White Label vs. Private Label Products: What’s the Difference?

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, a seasoned industry leader who currently holds the role of CEO at ProStrategix Consulting based 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 magnitude and specificity of your target market are critically important elements that guide your business strategy.

The decision to sell in a single location or expand to multiple venues is a defining strategic choice that can significantly impact your bottom line. The traditional dichotomy between online and offline retail is gradually blurring.

Online marketplaces like Amazon, with its wide array of private label items and established sales process, offer a comprehensive platform to reach a global customer base.

Alternatively, working with resellers, either through your own website or physical store, can also help broaden your reach and diversify your sales channels.

“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.

Cairns also emphasized that you can often charge a higher price for private label products due to their perceived exclusivity and the reputation attached to the brand.

Another considerable advantage of private labeling is the stability it provides.

Establishing a private label product often involves contracts with retailers that secure a certain level of sales and provide a consistent revenue stream, providing a degree of predictability in an often turbulent retail market.

“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

When small and medium businesses (SMBs) are choosing between white and private label venues, they also need to consider the level of exposure their product can achieve. Striking a balance between the product’s visibility and the cost of marketing is crucial.

“Since white labeling takes a standard product and applies different branding, there needs to be a unique marketing strategy to make it successful.”

Fortunately, the advent of digital marketing has provided a cost-effective alternative to traditional marketing mediums like print, radio, and television.

SMBs can leverage social media, search engine optimization, email marketing, and other digital channels to reach a wide audience without straining their budget.

Stock Formulas

White label and private label products each have their unique characteristics and benefits, and understanding these differences is key to making an informed decision.

For example, for some small businesses, white label products are seen as a quicker solution to gain market entry with less initial investment.

Derek Du Chesne, Chief Growth Officer of EcoGen Laboratories, echoes this sentiment.

Du Chesne offers an industry insider’s perspective on the differences between these two strategies, elucidating their specific benefits and potential drawbacks, enabling businesses to make choices that align with their specific needs and capabilities.

“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 the dynamic business landscape, start-ups find themselves better positioned by opting for white label products, primarily due to the intense market competition.

The advantage of white labeling is its readiness for immediate market entry, allowing new businesses to hit the ground running.

However, more established companies, having solidified their market presence over time, can afford the luxury of longer lead times and the option of extensively customizing their products.

For such established small businesses, private label products become a viable option, enabling them to create unique offerings that can further enhance their brand’s distinctiveness and appeal.

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

The decision between white labeling and private labeling carries unique implications for internet-based businesses.