The concept of private labeling is not new in the manufacturing industry. In fact, it has been around ever since trade and commerce emerged. Most of the products you see out there in the market today are actually private label products which you do not know of since you never really cared to research on their production roots. A private label business model is a common practice in the world of manufacturing and you would be surprised to notice if it could be the perfect business option for you. There is a private/white label manufacturer for pretty much any product out there. Even Amazon itself is doing private label business this way.
What is a Private Label Business Model?
A private label business is the act of selling products manufactured by other companies under your own company or label. Have you noticed similar products out there in the market today which are almost the same except for their packaging and brand? Those are most likely private label products. Obviously, there has to be an agreement between the ODM (original design manufacturer) product owner and the private label business before the latter is able to acquire and be authorized to rebrand and repackage such product/s.
Popular e-commerce websites such as Amazon and eBay are homes to a lot of businesses selling private label products. You can check this yourself by visiting any of these virtual stores and search for a specific item which is currently trendy and is very marketable. The search results will present multiple products being sold by different merchants. If you observe closely, the items presented vary in terms of price and packaging but if you read the product specifications they are one and the same. These are surely private label products.
Why does the Private Label Business Model Work?
Consumers are always open for options and selling private label products simply gives that possibility. Besides, having different brands instead of a lone dominant brand is always proven to be healthy for the market economy-wise. On behalf of original design manufacturers, they are able to rake in sales by allowing these private label companies to purchase their products and market them as the latter’s own private label products. Even without their brand getting recognition, ODM companies are able to sell their products with lower manufacturing costs by escaping the marketing and advertising expenses.
A private label business model is a win-win concept for both ODM companies and private label businesses. If these private label companies will excel in selling their own private label products then the ODM companies will still indirectly gain from these since the private label companies cannot deny their manufacturing origins. In fact, a private label company can work harmoniously with an ODM company and both draw success from their respective work.
The private label business model is perfect for products which need branding and new approach. Even if you’re already selling branded good, go out and create your won label brand from what you have learned as described here by the Financial Times. These days, you can rarely see a product out there in the market which is totally unique and without any counterparts. A generic product with literally no market experience can be transformed into a fresh item via private labeling as long as it is done with right advertising, branding and packaging. Consumers will become curious and be enticed to buy this new product not realizing it is only a revamped version of the generic one.
Dealing with Private Label Manufacturers
If you intend to start selling private label products then you need to work with a private label manufacturer or an ODM company suitable to your needs. First and foremost, you need to conduct research on your potential customers to know what they want and understanding their purchasing power before finding your potential private label manufacturer. Once you know the product you want to sell and with a solid private label business plan then it would be easy to find a ODM manufacturing company you can work with to create your own design.
Original equipment manufacturers or ODM companies can easily be found at trade shows and networking events as they normally showcase their latest products in these places. Try talking to several ODM companies before making your choice instead of settling with the first private label manufacturer you can talk to. After making a choice, talk them out regarding patent and licensing for products you will purchase from them. This move will not only give you ownership of your private label products but also protect them from competitors trying to market similar products.
Private label manufacturers have different terms and conditions when dealing with private label businesses. You need to have all of these sorted before signing any contract with them which you might later regret due to a single term or condition in which you cannot agree on. Have an open communication line and discuss with them your private label business plan so they can understand how and in what aspect they need to support you to altogether form a harmonious business relationship.