What Is a White Label Product?

What Is a White Label Product?

Let me explain what a white label product is directly: it's a good manufactured by one company but sold by another under its own brand name. You see these products sold by retailers with their own branding and logo, but they're actually made by a third party. White labeling happens when the manufacturer uses the branding requested by the purchaser or marketer instead of its own, so the end product looks like it was produced by the purchaser.

Key Takeaways

Here's what you need to know: white label products are made by one company and packaged and sold by others under various brand names. Big-box retailers have succeeded in selling white label items with their own branding. Private label branding is a global phenomenon that's been growing steadily since the late 1990s. And white label branding saves companies time, energy, and money on production and marketing costs.

Understanding a White Label Product

You should understand that white label products are manufactured by a third party, not by the company that sells or even markets them. The advantage here is that a single company doesn't have to handle the entire process of creating and selling a product. One firm can focus on producing it, another on marketing, and yet another on selling, each playing to their strengths and preferences.

The major benefits of white label branding are clear: it saves companies time, energy, and money in production and marketing costs. Another key advantage is that transportation expenses might be lower, and if a supermarket has an exclusive deal with a manufacturer, the company benefits from economies of scale in distribution. This means the retailer can sell the product cheaper and still make a bigger profit margin due to those lower costs.

Businesses That Use White Label Products

Let's look at the businesses that use these products. In retail, white label products appear in any industry, but large retailers have done well with them. Companies like Whole Foods and Walmart benefit by selling their own branded products made by other manufacturers. This lets retailers control branding, packaging, and pricing while offering exclusive products that fit their brand identity. Private label branding isn't just for supermarkets; major electronics makers put their names on cheaper white label products to expand offerings.

Beauty and cosmetics brands often leverage white label products. They collaborate with manufacturers to customize skincare, makeup, and hair care under their branding. For example, a skincare company might white label anti-aging serums or moisturizers, tailoring them to their audience, but they don't handle the manufacturing themselves.

Health and wellness companies use white label products for dietary supplements, vitamins, and herbal remedies under their own names. By partnering with reputable manufacturers, they ensure quality and efficacy.

Food and beverage brands utilize white label products for snacks, beverages, condiments, and packaged foods. Partnering with manufacturers helps maintain quality through compliant production plants.

White label products aren't always tangible; services adopt this too. Some banks use white label services like credit card processing if they don't have them in-house. Businesses without banking operations offer branded credit cards, which is a form of white labeling. For instance, L.L.Bean offers a branded Mastercard, and Macy’s does the same, provided by American Express.

Important Note on Private Label Brands

You should note that private label brands are increasingly popular, showing consumers are more price-sensitive and less loyal to traditional brands. This growth is reducing market share for national brands and manufacturers in many countries.

Advantages and Disadvantages of White Label Products

The concept of white labeling has both positive and negative sides, so consider them carefully.

Advantages

Firms can expand product lines with white label brands to target customers strategically, boosting competitive advantage. Third-party producers get large contracts with guaranteed sales and revenue. Stores can increase revenue by selling white label products at a discount compared to national brands. These brands can match the quality of national ones since they often use the same producers, leading to satisfied customers. White labeling reduces time to market because manufacturing is already done, so you focus on branding and marketing—this is key in fast-changing industries. It saves on product development, research, and manufacturing costs, which you can redirect to sales and engagement. Finally, it enables brand expansion without developing everything from scratch.

Disadvantages

Copycatting with similar packaging can be illegal and must be avoided to not mislead consumers. A powerful retailer might create a monopsony, pushing out smaller competitors. The dominance of white label brands can raise barriers to entry for new firms, reducing competition. Since manufacturing is outsourced, you have less control over quality, and inconsistencies can damage your reputation. Market saturation happens when multiple companies sell the same products, making differentiation hard. Dependence on suppliers is risky if they have issues, affecting your product availability and sales.

Real-World Example

Take Costco, the U.S.-based warehouse club: they get creative with their Kirkland brand of private-label products. Costco doesn't make all those Kirkland items; they contract with various producers who package them as Kirkland. Often, a Kirkland product sits next to the national brand that actually makes it—same product, different name, but the national one costs more. For example, Costco sells Saran Wrap and their own Kirkland Signature version. They've blurred lines by co-branding with premium names like Starbucks, Quaker Oats, and Tyson Foods.

Frequently Asked Questions

What are white label products? They're manufactured by one company but branded and sold by another as their own, allowing businesses to offer products without investing in production.

Where does the name 'white label' come from? It suggests a blank canvas that can be personalized easily.

What is a tangible product? It's something you can touch and see before buying, unlike a service or idea, so you can assess its quality upfront.

How do white label products differ from private label products? White label are generic and sold to multiple retailers for rebranding, while private label are made exclusively for one retailer with custom specs.

What are the costs involved in white labeling products? Costs vary by product, customization, and quantity, including development fees, samples, packaging design, and production expenses like manufacturing and labeling.

The Bottom Line

In summary, a white label product carries a retailer's branding and logo but is manufactured by another party. The manufacturer labels it per the retailer's wishes, not their own. These are commonly labeled with the retailer's name despite not being made by them. Both consumer product and retail executives see co-branding between retailers and national brands as a win-win.