What is Private Labeling?
These are brands that are owned by a retail store or a retail store that takes the help of the third-party manufacturer to make a brand under its name.
OK, now you might be confused. So, here is how it works.
For example, I have a retail store, and my store contains products from different brands and company names. I have one product, maybe some kind of chips or a food item that is made in-house and that product is only sold at my store. That product has my brand name. So, I hope this clears your confusion.
Private labels have a low cost but fetch better margins, which proves to be a lucrative investment.
A few years back, there were certain retailers who used to sell low quality, cheap and generic products, but with time the markets in the UK, US, and Europe have seen drastic changes. They have been transformed into markets with good quality and reliable products.
Below are the private label categories that a retailer can think about to start of its own:
- Personal Care
- Household cleaners
- Paper Products
- Frozen foods
- Diary items
- Condiments and salad dressing
- The retailer has complete control over the product.
- Can do customization of the product as per the customer requirements
- Retailers can decide the pricing of the product and the profit margin
- As the production of the product is on a small scale, the retailer has that advantage of increasing the production in case of more and urgent requirement.
There only problem with private labeling is that it is a little difficult to build the brand name and loyalty, but it’s not impossible. If you become successful, building that trust among your customers, then your product will definitely be bought by many through word of mouth and positive reviews.
What is White Labeling?
A generic product that is created by a manufacturer and distributed to many retailers. In white labeling, the retailers can re-brand this product and can sell it by its own name and branding. The only difference is that all the retailers would be selling the same products with different names. If you are retailing some food item, it would have the same taste what other retailers are having as the manufacturer is same.
You don’t need to spend your quality time in designing and creating the product, you just need to focus on branding the product.
Whether it be Private or white labeling, both the business models are lucrative in their own ways. In both the models, you have a good profit margin.
These business models save time and money and help to focus on areas where expertise is needed which largely impacts on your business growth.