There are multiple private label definitions but at its simplest, a private label is a product sold under the name of a retailer and produced by a contractor or third-party manufacturer. In a private label transaction, the retailer recommends to the manufacturer everything about the end product including the materials that go into it, how it should look, and so on. The retailer then pays for the products’ production as well as delivery to their preferred location. Unlike in the convention retailer-vendor relationship where buyers acquire products branded in the manufacturer’s name, a private label affords the retailer custom products with their business details including the brand name on them.
Many companies globally sell private label products and as a wholesaler or distributor, you’ll certainly not be alone should you choose this path. Target, an online and in-store groceries and essentials company sells an assortment of branded snacks from different producers including Frito-Lay and General Mills, but they also sell their own branded crackers and fries under their private label called Archer Farms.
We’ve come across players in cosmetics, clothing, and electronics who create their own private labels including shampoos, pants, TV sets, to name a few. It’s also becoming common for eateries to private-label mixes and condiments that are popular among their customers.
Private labels are categorized differently depending on a product’s industry, purpose, target market, and so on.
Categories of Private Labels
Every sector has different types of private labels, here are some common ones:
- Personal care
- Frozen food
- Paper products
- Salad dressings and condiments
- Personal care
In the US alone, supermarket sales comprise about 15% of private label products, this is according to the Harvard Business Review. But while they are in the minority, several private labels are realizing a steady rise in consumer adoption, if a recent report by Nielson is anything to go by.
So, are there any known downsides of private label products? But perhaps more importantly, why should you consider going for a private label in the first place?
- Production control. The producers are directed by the retailer in all aspects of the product including the materials, design, and quality.
- Pricing control. With full control over the production process, retailers can easily set their prices independently.
- Control over branding and design. Private label products are manufactured on behalf of the retailers, meaning, they’re in charge of the initial design work and the final branding of their orders.
- High adaptability. In case a new market need emerges, private label retailers can immediately adjust their products to match the changes. If a retailer’s market requires an additional feature on a product, the manufacturers can easily tweak the product to the end consumers’ tastes and preferences.
- Control over profitability. Since private label products enable the retailers to dictate their prices, it means that they can also set target profits by controlling product costs as well as the retail prices.
- It can be hard to build loyalty. Almost all sectors have established brands that can be difficult to out-muscle. Big brands sell their products through multiple channels and outlets but as a small business, your products may only be available in your store thus limiting access by customers. Of course, a good eCommerce tool could help you reach customers globally, but then you’d need to find a perfect fit for your nature of business and goods.
- Increased dependence on one manufacturer. Private labels are produced by specific manufacturers, and it lies upon retailers to maintain a good working relationship otherwise, the entire business could be impacted negatively. And if your manufacturer runs out of business or incurs any form of production hitch, your business could also be affected.
Both online and offline businesses have access to private labelling opportunities. The principal advantage of this business model has to do with the power it gives to a retailer. They stay on top of their products’ production, pricing, and branding. So if those sound like the things you’d want in your business, we welcome you to check out the numerous opportunities offered by our wholesale eCommerce tool. Among its core functions, Turis offers a professional online wholesale store for your company, easy product and stock management, efficient tools to bring in new retailers, as well as over 2,000 top-of-the-range integrations. Here’s a breakdown of everything to expect as an online entrepreneur using Turis.