Whether in-store or online, most retailers obtain their products from suppliers. Most brands don't manufacture and sell their lines directly to consumers.
Unlike sellers of video conferencing solutions or other software service providers, many brands don't sell products under their own name or branding unless they invest in private label products. If you're not accustomed to the term private label, you need to read on. We'll go over what these products are, their most notable pros and cons, and how to use them to your advantage.
Private Label Products
Private label products are produced by a third-party manufacturer and sold under a retailer's brand name. As the retailer, you have total control over the product's specifications – what goes in it, the packaging, and pay to have it manufactured and distributed to your store.
Here’s a quick example of this. Target sells various branded snacks from General Mills and Frito-Lay. However, it also sells snacks under the private label brand Archer Farms. Archer Farms is one of Target’s private brand labels.
As far as consumers are concerned, nothing changes in how they perceive the retailer. Most consumer goods categories carry both branded and private label lines. The following sectors are where private labeling is most prevalent:
- Food & Drink: Chain stores’ brand condiments, sauces, etc.
- Apparel: Mainstream clothing stores often sell their own lines alongside branded lines.
- Grooming & Beauty Care: Nail salons and other beauty establishments often sell private label products such as nail polish, lotion, etc.
- Pet Food & Accessories: Pet wellness shops sell food, toys, and more with their own lines.
Benefits of Private Labels
Private labeling is becoming increasingly common in many niches. The practice holds an array of advantages for retailers, whether large, small, or startups. These are the most notable benefits:
Some retailers depend on suppliers for all their products. Consequently, they rely on said suppliers to counter market demand. If your customers want new lines or new features to an already existing product, it's the suppliers who must adapt to these changes. This process can prove excruciatingly slow.
Another advantage of private labeling is that it gives retailers more control over the production of the products. The retailer directs the manufacturer on all phases of a private label product. They set the ingredients or elements. They can request precise specs, down to fundamentals, such as a product's appearance, shape, or color.
The practice of private labeling allows retailers to be in charge of the entire supply chain. They establish and control production expenses to ensure the most profitable pricing and help the process of competitor pricing strategy. Products get made in a way that guarantees the best final margins.
The issue with branded products is that it's not your brand that the consumers love. They'll be loyal to the creators of their favorite items, not the acting distributors. On the other hand, private label products bear your name and branding on the package.
Disadvantages of Private Labels
Nothing is ever that straightforward in e-commerce. While private labeling has many advantages, there's also one notable potential con.
Difficulty Raising Brand Loyalty
Putting your name on products is an excellent idea in theory. In reality, however, it can be challenging to build meaningful brand loyalty. Yes, they're your products, and yes, you have control over what goes into them, but you still have to compete with settled names in the space.
Those well-established brands hold some crucial advantages over your relatively new private-label line. For starters, they're going to be available on many more shelves in a lot more stores. Last but not least, these brands have a far vaster budget to promote their products.
Choosing Your Private-label Manufacturer
Before committing to a manufacturer, conduct research on your target customers so that you're accustomed to their buying patterns. That way, you can develop the most suitable proposal for potential private-label brands. Frequent networking events, trade shows, make connections and scale the competition. Also, consider patenting your idea to stop competitors from producing similar products.
When choosing which private-label manufacturer to partner with, many brands or individual sellers go for Amazon. However, you should always consider other manufacturers specific to your offerings. For example, Vega Coffee secured numerous deals with ice cream makers and other coffee brands rather than following the crowd to a general marketplace.
Note: The Private Label Manufacturers Association hosts trade shows where you can obtain potential partners. In addition, a simple Google search will provide you with countless options.
Whether you're an online or offline retailer, private labeling is open to everyone. Private labeling is where the retailer has products made to sell under its name and its branding. The essential advantage of this practice lies in the power it grants retailers—they have total control of production, pricing, and branding. While having control over your offering is excellent, taking on instituted brands and other private label manufacturers in a niche is no small task. Learn more about private labels and delve into how they can help your business.