Most retailers – both online and off – get their products from suppliers. There aren’t many brands that manufacture and sell their lines direct to consumers. That sales channel strategy is growing in popularity but is far from common right now.
Unlike a seller of video conferencing solutions or other SaaS providers, many firms sell products without their own name or branding. That is unless they invest in the production of private label products. If the term isn’t familiar to you, you need to read on. We’ll explain precisely what these products are. Then, we’ll outline their most notable pros and cons.
A private label product is one that a retailer gets produced by a third-party but sells under its own brand name. The retailer controls everything about the product or products. That includes the specs of the product, how it’s packaged, and everything else besides.
Private label products are then delivered to the retailer to sell. As far as consumers are concerned, they’re the company’s ‘own brand’ products. For instance, a seller of collaboration software might launch a private label line of conference call hardware. Those products would get manufactured by another firm. They'd get sold, though, under the initial business’s brand name.
Most consumer product categories include both branded and private label lines. The following are some examples of sectors where private labeling is most prevalent:
Why, then, is private labeling common in so many niches? Put simply, it’s because the practice holds an array of advantages for retailers, big or small. The following are four of the most notable:
Some retailers depend on suppliers for all their products. As such, they rely on them to react to market demand. If consumers start to desire new lines or new features, it’s the suppliers who must adapt their offerings. This can be a slow process.
When a retailer gets private label products manufactured, they can be more agile. They can react more swiftly if they notice a shift in customer behavior. With a quick video call online, they can tell a manufacturer to tweak the product accordingly.
It’s not only when rapid adaptation is required that retailers have greater power. Another advantage of private labeling is that it gives more control over production.
The retailer instructs the manufacturer on all aspects of a private label product. They can define ingredients or components. They can insist upon precise specs, down to things as fundamental as a product’s color or shape.
With private labeling, retailers are in charge of the entire supply chain. They set and control production costs to ensure the most profitable pricing. Products get made in a way that makes sure of the healthiest ultimate margins.
The issue with selling branded products is that it’s not your company which consumers come to love. They develop loyalty to the makers of their favorite items, not the distributors. Private label products and their packaging bear your own name and branding.
Nothing’s ever cut and dried in ecommerce or retail. While private labeling has lots of pros, there’s also one significant potential con.
Putting your branding on products is an excellent idea in theory. In practice, however, it can be a struggle to build significant brand loyalty. Your private label lines, after all, often compete with established names in a niche.
Those long-lived brands hold some significant advantages over your private label lines. They’re going to be available in a broader range of stores, for one thing. Your private label products will be on your shelves alone. National or multinational brands, too, have a far greater budget to use on promoting their products.
Private labeling is an option open to both online and offline retailers. It’s where the vendor has lines manufactured to sell under their name and with their own branding. The principal advantages of this lie in the power it gives retailers. They control production, pricing, and branding. Taking on established brands and manufacturers, though, is no small undertaking.