Recent research shows SMBs need to be aware of how white label and private label products perform in the marketplace. Small Business Trends contacted some experts to find out the differences between them.
White Label vs. Private Label
Brian Cairns is the CEO of ProStrategix Consulting in New York. He explained it this way.
Distinctions
“The distinction between white label and private label are subtle,” he writes. “That’s why these terms are so easily confused.
Private label is a brand sold exclusively in one retailer, for example, Equate (WalMart). White label is a generic product, which is sold to multiple retailers like generic ibuprofen (Advil).”
Markets Matter
The scope of your target market is important. Deciding on whether you want to sell in one place or several matters. It doesn’t matter whether you’re selling online or not. Amazon has many private label items and a process to sell there. You can also work with resellers from your website or physical store.
“The key advantage of white label products is economies of scale,” Cairns writes. In other words, you’re free to sell your goods and services to a wider market of your choosing.
He also says you can often charge a higher price for private label products. One of the other upsides is stability.
“There’s usually a long-term contract or relationship with a large retailer.”
Other small businesses offered other insights
Got A Unique Product?
“Small businesses should opt for private label services if they make a unique product,” Calloway Cook Founder Illuminate Labs writes. It’s a way to cut down on some production costs.
“Outsourcing the manufacturing to a contract manufacturer is cost-efficient. And quality can be ensured through third-party testing.”
Marketing Strategy Choices
SMBs need to consider exposure too when choosing between white and private label venues.
“Since white labeling takes a standard product and applies different branding, there needs to be a unique marketing strategy to make it successful.”
This doesn’t need to be costly. Digital marketing is much cheaper than print, radio and/or television.
Stock Formulas
There are other differences between white label and private label products. For example, some small businesses see white label as a quicker solution for some products.
Derek Du Chesne, Chief Growth Officer of EcoGen Laboratories ,explains how he sees the differences.
“White-label uses our stock formulas and stock packaging to have it readily accessible. It’s a turnkey quick-start solution for brands that need products ASAP. “
He also says that white label products have a good history in their respective market and low minimums with short lead times. Private label products, on the other hand, allow for more flexibility.
“With the private-label program it allows for us to collaborate with the brands more in-depth with custom ingredients, formulations, packaging, and SKU’s.”
Competitive Markets
In this situation, start-ups would do better with a white label product because the market is so competitive. Companies that have been around for a while can afford longer lead times and more customization. For these small businesses, the door is a little more open for private label products.
Bernadette Kelly is the Media Director for ActiveWin Media. She sees the differences in terms of legal requirements.
“The massive advantage is the white label provider typically has secured regulatory licenses or legal requirements to operate an e-commerce site. Unfortunately, many start-ups fail to consider the legal hoops they have to jump through to sell online,” she writes.
Internet Based Businesses
There are even some differences for internet-based businesses.
“White label sites rest on very solid foundations. That means they rarely crash and can be found by search engines.
The trade-off is functionality, but that is a small price for someone just starting. Often, the CMS for a white label site is non-existent, making SEO optimization difficult.”
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