White label and private label are both terms you’ll hear a lot in the world of sourcing and eCommerce, and if you’re a budding eCommerce entrepreneur looking to source products from China, understanding the difference is super important.
Welcome back to our Sourcing 101 series.
In this series we break down the basics and arm you with actionable intel to help you source products from China like a pro.
In this post we'll answer a question that causes a lot of confusion in the sourcing world; what is the difference between white label and private label products?
White label and private label are both terms you'll hear a lot in the world of sourcing and eCommerce, and if you're a budding eCommerce entrepreneur looking to source products from China, understanding the difference is super important.
Knowing how each works will help you make an informed decision about which is best for your business.
So, without further ado, let's look at white label vs private label products.
Before we dive into the subtleties and intricacies of white labeling and private labeling, let's journey back to the good old days. If you wanted to sell a product back in the day, you did it the hard way. You designed it, manufactured it yourself, marketed it, and sold it to your customers.
Then along came the wonderful world of low-cost manufacturing, and through a few twists and turns, we've reached the age of white label products and private label products.
White label products are made by a manufacturer and then sold to resellers (or retailers) who then sell them to their customers. They are generic products and you'll usually find many indistinguishable examples for sale in a particular market.
Let's say you're selling gym accessories online and want to add a protein shaker to your product catalogue. You could pull out a pen and a pad and start designing one from scratch, but you're a small startup and want to keep costs down. You're not trying to reinvent the wheel with this protein shaker, so investing in designing and prototyping really doesn't make sense.
You need a white label product.
A quick search on a B2B marketplace like Alibaba and you'll find a manufacturer selling just what you need.
Order some of these stylish gym companions and you're ready to go, with minimal investment. It's so easy you could start doing it today. Drop us an email and we'll help you do it!
Origin of the term 'White label'
The term white label comes from a term given to promotional records sent to radio stations. A band would have a record release coming up and want their tunes spun on the radio. So, the label would fire out promotional copies of albums or singles with a basic white album sleeve. True story (maybe).
A lot of the confusion around white-label and private-label products stems from the overlap between the two.
As a general rule, white label sourcing means buying products as they are. Standardisation is what allows suppliers to streamline their manufacturing process, which is why these products are so affordable for resellers and retailers.
Returning to our protein shaker for a second, you'll notice that you often have the option of a customised logo and custom packaging. You can often customise white label products in small ways, but as a general rule you're buying a generic product as advertised. If you want the shaker to have a different size or shape for example, then the manufacturer will need to create moulds and change their manufacturing process. This pushes up the cost of manufacturing (often significantly), undermining the biggest advantage of white label products.
So where is the overlap?
If you start making significant changes to a white label product, you're heading in the direction of private labelling.
This grey area actually represents a very interesting sourcing hack in itself.
Sourcing Hack:
Find a generic white label product → learn what features it lacks → make meaningful customisations that differentiate it from similar products in the market → sell a custom product no one else is selling.
A private label product is where a reseller (or retailer) uses a 3rd party manufacturer to produce a product for them. The main distinction here is that you (the reseller or retailer) specify all aspects of the product. You're essentially designing the product yourself, and then outsourcing the manufacturing.
Take Apple as an example. Apple designs their products but they do not manufacture them. They use 3rd party manufacturers like Foxconn to produce or assemble their products.
Anyone who has been to a supermarket in the last 20 years will be familiar with the home brand. It's that cheaper option on the shelf that bears a striking resemblance to the big-brand product you know and love.
The success of home brand products gave rise to the private-label entrepreneur. Those opportunists looking to cash in on the popularity of 'like' products.
As we noted above, the investment required to design, develop, market, and sell a brand new product is hefty. An alternative is to find an existing product (preferably one that is selling well), identify the aspects of that product that make it popular, and have a similar version manufactured in a low-cost country like China.
The cosmetics industry is no stranger to this practice. Scan the face-wash section of your supermarket or pharmacy today and you'll find strikingly similar alternatives to leading brands at affordable prices.
Private-label entrepreneurs identify opportunities to sell 'like' products and position them next to well-known brands at lower prices. What happens next is that manufacturers in China start producing generic versions of these products themselves.
Jump on Alibaba and you'll find endless numbers of these ready-to-sell, unbranded, generic versions of products we all know. We call these… you guessed it.
WHITE LABEL PRODUCTS
Hey look, we're back to the start. Lesson complete :)
So there you have it: white label vs private label products. Hopefully we've cleared up some of the confusion around exactly what each one means.
The key takeaway is that these products provide a huge opportunity for budding entrepreneurs looking to break ground on their own business idea. We've worked with UK entrepreneurs who have done exactly that — and you can check out some of their stories here.
In the next post, we'll take a deeper dive into the pros and cons of white label and private label sourcing. Stay tuned!
Better sourcing everybody!
