White Label or Private Label: Which One is Right For Your Business?

There are many ways to start an ecommerce business. Two popular strategies that have gained significant traction are white labelling and private labelling. While these strategies have many similarities, they offer distinct advantages and opportunities for businesses looking to expand their product offerings and build a strong brand presence. 

In this blog, we’ll explore the benefits and challenges of white label vs private label, as well as their place in dropshipping. Whether you’re starting a new venture or looking to expand your existing ecommerce business, we’ll show you how white labelling and private labelling can equip you with the tools and knowledge to extend your product offerings. 

The core differences between white label and private label products

Selling white label or private label products is a fast, cost-effective way for ecommerce businesses to minimise risk while starting. They also help retailers differentiate themselves on the market while maximising profits. However, there are several core differences between the two methods that determine their cost and effectiveness. It’s important you understand these key differences to choose the right method for your brand.

Product control

White label products are generic products that are produced by a manufacturer and then rebranded and sold by various retailers under their own brand names. Retailers have minimal control over white label products - they can only specify what the label looks like.

Private label products are specifically produced for a retailer based on their specifications. Retailers have more control over the product’s design, features, and ingredients. This makes it easier for them to compete in a saturated market, but also increases production costs.

Exclusivity and competition

White label products are not exclusive to a single retailer. Rather, they are sold to multiple retailers at once, with the only difference being their unique branding. The benefit of this strategy is that manufacturers can sell their products for much lower prices, as they are selling in bulk to multiple retailers. However, this also means your competitors have access to the same products.

Private label products are developed exclusively for each individual retailer. They may feature customised packaging, proprietary formulas, and other unique aspects that competitors legally cannot copy. This makes it easier to compete in a saturated market, but it also increases the cost and risk for the retailer.

Cost

White label products are generic and can be easily produced in advance, in greater quantities and at shorter notice. This can lead to lower production costs, allowing retailers to purchase these products at a lower price. In comparison, the customisation and additional branding offered by private label manufacturers make these products more expensive, but they are also harder to reproduce and align more closely with brand voices, which can decrease ongoing marketing costs. 

With these key points out of the way, let’s deep dive into what white label and private label products are and how they can benefit your business.

What are white label products?

White label products feature unique branding and logos, but the underlying product is produced by a third-party manufacturer. In this way, the end product appears as if it’s been developed and produced by the retailer, not the supplier.

For example: You’re a retailer who wants to sell organic skincare products, but you lack the expertise to develop a skincare line. You contact a manufacturer who specialises in skincare. They place your label and branding on their products. However, they also sell skincare products to other brands. The product remains the same, only the branding changes across different retailers.

The term “white label” comes from the music industry. Record companies used to produce records with literal white labels attached, often with minimal or handwritten information. These were used to promote new or upcoming artists and differentiate test pressings from public releases. Now, the term is also used to describe products that can be easily rebranded to suit different retailers.

White label products are most often generic and mass-produced, including products such as electronics, supplements, basic clothing items or accessories, household goods and even SaaS products. Thanks to its wide range of applications, white labelling allows businesses to offer various products without investing in the development and manufacturing processes, making it a popular strategy across diverse industries. For example, many supermarkets or other big box retailers sell white-label products under the store’s own branding, such as AmazonBasics.

Pros of white labelling

Fast market entry

White label products have already undergone the essential market research, product development and marketing that goes into launching a new product. Their generic nature also makes them easy to mass produce. This means they can be quickly rebranded and brought to market, allowing retailers to respond rapidly to market trends and demands.

Lower costs

By using white label products, retailers save on the costs associated with product development, research, and design. Additionally, since the same product is produced in large quantities for multiple retailers, manufacturers can achieve economies of scale, reducing the cost per unit. 

Focus on marketing

By reducing the cost per unit of your products, businesses are free to invest leftover capital in marketing strategies that will help you increase sales. This can mean investing in paid advertising campaigns, spending more time and resources on omnichannel marketing efforts, or implementing customer retention strategies such as free or express shipping. 

Cons of white labelling

Lack of brand identity

Although white label products feature unique labelling for each brand, the underlying product and packaging are the same. Selling generic products can dilute your brand identity and make it harder to build a loyal customer base. Customers might even recognise the same generic product but under different brands, potentially leading to brand confusion.

Market saturation

White label products are generally identical across multiple retailers, making it difficult to stand out in the market. This makes it harder for retailers to build brand loyalty, which has consequences for long-term growth. Marketing costs may increase as white label brands must invest more time and resources into creative and consistent marketing. Finally, competitive pricing may force businesses to lower their prices to attract customers, eating into your profit margins.

Lack of control 

With white label products, retailers have little to no control over the manufacturing process and product quality. Retailers must also depend on the white label manufacturer for product availability and consistency, which can pose risks if there are supply chain disruptions.

What are private label products?

Private label products are goods that are manufactured by one company but sold under another company's own brand name. The company that sells the private label products has full control over the private label product's branding, packaging, and often its specifications, allowing them to tailor the product to their market and customers. Private label products are almost always exclusively offered by the brand that commissions them.

For example: You’re a retailer who has developed an organic skincare line, but you lack the resources to manufacture it. You contact a manufacturer who creates and applies branding to your products. Only you sell this private label brand, and you have exclusive rights to the specific formula and product design. 

While white labelling and private labelling have much in common, namely the inclusion of a third-party manufacturer, private label products offer much more flexibility when it comes to quality control, packaging, pricing and exclusivity.

Supermarkets often employ private label models for their home brand products, as well as a new subset of “phantom brands” - private label brands that are actually owned by the store, but feature distinct designs that differentiate them from traditional home brand design. 

Pros of private labelling

Customisation opportunities

Private label manufacturing allows for custom product development, from essential ingredients to packaging. This opens up endless customisation possibilities such as campaign-specific packaging, personalisation, flexibility when it comes to product variations and more. By designing your own product, you have the opportunity to provide a unique selling proposition distinct from competitors. You also have more opportunities to negotiate cost-cutting measures with your private label manufacturer, which allows for more flexible pricing strategies.  

Market exclusivity

Unlike white label products, which are largely generic, private label products are developed to a single brand’s specifications and sold exclusively by that brand. This means that you’ll have the only version of your product on the market, which will aid in brand building, differentiation and awareness.

Brand equity

Private labelling enhances overall brand value through the development of new, unique and high quality products for your business. The higher degree of control also allows for more creative marketing and branding strategies, enhancing brand recognition over time. 

Cons of private labelling

Higher cost

Selling private label products involves significant investment in research, development, and design. Because each product is unique, initial production runs may be costly, especially if a supplier has high minimum order quantities.

Longer development times

Designing and producing your own products takes more time compared to generic items. Manufacturing and quality testing can extend the time needed to bring the product to market. This makes it harder for ecommerce businesses to capitalise on trends and to meet fluctuating consumer demands. 

Higher risk

Private label products have not necessarily been tested on the market prior to selling. This means there is a higher risk that the product may not be well-received by the market, leading to potential losses. If suppliers have minimum order quantities, this also increases the risk of unsold inventory. 

Which path is best for your business?

Deciding whether white labelling or private labelling is better for your business depends on various factors, including your business goals, resources, market conditions, and brand positioning. Here are some of the things you’ll need to consider when choosing whether to sell white label vs private label products.

Assess your business goals

Where do you see your company in the next year, two years, five years? Are you looking for a fast growth solution, or a slow burn?

If you need to enter the market quickly with minimal investment, such as to capitalise on a trend, white labelling might be suitable for your business. If you aim to build a strong, differentiated brand over time, private labelling could be a better choice. You’ll also need to consider the scalability of each option, depending on how you want to grow your business.

Evaluate your resources

The amount of start-up capital available may determine your production choice. White labelling requires little upfront investment, but may require more resources over time in terms of marketing and acquisition. Private label products generally require more investment upfront, but the quality of your product and packaging will likely boost brand awareness, saving you marketing costs over time. 

Understand your market

Conduct market research to see what products are trending, and which may have oversaturated the market. Because of the generic nature of white label products, this solution may not be ideal for certain businesses or competitive markets. Private label products can help businesses offer unique value propositions, making it easier to stand out. However, long development times may prevent you from taking advantage of viral products. 

Determine acceptable risk

Evaluate your tolerance for financial and market risks. White labelling carries less risk, but it may take longer to differentiate your brand and succeed. Private labelling involves higher risks but also offers higher rewards if successful.

Should all your products be the same?

When it comes to white labelling and private labelling, it’s not necessarily beneficial for all your products to be the same. Each approach has its own strategic advantages, and the decision should be tailored to your business goals, market conditions, and customer preferences. 

Selling multiple products vs a one-product model

When deciding what to sell in your online store, many businesses will ask whether they should sell a wide range of products, or stick to a niche range. Some businesses will even take this to the extreme and become single-product stores. But which of these models is the most favourable, and how can white labelling or private labelling help?

The past few years have seen a rise in curated marketplaces that tailor to specialised audiences. When it comes to health, beauty and pet categories, nearly half of consumers prefer to shop curated ranges. However, around 3 in 5 Australian shoppers still show a preference for wide ranges, though this varies between both product categories and target markets. For example, shoppers under 25 are more likely to prefer a curated range than shoppers 60 and over. 

For online retailers looking to offer a wide range of products, white labelling is an elegant solution. It allows retailers to offer many different types of products with less risk than traditional retail. Additionally, retailers can reach out to multiple manufacturers in order to sell many products under the same branding.

Another type of retailer to pop up in recent years is the single-product store. These stores combat consumer choice paralysis by specialising in a single hero product. This allows them to focus on a specific market segment, create hyper-specific marketing campaigns, and stand out as an expert seller in their chosen field. Some classic examples of single-product stores that have risen to fame include Crocs and Oodie. Although both stores have since expanded their range, both companies began as one-product stores that became famous for their cosy, comfortable and practical footwear and wearable blankets. These single-product stores achieved remarkable success by focusing on perfecting and marketing one main product, often expanding their offerings only after establishing a strong brand identity and customer loyalty. 

For niche or single-product stores, private labelling is an excellent choice. These stores rely more heavily on a product’s quality and specifications. The more say a retailer has in the product’s development, the easier it will be for the brand to stand out in terms of quality and uniqueness.

Uniformity vs variety

Whether your products should all look the same or show variety depends on your brand strategy, target market, and the type of products you offer.

When all your products have a similar look, it reinforces your brand identity. It not only makes your brand more recognisable, but it helps meet customer expectations and allows for more straightforward marketing strategies. However, there are certain circumstances where product similarity is a disadvantage. 

Different products require different marketing strategies: you wouldn’t sell skincare and toys in the same manner. In this way, a brand may prefer to differentiate different product lines. This is advantageous for variety businesses that want to employ white labelling, as they can offer a variety of products that attract a broader customer base. By providing many different options,  both in terms of products and design, you increase the likelihood that customers will find something they like, potentially leading to higher sales and repeat business.

If your brand is built around a specific aesthetic or identity, maintaining consistency may be a priority. For example, a luxury brand might want all its products to have a consistent, high-end look. The nature of your products also matters. For example, in fashion, variety is often expected, while in tech or beauty, consistency might be more valued. Consider the preferences of your target audience or market and what they value in their products.

Can you dropship both kinds of products?

Yes. There are many companies that will help you dropship both white label and private label products.

Dropshipping white label products is an excellent way to easily and quickly enter the ecommerce market. By employing both methods, businesses save on the costs of not only product development and manufacturing, but also logistics such as shipping and handling. In this instance, retailers essentially become marketing specialists, dedicating most resources to marketing, acquisition and retention strategies. 

Dropshipping private label products mitigates some of the risks associated with dropshipping, namely the lack of product control, while continuing to reap the benefits. While private labelling comes with its own set of risks as well as higher overall costs, these may be outweighed by the potential for higher profit margins, particularly for dedicated retailers. 

Summary

White label products offer a cost-effective and quick way for retailers to enter the competitive market with proven products, allowing them to focus on branding and marketing. However, the lack of product differentiation and potential for intense price competition are significant drawbacks. Private labelling offers significant advantages in terms of product customisation, exclusivity, and brand differentiation, leading to higher profit margins and stronger brand identity. However, it also involves higher initial investments, longer time to market, and increased risks. Retailers must carefully weigh the pros and cons when considering white labelling or private labelling products.