31Dec
By: Justas Markus December 31, 2016

What is Private Label?

Private label product, also called “white label” or “private brand”, is a unique product produced by one company but packaged and sold under another company’s own brand name. Private labeling allows retailers to use contract manufacturers to produce items as per their specific requirements (quality, materials, design, etc.) without investing much capital to start their own line of products.

What is Private Label Branding?

Private label branding is all the marketing tactics and techniques used to establish a positive image of a private label product in order to identify and differentiate it in the customer’s eyes.

Although the majority of private label goods and services are positioned as cheaper alternatives to the well-known national and international brands, a new generation of “premium” private label products has recently started competing head-to-head with the world’s biggest brands on quality and brand positioning rather than price. To cut into the market share of these well-established rivals, retailers need to adopt smart branding strategies that take advantage of the almost real-time feedback from their customers who are voting with their wallets.

The overwhelming growth trend of the private label goods indicates the diminishing advantage of higher priced international brands and suggests a unique sales opportunity for smaller retailers. As consumers are warming up to the idea of switching to private label brands, it’s an exceptionally good time for eCommerce retailers to jump aboard and experiment in this space.

Private Label Categories

With only a few exceptions, almost all consumer goods categories benefit from both private label and established brands’ offerings. Some of the strongest private label categories include:

  • Frozen food
  • Chilled and fresh food
  • Household
  • Ambient food (shelf-stable food)
  • Pet food and care
  • Non-alcoholic drinks
  • Personal care
  • Confectionary
  • Cosmetics

Advantages of private labeling

Thanks to their numerous advantages, a rapidly growing number of retailers are eyeballing the opportunity to use private label products as part of their merchandise lines. Here’s why:

  • Higher control of production – depending on your contract with a manufacturer, you can have varying degrees of control over product quality, ingredients, materials, and design.
  • Control over pricing – as a result of your influence over product manufacturing, you get to determine product cost and set profitable margins.
  • Control over branding – since private label products will bear your own brand, you have the final say in how, when and where they’ll be marketed.
  • Staying nimble – with low entry barriers and the ability to make decisions quickly, smaller retailers have the advantage of using private label products to respond to market trends and demands.
  • Higher customer loyalty – successful private label products can be a great customer loyalty booster and help raise brand awareness for the retailer.   

Disadvantages of private labeling

While the disadvantages are few when compared to the advantages, they still need to be considered.

  • Competing against big names – although you have complete control over branding and private label products can help increase customer loyalty, competing against established brands can be a difficult thing to pull off. For one, your branding budget won’t match the financial capacities of the big dogs. Then, there’s the limited availability issue, as your private label products can only be bought in your store while well-known brands are available everywhere.  
  • Manufacturer dependency – as you are partnering with one manufacturer only, you’re exposed to financial risks if your manufacturer experiences issues and can’t deliver the products on time or up to a certain standard.
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