent law, liability insurance at the outset and clear markings on your packages to warn your customers. There is a saying: An ounce of prevention is worth a pound of cure. This is especially true with private labels. You can see an example of what Sourcing Nova refers to in this piece on private label candles. Go to the section on Clear Warning Label for the specific details.
These advantages and disadvantages are all a part of any business venture no matter what it is. Knowing as much as you can ahead of time protects you, the brand and your investments in the case of a problem with your products.
The best thing to do is be proactive from the beginning. This means finding the perfect manufacturer for your products.
The manufacturer – the best characteristics to look for
Before you start to put a value on a specific manufacturer for your private label, there is one important thing to consider – every manufacturer will have specific strengths and weaknesses. Finding your specific manufacturer is going to take time and likely some compromise on your part. Your ultimate goal should be a high quality product at the lowest possible price with the highest profit margin. This means you will have to spend time making sure the manufacturer can meet your specific requests. Namely:
- Ability to source necessary raw materials
- Lowest possible prices
- Highest possible quality
- Reliable delivery schedule and times
- Minimal defects and damage
- Product specialization
The best way to do this is to look at five different manufacturers of the products you want. You will need to take your specific private labeling and add to the price as well. Order samples from each manufacturer, and if possible, make a visit to the manufacturer.
Finding your private label manufacturer
- By now, you have all of the information you need on your product. It is time to find someone who can make them for you. Fortunately, there are a few places to look across the Internet that will help you with your search. Here are Sourcing Nova’s recommendations on finding a manufacturer:
It should be fairly obvious where the first option would be. After all, the search engine giant has its own set of tools to help you find products, key words and more for building a private brand label. Here are some tips and terms for searching Google for your specifics:
Search your niche + or product + (main keyword) and a set of different terms related to private label (secondary keyword):
- Private label product(s)
- Private labeler(s)
- White label
- Filter out your options using a location name
- China/Chinese manufacturer
- U.S./USA/United States manufacturers
- Add more details to your search string
- Allow dropshipping
- Air freight
- Sea freight
Several online directories exist and do not require the depth of searching like Google. The top directories to search include:
- Alibaba – The parent company of AliExpress
- Global Sources
All three of these are Chinese-based and have varied reputations. You will also run into some language barrier issues when chatting with some of the companies featured on the directories.
If you are hesitant to deal with a Chinese company, there are others:
- Store Brands
- Maker’s Row
There are excellent forums to consider as well with plenty of companies forum members have done successful and not so successful business with in the past.
Warrior has plenty of excellent forum threads for the new business owner both free and paid. There are always people willing to answer questions and provide tips – just ask.
Another online forum with plenty to offer, SaleHoo has the two big niches of interest: dropshipping and private label. Plenty of members have experiences to share with any interested new members. Expect to dig, but find lists of manufacturers and discussions on a variety of niche products.
Reddit is one of the most visited sites on the Internet and has a huge following for those interested in e-commerce and private labeling. Most everyone is helpful and willing to share, although be warned – some threads will lead you into a Rabbit Hole.
There are plenty of online platforms that have plenty of private label products you can review. Amazon, of course, is the leader. The two other biggest sites are:
Find a store or local niche store that sells products you have an interest in selling yourself. Peruse their stock, take notes and pictures. This way you can find products with searches mentioned above.
There are always trade shows for various products throughout the year in a variety of locations across the globe. If you are fortunate enough to be a near a city hosting one, it is a good idea to give them a look. Many manufacturers are keen on helping new businesses establish themselves and will often make good deals at the show.
Reaching out to the private label manufacturers
You now have all of the information you need to start the process of getting your products. You know what you want to sell, the design and package and have all of the other details firmly in place. It is time to find someone to make the products you want.
Like we said, it is best to narrow down your choices to about five potential manufacturers. You do not want more than that because it will tire you out and bog you down trying to get all of your questions answered.
Be the ideal customer
It is important to be a proper customer with these manufacturers you are going to speak to and deal with. Approach them the same way you would when you are buying any products: know what you want, be polite, personable and communicate clearly (more on this coming).
The first email
You have one chance to make a first impression, and this is also true reaching out to a potential business partner. You need to be very careful with crafting your email. It is a good idea to make your email into a template for all of the manufacturers you are interested in making your products.
Information in your first email
- Simple language – Your contact is likely using your language as a second language. Use very easy to understand words.
- Numbers – If you use numbers, write the symbol and not the word. 1,000 and not one thousand.
- Your product – Be specific as possible with sizes, colors and the like. Pictures and schematics are a good idea. Scale properly. Do not use hand sketches.
- Be patient – You may or may not get a response in 24 hours time. If you do not have an answer after a week, do email a second time with the same information.
- Be brief – This first email is to get feelers out about your products and desires. The second email will cover specifics.
The follow up email
Once you have gotten responses from the first email, it is time for the questions. Each of these questions you want answered fully and completely. Do not be afraid to resend a question, or ask clarification on any question you have. Manufacturers who recognize you are serious will take time to answer you. Those who do not are not worth your time and money. Here are your specific questions you want answered:
- What is your MOQ – Some will be willing to work with you on this if you present yourself as serious and willing to work long term.
- Can you change the product – You want to be able to upgrade and make changes as you develop your business.
- Ask specifics – Color, size, dimensions (depending on your product).
- What is the cost for samples – You will need to pay for samples normally. The price can be deducted from your order.
- What is the price per unit, PPU – You need to know this to figure profit margins.
- What is the production time – When can they start, and when you can expect the first batch.
- What is your preferred payment – Learn theirs, and offer yours as well.
- What are the payment terms – Most require full payment at 80 percent completion.
- Where is your physical location and address – Some businesses do not have either.
- Are you authorized to ship overseas – This is important as some may not be able to ship overseas.
- Telephone, Skype and email – You need a contact person with one of each.
- Can you visit – If they decline, this is a huge red flag on the manufacturer.
- Shipping – Do the products come to you or a holding warehouse.
- Dropshipping – Some may or may not offer this.
- Do I need a contract – A contract protects you and your products in case of a problem.
- Shipping – Air or sea?
- Delivery – What delivery system is used when the products reach the destination country?
If you do not get satisfactory answers to these questions or are not treated well, find another manufacturer. Until you have a contract, you have no obligations to any one manufacturer.
Your first order
The first order you make should always be a sample. There are a few ways you can do this:
- Online platform – Put products in a cart, make notes and pay.
- Online form – The old way of doing things, but it works and works well.
- Catalog and email – Digital catalogs are still common.
- Phone – Not an option with Chinese manufacturers.
Choice of manufacturer
There are two potential choices you have for manufacturing your products – domestic and international.
There are advantages and disadvantages to both. However, you may find that even when all factors are included into a decision, importing your products from overseas becomes a less expensive and more profitable option.
Private label products
The vast majority of private label products available are neither new or groundbreaking. They are simply variations on commonly selected pieces. The most popular private label products include:
- Clothing (particularly organic cotton)
- Perfumes and colognes
- Phone accessories
- Home decor
- LED lights
- Hair and beauty
- Essential oils
- Tracking devices
- Yoga accessories
The decision to start a private label has lots of potential for good profits and a successful passive income from sales. What is a product you would like for Sourcing Nova to look for on your behalf? Our deep network of manufacturers gives us a unique insight into the world of private labeling. Let us know what we can find for you today in a comment below.