The words white label and private label are sometimes used interchangeably. However, some minute distinctions between the two descriptions pertain to the marketing of goods made by a different firm. The distinctions will be covered in this article. Remember that these procedures need a two-party agreement:
- a merchant or reseller trying to market a product made by another person
- A manufacturer who gives the store the service of creating a product for sale
Key variations (white label vs. private label)
Since the private label manufacturer produces private label products just for one particular shop, it is unlikely that other merchants would provide comparable goods. If a reseller decides to offer private-label goods, they will probably define a few detailed designs, textures, or material details before the goods are manufactured.
White-label manufacturers produce identical products that may be made accessible to several resellers simultaneously, making it far simpler for start-up businesses in specialized sectors to join the market with a ready-made solution.
The manufacturer's customization options, branding, and marketing decisions will mostly determine these items' distinctiveness.
As a result, the same towel maker may offer towels with the same design and other specs to many resellers, who would choose their branding and marketing approach.
2. Industry decision
Private label is often used for tangible goods, including clothing, accessories, cosmetics, and home goods. Small enterprises specializing in certain physical commodities with little manufacturing complexity often utilize it. Private labeling is particularly common in healthcare and consumable items like food and drinks.
If we compare white label items to private labels, the scope of this approach is a little bit larger since white labels may also be utilized for physical products.
Regarding geographical distribution, Western Europe has the biggest private label market share, at over 40%, compared to only 19.5% in the US, where personal label activities are more common.
In the ad tech sector, white label is also a highly well-liked business model, particularly programmatic, as ad expenditure on this channel is increasing annually. As a result, a new ad tech brand often seeks to streamline the implementation of a complicated solution that calls for several interfaces and modifications.
3. Product personalization
This is also a crucial time to distinguish between white-label and private-label products. As this business strategy indicates, shops are giving their demands to the manufacturer before the actual manufacturing begins; private labeling is, by nature, more adjustable than the white label.
White labeling allows you to modify the packaging, but often the items are already produced by the time the sale is finalized. However, that does not imply that white-label goods resellers are powerless to alter their products.
Numerous white-label suppliers provide adaptable solutions that may be changed to suit the demands of customers' businesses.
4. Changes to a product line
Retailers may modify their product range thanks to private labels. The function of the product is unaffected by these alterations, which are generally topical or cosmetic. For instance, a shop that buys a line of cosmetics with a private label may modify the colors or packaging of the makeup but is unlikely to change the makeup's components. However, white labels prohibit shops from changing product lines from another business. With a white label, merchants may alter the product's label, not the product itself.
Why Is It Possible For Private Label Products To Cost More Than White Label Products?
Efficiency in production, in a nutshell. Because you specify every aspect of private label items, the manufacturer must only set up a system or manufacturing process to design and produce your products. Despite any resemblance to another product they make of a similar kind, your product is entirely original (exclusive). These modifications to the production process raise expenses, which are then passed on to the customer.
With a white label, the manufacturer may create an identical product for you and others, while the only thing that varies is the label. Thus you lose exclusivity. These efficiencies are shared with you and other customers, and the lower costs that arise from being able to produce the same product again for several clients are then passed on to you.
Of course, this might alter if you have the volume to make up for these cost concerns. When you achieve that volume, you could have reached a point where you can produce the product profitably and no longer need contract manufacturing.