A white label product is a product or service produced by one company that other marketers rebrand to make it appear as if they had produced it.
A white label supplier builds an unbranded product or service and then sells it to a re-seller, that re-seller then goes ahead to stamp their brand, logo all over the product and sells it as if it was their own to the end-user (sometimes a consumer or local business).
White labeling is the e-commerce business model lovechild of drop-shipping and manufacturing, just like drop-shipping, you find a product that’s already selling well and brand it as yours. Depending on that the item is, you may be able to brand the product or the packaging or sometimes both. Unlike drop-shipping though, you’ll need to purchase a minimum number of products to white label them meaning you’ll also have to store, pack and ship them too.
THE PROS
• Selling an existing product reduces the risk of manufacturing.
• You usually get the lowest cost per unit.
THE CONS
• Your market entry can be quite high although not as high as manufacturing since you may be able to negotiate a lower minimum order quantity, you need to think about warehousing and fulfillment and you’re stuck with any inventory if you can’t sell it.
• Although you’ve branded an item as yours, other people can do that too meaning your product isn’t unique in the market. Private label products or services are typically those manufactured or provided by one company under another company’s brand. Private label goods and services are available in a wide range of industries from food to cosmetics to web hosting. They are often positioned as lower cost alternatives to regional, national and international brands.
Online shopping has experienced rapid growth over the past few years. According to the US Census Bureau, for the fiscal year of 2018, US consumers spent about $517bn in online retail, growing 15% from 2017 e-commerce sales. And as of the first quarter of 2019, e-commerce represents 10% of total retail sales in the US (Sosa Sanna, 2019).
Millennials, representing more than one-quarter of the nation’s population, have become the largest consumer cohort in the US and are also a key force behind private label products’ growth.
Millennials are becoming more indifferent about brand names and are treating private labels “as just another brand” and not a cheap substitute for the real thing.
For instance, according to a report by Cadent Consulting Group, a typical shopping cart of an average consumer is filled with 25% private label products, but Millennials’ baskets have about 32% of private label products.
Consumers are also moving towards private labels for high-quality products. About 20% of private label sales growth is driven by products that are branded premium, trendy or organic (Sosa Sanna, 2019). In addition, over 40% of consumers would like to see more “better-for-you” or more unique attributes in private label products offered on retailer shelves, or online scroll menus.
Among the various private label products, private label tissue products have seen an increase in demand as well. Private label tissue products currently represent an estimated 30% of retail tissue demand in North America, and the share is growing. Private label tissue products have caught up in quality to the leading brands and are becoming a more popular choice among US consumers, especially in terms of everyday-needs tissue products like toilet paper and paper towels. And just like how private label tissue products are growing within retail stores, consumers are opting for private label tissue products on e-commerce websites as well.
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