Take a second and think about a time you recently scrolled through Amazon or eBay.
If you have the time, think about opening a tab to one of those marketplaces. Search for a general term – something that will return a lot of results.
What are you noticing about the results page?
Depending on your search query, you might see repetitive, generic item listings. That is, the same unbranded product listed for sale by different vendors.
You may notice that branded products stick out. Amazon’s ‘Amazonbasics’ brand comes to mind.
Oftentimes, price is the only noticeable difference among these unbranded listings.
The listings blend in together, creating a pool of indistinguishable generic products shoppers wade through to find what they’re looking for.
If you’re re-selling generic, unbranded products courtesy of wholesalers, your listing are going to blend in, too.
Enter the practice of private labeling.
Private labeling is a powerful way for brands to make their products stand out from the crowd. When a consumer buys a privately labelled product, it feels like an exclusive experience.
The best part about creating a private label product?
It gives you – the vendor – complete control.
By selling private label products, vendors can:
- Manage the production and manufacturing process directly
- Set and negotiate pricing
- Create and implement their own branding strategy
Starting a private label business takes more planning than reselling generic inventory, but it’s easier than most people think.
What is Private labeling?
So – what is a private label product?
Simply put, private label products are manufactured by one company and sold by a another, using the retail vendor’s branding.
For example, Company A purchases bulk phone cases from a manufacturer. They sell the phone cases on Amazon without any branding.
In this scenario, there’s nothing setting Company A’s phone cases apart from competing vendors.
In fact, other vendors may be selling the exact same phone cases as Company A.
Enter Company B.
Company B wants to sell unique phone cases – ones shoppers can’t find anywhere else.
They contact a manufacturer, propose their ideas, and buy inventory customized to reflect their brand.
The manufacturer produces phone labels with Company B’s logo on them. Now Company B’s phone cases have something other listings don’t – branding.
Now, shoppers know who they’re buying their phone cases from right away. When they buy more in the future, they’ll have a specific brand in mind.
Private labeling is popular on Amazon and eBay, but it’s common in box-stores and grocery chains, too. Chain-retailer Target is a great example, introducing eight new private label brands in 2018 (twenty total since 2016!).
Restaurants are another place you may find private label products. Many sell sauces, marinades, baked goods, and other items in-house that reflect their brand.
But ultimately – there are few limits to which products vendors can sell on their private label. If you can find a quality manufacturer and there’s a market for the product, you’ve got an opportunity to build a private label brand.
Why Private labeling is Important
By private labeling products, up-and-coming businesses can set themselves apart from others and make a clear name for themselves.
Private labeling puts you in the driver’s seat.
You control the quality of your product, the price, and your brand’s appearance.
Yep – as a private label business owner, you get to make the important decisions for your brand.
You won’t necessarily exercise the same control if your brand re-sells generic products. This can have a major impact on your marketing strategies, since you don’t have to work around another company’s vision.
For example, Target can control the production of their Archer Farms cereal brands, but they can’t determine how Kellogg’s manufacturers or markets their products (even when they sell their cereal on Target’s shelves).
When companies sell private label products, they’re driving loyalty among their shoppers.
According to a report by retail service provider Daymon, 53% of consumers said they shop at stores specifically for their private label products.
Think that’s shocking?
The same report showed that 85% of shoppers trust private-label products as much as those from leading national brands.
For small business owners like you, this means private labeling could be key for higher customer retention.
Let’s take a look at some of the benefits and risks of selling private label products to help you decide if it’s the right choice for your brand.
Benefits of Selling Private Label Products
1) Higher Profit Margins
Who doesn’t like high returns on their investments?
With private labeling, retailers can increase their profit margins significantly by saving money on production and setting their own prices.
“Wait – doesn’t paying for private label inventory cost more than buying generic bulk?”
Truthfully, private labeling can – and often does – cost more upfront than buying generic inventory.
Conversely, you can sell your inventory for a higher price.
Private label products cost more because you’re customizing it with your own branding – but this doesn’t mean doing so makes it a less profitable business model.
In fact, the total costs to manufacture and distribute private label products can be up to 50% less expensive than to sell another brand’s products!
Yep, that’s right.
You’ll spend up to 50% less overall when you sell private label products, thanks to the lack of middlemen and paid representatives involved.
When you start a private label brand, you don’t have to work with the other company’s regional wholesalers, distributors, and sales representatives.
Everyone involved with manufacturing and distributing takes their own cut of the profits. Private labeling eliminates the need for many middlemen, putting more money in your pocket.
The best part?
You can set your own prices.
Oftentimes, brands set their own manufacturer’s suggested retail prices (MSRP). Apple is a great example of this: they set the MSRP for their devices, retailers are required by contract to sell it for that price (or higher), and they take a cut of the revenue.
When you sell private label products, this isn’t the case. You are not contractually obligated to sell your products for a minimum price.
Instead, you can set ideal profit margins and adjust your prices accordingly.
2) Exclusivity Breeds Loyalty
Thanks to the internet, shoppers have more control over their purchases today than ever before in history.
Before you buy something online, you can compare prices, shipping, and return policies – all from one device.
Think about it: how often do you buy something online without comparing prices?
As such, it’s challenging for sellers to compete when other brands undercut their prices.
Here, brick and mortar stores have an advantage. How many times have you bought something at one store – knowing it’s cheaper at another – because it’s more convenient?
Shopping online creates an entirely new dynamic of convenience.
It’s not difficult to comparison shop online and it’s less time consuming than going to different shops, looking for low prices.
This creates a race to the bottom for retailers selling generic, mass-produced products (and national brands).
When you sell private label products, you’re offering something shoppers can’t find anywhere else.
Unlike generics and national brands, your private label products are exclusive to your company.
When shoppers want your exclusive products, they don’t have the option to take their business elsewhere – think about Apple and the iPhone, for example.
Apple’s iPhones offer software you won’t find on other devices. You can buy a Samsung or LG phone with similar technical specifications, but you won’t find another brand selling iPhones with Apple’s highly sought after iOS operating system.
Regardless of the competition – which includes substantially cheaper phones – shoppers continue buying iPhones because they want the exclusive Apple-only features.
The same logic applies when you sell private label products.
If your brand offers something customers can’t find anywhere else, they are more likely to shop from you again in the future.
Additionally, private-label products eliminate the chances of other retailers undercutting your prices. By selling customized, branded products, you encourage shoppers to give you their business by minimizing the competition.
3) Valuable Opportunity to Build a Brand
The statistics behind consumers and brand recognition are astounding.
According to Forbes, consistent brand representation across all marketing platforms can increase your revenue by up to 23%.
Another study – conducted by Circle Research – shows that 77% of B2B Marketers say quality branding is critical for growth.
Simply put: good, consistent branding is crucial for e-commerce success. And when you’re selling generic products, you’re losing out on valuable opportunities to make your mark.
By creating a strong brand identity, you’re establishing credibility.
Established brands have an easier time earning customer loyalty and audience recognition than retailers who resell generic goods.
And when customers begin to associate your brand with quality products that exceed their expectations, you’ll earn a positive reputation.
Ultimately, having a unique brand identity makes it easier for shoppers to trust you. When you sell private label products, you have total control over your branding strategy and you aren’t limited by the manufacturer’s branding choices.
4) Increased Marketing Potential
Marketing potential and branding go hand-in-hand.
If you establish a credible, recognizable brand, your marketing potential will skyrocket.
When you sell private label products, you can market them in whichever way you please. You aren’t limited by the manufacturer, giving you total freedom over advertising.
Want to work with YouTube influencers to reach larger audiences?
Want to market your products on social media using a meaningful brand story and creative photography?
It’s entirely up to you when you sell privately labelled products.
Risks of Selling Private Label Products
Starting a private label brand can be wildly beneficial, but store owners should be aware of a few risks that come with the territory:
1) Subpar Quality Products Can Damage Your Brand’s Reputation
Managing product quality is a challenge for all online retailers – resellers and private label brands alike.
Unfortunately, it’s not uncommon for poor quality products to make their way into the hands of shoppers.
And when they do, it can spell disaster for online retailers.
Selling poor quality private label products – even inadvertently – can have drastically negative effects on your brand’s reputation.
Shoppers love to talk about their brand experiences – and not just the positive ones.
According to Action Card, shoppers make roughly 2.1 million negative social mentions about brands each day – and that’s just in the United States!
Simply put: shoppers are talking. And if you let them down, it will get around.
Think about product recalls from nationally recognized brands. Hypothetically, let’s say a leading beef supplier issues a product recall for contaminated product. The grocery store isn’t responsible for the recall, and you probably won’t blame them for it.
Apply this to private labeling: when you sell something that represents your brand, customers will hold you accountable for their satisfaction.
If customers receive products that don’t meet their expectations, they won’t have a favorable opinion of the brand who sold it to them.
Fortunately, you can minimize your risk by testing sample products from reputable manufacturers before you order bulk inventory.
Typically, reputable manufacturers will offer samples before requiring customers to sign contracts. Take advantage of these opportunities and review your products before your shoppers get the chance.
2) Private Label Products Carry Additional Liability
Now it’s time to talk about the scary part of private labeling – liability.
Okay – increased liability doesn’t have to be scary. But it can be, if you don’t take the proper precautionary steps.
Selling private label products carries additional liability risks that aren’t present for resale retailers. You’re the one taking responsibility for how it works, and you’re the one who will take the heat if it doesn’t.
Liability issues are common for private label brands who sell products that are fragile or dangerous by nature, but they can be a problem for anyone.
Frequently sold items with high liability risks include (but are not limited to):
- Sports equipment
- Dietary supplements
- Food and drinks
- Baby products
To put it bluntly: you are at fault if your products endanger customers or cause damage in any way.
The less likely your product is to cause harm or endangerment, the less you need to worry about liability issues.
Let’s look an example to make private label liability a little more clear:
Assume you’re selling ice skates on your private label. A customer gets a faulty pair and they break their ankle because the skates failed during use due to a manufacturing error.
You are responsible for the damages.
The person needs surgery to repair their ankle?
Or they need crutches to get around?
Guess what: you’re liable to cover those costs because your product was the cause.
When you sell anything, you are vouching for its safety. You are saying it will perform as described, without defects or intentional misrepresentation.
Liability cases can halt a brand’s growth, compromising their entire operation. You can minimize your financials risks with product liability insurance, but it won’t protect your reputation if you ship faulty inventory.
Choosing reliable manufacturers is the best thing you can do to avoid lawsuits. Sometimes, they will happen and there isn’t much you can do, but working with reputable producers can minimize your chances.
3) Legal Issues May Arise
Speaking of liability, let’s talk about other legal issues that may impact your private label business.
It’s critical to understand trading regulations, possible patent infringement, and trademark violations when you create a private label product.
Violating any intellectual property laws or importing/exporting regulations can lead to major headaches down the road – heavily impacting your business.
Understanding advertising and marketing laws is equally important. According to the Federal Trade Comission (FTC):
- Advertisements cannot deceive audiences, must present truthful information, and must be evidence-based.
- Companies must complete refunds when promised.
- Video demonstrations must show how the product performs under ‘normal use’.
- Products must be “all or virtually all made in the United States” to be advertised as “Made in the U.S.A.”
- Advertisements targeting children must comply with the Children’s Online Privacy Protection Act (COPPA) when published on the internet.
- Companies must include disclaimers when applicable; disclaimers must be clear, noticeable, and the language must be easy-to-understand.
If your private label products or advertisements violate any laws, you are accountable. Before you start selling anything, get familiar with the laws that apply to your industry.
4) Manufacturer Reliability Varies
Just as retailers are not created equal, neither are manufacturers.
Turnaround times, product quality, and cost can vary greatly among production companies – and you are responsible for the logistics.
Manufacturers may suddenly shut their doors, take too long to ship your inventory, or otherwise fall through on their end of the bargain.
Regardless of the circumstances, you are responsible for the fallout if your manufacturer falls through.
Ultimately, it’s impossible to avoid manufacturer woes altogether, but choosing reputable companies can minimize your risk.
In the next section, we’ll discuss how you can find reliable private label manufacturers who will meet your expectations.
Choosing Private Label Manufacturers
Reliable manufacturers are the cornerstone of successful private label brands.
When you work with a manufacturer who produces quality, valuable products consistently, earning customer loyalty is a breeze.
But how do you know which private label manufacturers you can trust?
With tens of thousands of companies to choose from, it can feel overwhelming. Ideally, your manufacturer should produce high quality inventory at a low cost.
Let’s take a look a few key characteristics great private label manufacturers share:
Reliable Delivery Times
Running out of inventory can be a travesty for up-and-coming private label companies.
Let’s face it: who likes their purchases being delayed?
When your manufacturer delivers on time, every time, you can avoid devastating inventory mishaps and lost sales.
Asking about delivery times is one of the first questions you should ask when you’re considering a private label manufacturer.
Reading about experiences with the manufacturer from other brands is another great way to learn about their delivery times.
Find testimonials that confirm their reliability. If other customers report frequent delays, consider a more consistent manufacturer instead.
Affordable Pricing (Without Sacrificing Quality!)
Product quality and reliability are important, but you don’t want to pay too much for your inventory!
As a private label brand, your challenge is finding a manufacturer who will deliver exceptional products for a reasonable price.
It’ll be tempting to settle for the first reliable manufacturer you find, but don’t make any hasty decisions.
Chances are, you can find another company elsewhere offering similar quality products at a lower price-per-unit.
On the flip side, don’t be tempted by unreasonably low prices.
If the cost price-per-unit is drastically lower than competitors for similarly sized lots, you’re risking poor quality inventory.
Remember – you get what you pay for.
Get quotes from five or six manufacturers to learn what the average pricing is for your expected inventory. Ultimately, it’s worth your time to secure the lowest possible price.
And remember – it’s common practice for manufacturers to charge lower prices for larger lots of inventory. The price-per-unit for 1,000 items can vary immensely from a 10,000-item lot. `egr
Product Quality & Low Defect Rate
Poor quality products getting in the hands of customers can spell disaster for your private label brand.
It only takes a one bad review to lose potential sales – if shoppers hear you ship low quality (or defective) products, they’ll find a brand with a better reputation.
It’s imperative that private label owners find information about a manufacturer’s product quality before committing.
How can you dig up as much information about a manufacturer as possible?
Start with a simple Google search.
The internet is full of forums and feedback hubs where retailers can leave reviews of private label manufacturers (reddit is an excellent place to find candid feedback from other retailers).
Requesting samples is another great way to test a product’s quality before making a large purchase.
Pricing and shipping are important, but without high-quality inventory your private label company will not grow. In general, customers are not loyal to brands that ship defective products.
Ideally, you want a manufacturer who specializes in making the product you’re ordering.
By specializing in one or two types of products, manufacturers can offer better quality inventory. If they have a glowing reputation for creating products in your niche, you’ve found a potential supplier.
Don’t shy away from using different manufacturers for different products, either.
If you’re selling private label shirts, kitchenware, and mobile electronics under the same brand, it’s in your best interest to find manufacturers who specialize in those categories.
Where to Find Private Label Manufacturers
Finding a private label manufacturer may feel overwhelming at first. Sure – it isn’t as straightforward as going to Alibaba and ordering bulk inventory, but it doesn’t have to be challenging.
As you’re choosing a private label manufacturer, patience is key.
Don’t feel rushed into a commitment – take your time, compare prices, and review testimonials until you find a company that meets your expectations.
To give you a starting point, we’ve listed a few of our favorite places to find private label manufacturers below:
Okay – maybe this one was obvious. But it deserves a spot on the list.
When you’re starting your private label brand, Google can be your best friend. A simple search query can turn up thousands of potential manufacturers from around the world, including companies listed on directories.
Take a look at the screenshot below:
We searched “private label manufacturers food” and what did we find?
The query returned more than 27 million results. The first page was full of companies advertising themselves as private label food suppliers.
Sometimes, it really is that easy.
With the right Google search, you can find hundreds of potential suppliers to compare – the biggest downside is the lack of a central review system.
Right now, SaleHoo is one of the web’s most popular destinations for brands to connect with private label manufacturers.
Their directory features more than 8,000 legitimate private label suppliers, offering more than 1.6 million products.
Even better, they offer a forum where sellers can communicate with each other. They can leave feedback about suppliers, discuss ideas, and ask questions about private labeling.
And they don’t stop there.
SaleHoo integrates useful market research tools directly into their website. By using their unique Market Research Lab, you can learn more about your competition, see average prices, and find the most profitable products – all with one convenient tool.
If you’re looking for an all-in-one tool to find private label suppliers, we recommend starting with SaleHoo.
3. Source Local Suppliers
We tend to think of the internet first when we’re sourcing e-commerce inventory. However, local events are another excellent way to find private label suppliers.
Depending on where you live, there may be trade shows nearby. Manufacturers are a staple at any trade event, displaying their products and answering questions.
By attending trade shows, you can meet with supplier representatives in person, see the products first-hand, and negotiate prices face-to-face.
If you have business contacts in your area, they may also help you find a company that can produce your product.
The bottom line is: keep your eyes and ears open.
Ask around about reliable manufacturers and attend local events when you can. You never know what valuable business relationships can form when you ask the right questions.
4. Online Marketplaces
Okay – we’ve talked about SaleHoo, but when we say “online marketplaces,” we’re talking about something different.
Online marketplaces are third-party sites where you can find item listings from thousands of sellers. Popular examples include:
You might be thinking, “I’ve used those sites for personal purchases hundreds of times before – how are they suppliers of private label inventory?”
It’s easy: search for “private label” plus your product on any marketplace and browse the results.
Look for sellers selling a similar product and reach out to their supplier. It isn’t as simple placing a typical order, but it’s an effective way of finding private label manufacturers.
Choosing a Product to Private Label
Now you know where to find private label manufacturers, but first you need to know which products you’re going to sell!
Ultimately, whatever your sell should give you a high return on investment. It should be profitable, marketable, and – ideally – offer potential for repeat purchases.
Chances are, you already have ideas of what to sell. If not, simple research can help you find the right niche based on profitability and overall value.
As you think about products to sell and you conduct research, think about a few key factors that set great private label products apart from the rest:
1. Is it cost effective?
It goes without saying your profit margins are a major consideration when starting a private label brand.
If you don’t make money from your product, your business won’t last for long.
When you determine a product’s cost-effectiveness, you need to consider all of the expenses that go with it. This includes fees, taxes, shipping, and product loss.
If you can make your ideal profit margin after you consider your prospective costs, you may have found a valuable niche.
2. Will shoppers make repeat purchases?
Converting shoppers into long-term, repeat customers is valuable to any business. Earning loyal customers is a process, but offering the right types of products is a head start.
But what types of products do customers buy more than once?
Think about buying a pair of headphones as opposed to buying groceries. You might buy headphones once or twice a year, but you probably go grocery shopping once every week or two.
When you buy headphones, you aren’t going to make another purchase from the same brand until you need another pair (or you’re buying a gift).
This isn’t the case with food products. You might buy the same brand of cereal every time you go to the store.
Consider this when you’re thinking about potential private label products. Niches with high chances of repeat purchases include:
- Pet supplies
- Cleaning products
- Food and groceries
- Baby products
- Makeup and skin care
Another option is to sell products with replaceable accessories. For example, customers usually buy an air purifier once every few years, but they buy filters regularly in the meantime.
3. Is there enough demand for the product?
If shoppers don’t want your product, you’re not going to sell many units.
Alternatively, if they want it so much the market is saturated, you may struggle to get a foothold.
You want to find a product with an even balance. Your niche should be in demand, but you don’t want to compete with too many other brands.
Market research will help you find out which products are sellable and profitable, based on current trends. You can pay for a market research tool or do it manually.
Whichever method you use – make sure you note each product’s average revenue, their reviews, and their estimated monthly sales. These statistics will help you narrow down niches until you find one with profitable potential.
4. Are you excited about the product?
In business, we often consider profits over our personal preferences.
Regardless, your interests should play a key role when you start your private label business.
If you start a business in a niche you don’t like, you may be less likely to support it in the long-run. It’s important to have an interest in whatever you’re selling or you may tire of it quickly.
When you compare products to sell with your private label, start with the ideas that interest you the most. You may be surprised at how valuable your favorite interests can be!
Designing Your Brand Identity, Logo, and Packaging
Before you order any inventory, you need to sort your your brand’s vision.
How do you want your customers to see you?
What message are you trying to send?
This is all part of your brand identity, which sets you apart from other companies in your niche.
Your brand identity is almost as important as the quality of products you’re selling. Without a professional, memorable presences, it’ll be challenging to make an impact on shoppers.
After all – if your brand identity wasn’t so important, what would be the point of private labeling?
Determine Your Brand’s Personality and Vision
Have you ever associated certain thoughts or emotions with a brand?
Think about Apple and the message they’re trying to send: luxurious, simple, minimalist.
When you think of Apple, you know what they’re trying to achieve. It’s evident in everything they do – their products, logos, advertisements, etc.
Like Apple, think about your brand’s ideal personality.
Reflect your vision with your color choices, fonts, and imagery. Imagine you are telling a story with your branding.
If you’re working with a professional graphic designer, express your vision clearly. Make sure you describe what you want as closely as you can so they make it come to life.
With the right branding, your brand will have an aura of authority before you sell your first product. Take your time defining your vision and be sure to settle on a logo that truly represents your brand’s personality.
Create Branded Packaging For Your Products
Branded package is an excellent way to make your products stand out from generic alternatives.
Again – let’s think about Apple.
If you’ve ever purchased an Apple product, you know there is a certain ‘X factor’ when you open it for the the first time.
The packaging is classy yet minimal, reflecting Apple’s overall vision.
For Apple, packaging is as important to their brand as the product inside. It’s an extension of their personality.
You can offer a similar experience tailored to your niche. Think about it: when you open a recent purchase, you like it when the experience is memorable.
Consider branding your packaging with your logo, color scheme, and other graphics that represent your personality. Try to create an experience that leaves an impression on your customer.
Branded packaging also creates a sense of validity when customers open their product. If you’ve ever purchased something that showed up in an unmarked white box, you understand!
The internet is full of brand design services offering custom packaging options. You can order branded boxes, tape, and more to make your company stand out.
As with manufacturers, do your research before you hire a brand design services. Compare prices and look at reviews to make sure you’ll get what you pay for.
And yes – branded packaging will probably cost more than standard options. But it’s an important post-sale factor that helps you build community among your shoppers and earn a memorable reputation.
By taking this extra step, you can truly set your private label brand apart from the competition.
The internet is full of sellers trying to earn their piece of the pie.
To make your mark, your brand needs something to make it stand out.
Private label products are one of the most effective ways to compete. By offering exclusive products customers won’t find anywhere else, you’re minimizing your competition.
Building customer loyalty is also easier as a private label brand. When you deliver a quality, reliable product with your logo on it, shoppers will be more likely to consider you when they make future purchases.
Selling private label products doesn’t have to be complicated.
Research and patience are your most valuable tools, helping you find product suppliers that meet expectations.
Whether you’re selling products online or in a brick-and-mortar store, private labeling can boost your profit margins and help you outdo the competition.
Ultimately, with the right knowledge and planning, private labeling can give your brand a unique identity and help you make a name for your business.