What Is a Private Label? How Private Labeling Works

Are you thinking about starting an online business but don’t have any products of your own to sell? No worries! You don’t have to spend a ton of money on product development. In fact, there are plenty of e-commerce models out there where you don’t even have to handle the products yourself.

One option you might want to check out is private labeling. It’s a way to work with a manufacturer to create goods that have your own label on them. So even if you don’t have a product, you can still sell something online. If you already have a fanbase or audience, private labeling could be a great way to turn that into some cash.

What is a private label?

Private labeling allows retailers to sell products under their own label but they’re actually made by an independent manufacturer.

So, you might see products like Kirkland (Costco), Amazon Basics, and Crooked Coffee (Crooked Media) and not know that they’re actually made by someone else. That’s because these manufacturers don’t deal directly with customers, they only sell to stores which then sell them as their own.

But don’t worry, private label products can totally look and sound like the competition but the production process is unique. For example, if a store sells chocolate chip cookies under its own label, you can trust that you won’t find that exact recipe anywhere else. It’s the same for other products like consumer electronics, jewelry, clothes, pet food, and even beverages.

How does private labeling work?

In the private label business, there are two types of companies: those that make the stuff and those that put their own name on it and sell it to retailers. 

A good private label manufacturer will keep production costs low while still making sure the product is high quality. On the other hand, a smart private label supplier will build a loyal customer base, advertise their products, and set prices that make them a good profit.

It’s important to note that “private label” and “white label” aren’t the same thing. A white label product is made by a third party for sale in a store. White-label goods, on the other hand, are not made specifically for one retailer. 

Companies that make white-label products make a bunch of generic stuff that they sell to different stores, who then sell it to customers with their own names on it. So, a bunch of retailers could be selling the same white-label product under different names.

Pros of private labeling

When it comes to private labeling, there’s more to it than just making product development a breeze. Here are a few other perks to consider:

1. Better control over pricing

When it comes to private labeling, the cost of the product itself doesn’t change, but it gives you a ton of control over pricing. You can set your own prices based on your marketing strategy and really take charge of your sales. 

Plus, private labeling allows you to focus on building your brand without having to worry about constantly finding new suppliers. And let’s be real, not many competitors are willing to put in the time and effort to create a strong brand.

As demand for your products grows, you may be looking to increase production. One way to do this is by lowering prices, which can lead to more sales. People who are looking for a deal or aren’t loyal to one specific brand are more likely to go for a cheaper option that still looks good. 

And honestly, the price and the seller’s reputation can be just as important, if not more, than the quality of the product.

2. A unique value proposition

Private label manufacturers and retailers are pretty cool because they have the freedom to come up with their own unique product lines. This means that private label entrepreneurs can get creative and develop new and exciting products without worrying about what other brands are doing.

3. Can adapt quickly to changing conditions

When it comes to making changes to their products, prices, or marketing, big brands can be pretty slow to adapt. But private label sellers? They’re nimble as can be. These guys can make quick adjustments based on customer feedback or low sales, so they can always make the best product at the best price.

Plus, they can launch new products at just the right time to take advantage of high market demand – like during a big shopping season or a popular event. And for smaller manufacturers, teaming up with private label sellers can help them boost their sales and get their products out there to more people.

Cons of private labeling

Private labeling can be a great way to grow your business, but it’s not all sunshine and rainbows. Here are the challenges:

1. No control over a private label brand

It’s a bummer for retailers when their private label brand doesn’t keep up with changing customer preferences. If the market shifts and their brand doesn’t change with it, they’re gonna lose money ’cause customers will just go somewhere else that fits their needs better.

After all, most private label brands are like the copycat version of big name brands. They usually just ride on the coattails of all the fancy marketing that the big brands do and put out products that are pretty much the same, just with a different label.

2. Poor quality 

Have you noticed that the private label products on store shelves these days are pretty solid? But the thing is, they don’t always have that extra level of quality control you might expect from a big name brand. 

Sure, they might be a bit cheaper, but when it comes down to it, most of us would rather fork over a little extra dough for the peace of mind and trust we have in a major brand. Plus, let’s be real, it can be tough for a private label brand to stack up against a big name in terms of variety and selection.

3. Difficult to build loyalty

It can be tough to build loyalty for your brand. Big brands have been around for ages and people are really loyal to them. It’s because they’ve been using these products for like, forever and it’s just a part of their daily routine. 

But, here’s the thing, when you’ve got these private brands trying to make a name for themselves, they gotta bring something really exciting to the table. Like, they gotta promise something so good that people will actually pay attention. ‘Cause let’s be real, if they can’t deliver on that promise, people are just gonna go back to their trusty national brands.

Starting a brand from scratch takes time, so private labeling is better for people and brands that already have an established audience that trusts them.

Private label manufacturers

Although there are a number of private label manufacturers that may seem interchangeable at first glance, thorough research is essential to find the best solution for your company’s needs, both now and in the future. What products to make and sell, where to sell and ship them, and what prices to charge are all factors to think about.

Below is a brief overview of some of the best private label manufacturing services: 

Alibaba

Alibaba is like a dream come true for online sellers and traders. It’s got amazing products and services that have helped tons of businesses make a ton of money. And the best part? It also has vendors that offer private labels.

That’s right, you don’t have to go far to find a vendor that can provide you with private label services. All you gotta do is search for the perfect product and then ask the sellers if they offer private label services for that product.

If they do, all you need to do is tell them a bit about your company and they’ll reach out to you with a quote. Just keep in mind that vendors usually need a minimum purchase quantity to make private label services work for them.

DHgate

Are you thinking about starting a private label project? If so, DHgate is another Chinese e-commerce platform you should definitely check out. When you take a look at the product categories on their website, you’ll be blown away by how many options they have. But here’s the thing: none of the vendors on DHgate (or any other website for that matter) offer private label services.

But don’t worry! There’s an easy way to find private label providers on DHgate. Just type “private label” into the search bar and you’ll get a list of providers that you can check out. From there, you can make a shortlist of providers and give them a call to chat more about your business.

If you’ve already got a specific product or niche in mind, you can also use the search bar to find providers that deal with that specific product or niche. This way you can find the right fit for your business.

Wonnda

Meet Wonnda, a cool Berlin-based company that’s all about helping new consumer brands succeed. They launched in 2022 and have a mission to create a one-stop-shop for anyone looking to source, launch and scale their products with trusted European manufacturers.

They’ve got this sweet collaboration tool on their marketplace that connects all the key players in a project on one platform. This makes everything more transparent and efficient. Plus, it serves as a central hub for finding top-notch suppliers, getting sample products, keeping tabs on your projects, and staying on top of production progress.

Wonnda’s got its roots in Europe and they’re all about quality control. They carefully curate and verify each manufacturer, so you know you’re working with the best of the best. And they cover a wide range of products including cosmetics, nutritional supplements, fashion accessories, pet care, home and living, and even food and beverage.

Wordans 

There’s this rad clothing brand based in the U.S. Not only do they sell their own awesome gear, but they also have a private label where you can find a ton of different clothes and accessories.

From basic shirts and jackets to sportswear, headwear, and workwear, they’ve got you covered. Plus, they’ve got a wide range of accessories like bags, shorts, and underwear. You can even customize a lot of the clothes, like shirts and hoodies, to make them truly your own.

The best part? They offer all this cool stuff at totally reasonable prices. So, you can look good without breaking the bank!

Max Private Label

If you’re looking for a private label manufacturer in the US, I’ve got one for you – and it’s a good one! They’re one of the best in the game, and they specialize in exclusive private label cosmetic services.

But that’s not all – they don’t mess around when it comes to quality. They’ve got all the certifications you could ask for, so you know they’re taking care when it comes to the cosmetics they produce.

They’ve got you covered for all your personal care needs too. Whether you’re a man, a woman, a kid, or even a pet, they’ve got products that’ll work for you.

And if you’re looking to start your own private label cosmetic company, they’ve got you covered there too. They’ve got a whole product development service on their website, so you can launch your own line of cosmetics in the US.

6 quick steps for starting a private label business

You don’t need to worry about product development or inventory investments when you sell private label products.

Here are the steps you can take to start a private label business:

1. Pick a niche

So, you’re thinking about getting into the white label game? White label products are all around us, and can be found in just about every industry you can think of. 

Some popular options include hair products, pet products, body products, beard grooming products, baby products, and health products.

When you’re trying to figure out what exactly to sell, it’s a good idea to take a look at a few niche markets within those categories.

This way, you can really hone in on a specific group of people and target your marketing and advertising efforts to reach them. By doing this, you’ll be able to get your brand and products in front of the right audience and increase your chances of making a sale.

2. Contact the supplier

When you know what you want to sell, start hunting down manufacturers and suppliers who carry it. Some companies, like Dripshippers, may only focus on specific types of products. 

Make a list of potential manufacturers and reach out to them to see if they do private labeling. If they do, ask about setting up an account. 

Most manufacturers carry a bunch of different products, so you’ll be able to easily find a bunch of things that fit into your niche. Oh, and make sure to ask if there’s a minimum order amount – that’ll help you decide whether you want to stock up or just set up a prepaid account with the manufacturer.

3. Order samples

Make sure you test out that product before you buy it. Even if it looks good online or sounds great when you talk to the maker, it might not actually be as awesome as it seems. Do your research and make sure it meets all your needs and expectations.

4. Set up an online store

So you’ve found a manufacturer and you’ve got some cool stuff to sell. The next step is setting up an online store. Shopify is a great platform to use for this because it offers a ton of different e-commerce themes that you can choose from. 

Plus, once you’ve got your store up and running, you can browse through the Shopify App Store to find all sorts of Shopify apps that can help you customize and manage your private label business.

Learn more about how to create a Shopify store. 

5. Add your products to your store

To add products, you need to do the following:

• Write attractive product descriptions. A good product description is a crucial component of an e-commerce site that converts visitors. When a product description is written well, it informs shoppers and reduces the risk of abandoning a shopping cart. The best product descriptions emphasize benefits instead of features and specs. 
• Obtain high-quality product images. Shoppers can get a better idea of what the item looks like by looking at product photos, which is the closest they can get to see it in person. To get great product images, take a variety of shots and see what works best for you. See what works for you with your camera or smartphone settings. Sometimes the manufacturer can also provide images to you.
• Determine your pricing strategy. You need to price high enough to make a reasonable profit, but not so high that you overcharge your customers. It is recommended that you price your products at least two and a half times the cost. Traditionally, manufacturers increase the price of their products by two times. Currently, it is common for retailers to mark up private label products by at least three times their price. With this markup, you are still offering a high-quality alternative at a lower price.

6. Launch and market your store

When it comes to launching your store and private label products, it isn’t just a matter of flipping a switch. To make sales, you must build awareness and drive traffic to your site.

The best way to get your name out there for new stores is to advertise on channels like Google, Facebook, and Instagram. Of all the channels, Facebook advertising is the most popular because it allows you to target a specific audience that best fits your niche.

However, Facebook ad cost has soared in recent years. You might want to supplement your advertising efforts with some free traffic methods, including

• email marketing
• social media marketing
• content marketing
• SEO

Some private-label business owners might also use customer loyalty programs. In a customer loyalty program, a business offers rewards to frequent customers. This tactic encourages customers to repeatedly purchase from your business from a business standpoint.

Final Thoughts

 If you’re thinking about selling under a private label, there are a couple of things you should keep in mind. Firstly, only do it if you’re confident you’ll have enough profit margins. Trust us, you don’t want to cut into your bottom line. And even if you do decide to go for it and start selling your own brand name, it’s still a good idea to sell other brands too. That way, you’ll be able to reach a wider audience.

But overall, starting your own private label can make product development a whole lot easier. You can work directly with manufacturers to create products that your customers will love, all while rocking your own unique branding and logo. 

Private labeling FAQ

How much does private labeling cost?

Starting a private labeling business can be pretty pricey, with costs ranging from around $1,000 to $1,500. Most of the dough will go towards grabbing samples and getting the logistics of your business in order, like setting up your website, figuring out how you’ll handle payments, and making sure orders get shipped out smoothly. If you’re looking to learn more about working with manufacturers, check out the section above.

How do I create a private label?

First things first, you need to figure out who you’re going to sell to. This is called finding your niche market. Don’t worry, it’s not as scary as it sounds. Just take a look at the post above for some tips on how to do that.

Once you’ve got a good idea of who you’re going to sell to, it’s time to find a manufacturer. Reach out to them, ask for some samples of their work and see if they’re the right fit for you.

Now that you’ve got your products and a manufacturer, it’s time to set up an online store. You can use a platform like Shopify or Squarespace to do this, it’s pretty straightforward. Once you’ve got your store set up, you can start adding your products to it.

Finally, it’s time to launch and market your store. This is the fun part! You can use social media, influencer marketing, and other tactics to get the word out about your new online store.

And that’s it! Just follow the steps in this article, and you’ll be on your way to launching a private label business.

How do I price private label products?

So, when you’re figuring out how much to charge for your private label products, there are a few things you need to keep in mind. First, there’s the cost of making the product, including any costs associated with getting it delivered to you. Then, you’ll need to think about the expenses that come with actually selling your product, like building and maintaining a website, running marketing campaigns, and paying for things like payment processing fees.

Once you’ve taken all of that into account and come up with a price, it’s a good idea to check out what your competitors are charging for similar products. This will give you an idea of how your price point compares and can help you decide if you need to adjust your price.

And don’t be afraid to experiment a bit! You can always test out different prices to see what your customers are willing to pay and still make a profit. Just keep an eye on your numbers and make adjustments as needed.

Can you make money from private labeling?

Sure, you can make some cash by private labeling. It’s definitely possible and this article will show you the steps to take to get started. 

If you need more guidance, sign up for my online business coaching.