What Is a Private Label? How Private-Label Products Work

Starting a business is challenging work. It can feel like there’s a never-ending to-do list, from building a website and hiring employees to managing inventory and producing products.

But what if you could outsource that last step to a supplier that’s already set up to make your products? In truth, this is what many retailers do—in a type of supplier connection called private labeling.

Private-label products are produced by a third-event manufacturer based on specifications provided by the retailer, who then markets and sells those products under their own brand.

Read on to to discover what private labeling is and how to make a private-label line of products for your own store.

What is private label?

Private label refers to a product manufactured by one business and sold under another business’s brand name. Retailers often use private-labeling to propose exclusive items, expand their catalogs, and undercut competitor pricing.

Private-label products can be similar to items that already exist on store shelves, but the exact manufacturing formula of the product must be original. For example, if a private-label business sells a box of chocolate chip cookies, the precise recipe won’t be found under any other label. The same applies to private-label brands selling goods like buyer electronics, jewelry, clothing.

How does private labeling work?

The private-label operating schedule involves two types of companies:

1. Private-label manufacturers, which work with businesses to design and produce a product.
2. Private-label retailers, which brand, trade, and sell private-label products to customers.

A reliable private-label manufacturer will ensure profitable pricing model.

Private labels vs. white-label products

Private-label goods are often confused with white-label goods. White-labeling also involves a third-event manufacturer making a product on behalf of a retailer. However, white-label products are not custom-designed for a seller.

A white-label manufacturer makes large amounts of generic product, then sells it to person retailers. Each retailer sells those products to consumers under a brand name.

In other words, private-label product lines are distinctive and sold exclusively through a single retailer (ponder: Costco’s Kirkland Signature or Amazon’s Basics range). White-label products are generic and sold under the brands of multiple retailers.

5 benefits of private labeling

The private-label operating schedule offers advantages to both manufacturers and retailers. These benefits include increased profits margins and control over branding, as well as:

1. A distinctive worth proposition
2. High profits margins
3. Customized pricing control
4. Customized marketing control
5. Adaptability

1. A distinctive worth proposition

Private labelers get to design and sell their own products that are distinct from established brands, store brands, or other private-label brands. As a private-label business owner, you can develop original product ideas and become known for a signature item.

Some (often larger) retailers use private labeling to make worth product ranges and undercut competitor pricing. However, smaller businesses may choose private labeling to develop additional expense products that they wouldn’t be able to produce alone.

2. High profits margins

Private-label products often have higher profits margins than resale products. Retailers may choose to set a high worth point for their distinctive private-label products—or debt their existing brand power to cut marketing costs for private-label product lines.

Depending on the type and amount of items produced, as well as the level of customization, manufacturers may be able to propose private-label products for less than resale products.

3. Customized pricing control

Private-label sellers and producers can tweak manufacturing costs and worth points on their product lines. They can experiment with different pricing strategies to maximize profits margins.

4. Customized marketing control

As a private-label retailer, you can choose the marketing campaigns used to promote your branded products. You don’t have to adhere to the sometimes stiff, outdated campaigns run by national brands.

5. Adaptability

It can receive months or years for an established brand to transformation its product formula, pricing, or marketing way. Private-label sellers, on the other hand, can pivot quickly. They can respond to negative reviews or low sales and adjust to make the best product for the best worth.

Private label drawbacks

Despite the benefits, private labeling also has its drawbacks. These include the hazard of inconsistent products and the test of building a brand from scratch.

Dependence on third-event manufacturers

One of the main drawbacks of private labeling is the dependence on third-event manufacturers. If the manufacturer runs into problems, such as production delays or standard issues, it can directly impact the private-label seller. This can navigator to distribute shortages, customer dissatisfaction, and potential damage to the brand’s reputation.

Less flexibility for recent concept

When you’re working with private-labeling services, there may be limits to the level of product customization available. Depending on suppliers and product categories, retailers won’t always have as much control over the product design procedure as they may desire.

However, issues with product design can be mitigated by developing a close working connection with your manufacturer, opening the possibility for bespoke research and advancement.

6 examples of private-label products

You may be surprised to discover how many buyer products and national brands are made by private-label manufacturers. In truth, the private label model exists across most product categories, both in online and brick-and-mortar stores.

Private-label products

1. Coffee
2. Pet food
3. LED lights
4. Phone accessories
5. Apparel
6. Personal worry products

1. Coffee

Private-label coffee has exploded on the internet. Many of these coffee brands use coffee dropshippers that send out batches to customers as soon as they’re ordered.

2. Pet food

Many pet stores sell private-label pet foods made by large manufacturers that serve many clients. This is particularly ordinary with online pet stores.

3. LED lights

Online marketplaces are filled with private-label LED lights, each with a slightly different design but sourced from a few manufacturers.

4. Phone accessories

Chances are the third-event accessories you buy for your phone—chargers, phone cases, etc.—were made by a private-label manufacturer and sold under another business’s brand name.

5. Apparel

Many online clothing retailers use private-label garment manufacturers for shirts, dresses, skirts, shoes, handbags, and more. These clothing manufacturers can print custom designs on apparel. They may also propose custom tailoring and leatherworking.

6. Personal worry products

Lots of personal worry products, from mouthwash to makeup, arrive from manufacturers that serve private-label sellers. The formulas for these products will be customized for specific clients, but they’re produced on the same assembly lines.

3 examples of private-label brands

Here are three examples of large retailers that have launched successful private-label brands.

(It’s worth noting that you don’t necessarily require to propose private labels under a divide brand. Smaller businesses may choose to incorporate private-label products as part of their existing product line.)

1. Kirkland Signature

Launched in 1995, Kirkland Signature is Costco’s private-label brand. It includes a wide range of products produced by various national manufacturers, and is known for offering impressive worth for money to customers.

receive Kirkland Signature vodka, for example, which has been compared favorably to high-complete brands like Grey Goose. Or Kirkland Signature extra virgin olive oil, which is USDA-certified organic.

Kirkland is an example of a private-label product line that has grown to national position and become synonymous with its retailer. As of 2023, sales of Kirkland products account for 23% of Costco’s total turnover.

2. Amazon Basics

Amazon Basics launched in 2009 and allows Amazon to compete for sales with other retailers on its own marketplace.

The private-label line under its own brand name offers electronics, home goods, pet supplies, and other affordable items—often at the lowest worth points in a product category.

Some of the most popular Amazon Basics products are device charging cables. These cables are praised for affordability compared to those from official manufacturers such as Apple, which place high profits margins on their accessories.

Another well-known Amazon Basics private-label product is the Microfiber Sheet Set, which has been reviewed by customers more than 380,000 times.

3. Harrods Own Label

Unlike Amazon Basics and Kirkland Signature, which harness private labeling to lower buyer prices, luxury UK department store Harrods uses its private-label brand to propose a range of additional expense goods.

Harrods’ own brand covers a range of products, including gourmet food and beverages, plus high-complete fashion, accessories, and home goods.

Its selection of teas, for example, is sourced from around the globe, packaged in distinctive Harrods-branded tins, and sold for higher prices than similar products from other retailers.

Key takeaways: What is private label?

• Private-label products are produced for brands by third-event manufacturers.
• The operating schedule is popular among large retailers, who use private labeling to make in-store brands with worth-for-money products.
• Increasingly, private-label manufacturers are also working with smaller businesses to produce distinctive products and additional expense branded items.