A Guide To Private Label Products
Any successful business venture starts with a viable business idea. Every entrepreneur operates in a given market niche through the provision of products and services that are in high demand.
But what does it take to stand out from the crowd? Well, you have to develop a brand.
Developing a brand means that, you have to make your products known so that consumers can identify with your products.
As a startup, the first question that comes to your mind is how are you going to acquire the products that you want to sell?
Manufacturing your own branded products that bear your brand name and design is often challenging due to financial constraints and it might take a longer time to scale up the business before it becomes a national brand.
That’s where private label alternative comes in.
What Is A Private Label Product?
A private label refers to a brand that is not owned by the manufacturer but a retailer or supplier who orders products to be made under his own brand name label through a contract manufacturer.
A private label product is usually manufactured by a third-party manufacturer and it’s the responsibility of the retailer to give product specification to the manufacturer so as to produce quality private label products.
In private label, the retailer gives detailed specifications of the required ingredients, quantities, how the product is packaged as well as the design of the private label.
Then, the contract manufacturer handles the rest of the work through proper procurement procedures and delivers the finished products to the retailer bearing the retailer’s brand name and design.
Categories of Private Label Products
Private label products are popular with most consumer goods since many retailers/suppliers would want their customers to buy products with their own brands and design.
In the U.S consumer markets, private label products represent 15% of total supermarket sales. Although many consumer products in the market are from well-established national brands, private label has gained popularity in the following product categories;
- Health and beauty aid products
Johnson & Johnson specializes in the manufacturing of personal care products, pharmaceuticals, perfumes, baby products, and, medical devices. It’s a U.S based white label company and it manufactures and distributes over 80 brands.
Coca-Cola is one of the leading white label company suppliers in US specializing in commercialization and distribution of non-alcoholic beverages. The company has a wide network of bottling partners and it produces over 400 brands of beverages that come with wide array of flavors.
- Household products
Procter and Gamble is a perfect example of a U.S company that deals with white label households and consumer goods. It’s a multinational company and most of its global brands include; Gillette, Old Spice, Pampers, Head and Shoulders and much more.
- Dairy and frozen foods
An example of white label company in U.S that specializes in this category is Mars. The company is a global manufacturer of food, pet food, dairy, and other related products. Some of its common brands are; Amecelli, Bounty, American heritage to mention just a few. Mars currently distributes over 100 brands.
- Paper products
Great Little Box Company is a leading manufacturer and distributor of custom and stock packaging solutions. The company specializes in the production of corrugated boxes, custom displays, labels, flexible packaging, folding cartons, rigid boxes, and protective packaging.
- Condiments and salad dressings
Private Food Label is a global manufacturer and distributor of sauces and it also offers custom private label solutions to retailers. The company offers private label solutions and retailers often contract private label services for salad dressings, marinades, pasta sauces, wing sauce, hot sauce, and cocktail sauces.
In addition, Wal-Mart which is one of the leading food retailer stores in the U.S has also recorded increased sales of consumers’ goods and customer’s loyalty through private label products. Thanks to the contract manufacturers who design the Wal-Mart custom labels.
Unlike the past negative perceptive regarding private label products (Being “generic” and of poor quality), most of the manufacturers have invested highly in improving quality standards of private label products.
Thus, many consumers have gained confidence with private label products something that has made this concept record tremendous growth and popularity globally.
Pros & Cons of Private Label Products over Branded
Easily Available at Affordable rates-
Due to the high demand of private labels, there are hundreds of contract/third-party manufacturers out there looking for retailers. The multiple private label manufacturers are likely to compete for few available custom private label jobs, thus, giving the retailers a great chance to go for best quality at affordable prices.
Retailers retain full control over production-
The contract manufacturers work as directed by the retailers. They adhere to all directives regarding ingredients, design type, and packaging requirements. As a result, retailers are now able to order premium private label products that fetch higher prices due to their improved quality.
Retailers set the prices-
Unlike branded products that come with RRP (Recommended Retail Price), private label products are priced at the retailers’ preferred prices. A private label product gives the retailers control over profitability. This is usually achieved by determining product costs which set the profit margins.
It can be tailored to meet the need of emerging markets/trends-
Retailers often take advantage of their flexibility and order customized private label products to meet the need of a new market or trend. Thus, they are able to respond to the market needs faster as opposed to already established brands which have established a market niche.
Retailers enjoy branding control-
Unlike the branded products which are sold on selves with the manufacturers sole brand name, private label gives retailers an opportunity to sell similar products that bear their brand name as well retailers recommended packaging design. This, in turn, increases customers’ loyalty.
Although private label seems as a straight forward stuff, it comes with a few challenges as outlined below;
As a retailer, you will need to have financial resources in order to contract a private label manufacturer. It’s also time-consuming because you will have to come up with your preferred design for different products that you want to sell otherwise, you will need to hire a professional to do it for you which will dig deep into your pocket.
As a retailer, you will have to rely on the manufacturer to get your branded products done. It can sometimes become stressful if you deal with an unreliable producer and are unable to have your products on time. Therefore, it’s advisable to work with well-established and reputable manufacturers.
It takes time to build brand loyalty-
Although private label products give retailers the privilege to sell products under their brand name, competing with the already established brands remains a hard nut to crack.
The other challenge is that private label products are mostly available at retailers’ stores only as opposed to national brands which are available at any store everywhere at the convenience of the consumers.
This means that customers will be forced to remain loyal to the retailers if they want to purchase private label products of their choice (which is a plus to the retailers).
Private label products have gained a lot of popularity over the years and the future is still positive. With the recent developments of premium private label brands, the emergence of new channels such as mass merchandisers and warehouse clubs, consumers have changed their perception towards private label products.
As a result of improved quality, many consumers are going for private label products giving this merchandising concept a different narrative.
If you want to take Private Labeling to the next level, this Step-By-Step Guide To Product Design and Development will get you started.
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