Products which are rebranded and modified by resellers then made available in the market are known as either private label or white label products. These two terms are often confused with each other and a lot of people think both describe the same thing. In this wiki article, we will enlighten you about the difference between private label and white label manufacturing to clearly distinct these two. In general, both are ready-made existing and off-the-shelf designs, also called Original Design Manufacturing (ODM), and shouldn’t be confused with custom or self developed designs, also known as Original Equipment Manufacturing (OEM).
Private Label vs. White Label: The Difference
When you look around malls and supermarkets, you will see products which are not sold under the actual manufacturer’s name. A good example are well-known food brands. Consumers already identify this brand and trust is already established between the brand and consumers. In the case of private label brands, products are made by manufacturers that are not associated with the brand but the private label company acquires exclusive rights to sell and market them as private label products. The private label company has the right to modify or enhance the products according to their target market, but the product is in principle the same and often sold to many different brands (I bet that the 20 kinds of French fries in your supermarket just come from 2-3 manufacturers with minor differences). Here is a nice article about another everyday product and it’s private label background.
On the other hand, white label products are simply generic products sold by manufacturers to retailers. The retailers have limited rights and privileges to alter these products but they can repackage these white label products under their own label. If you see products in the market which are very similar yet branded differently, these are prime examples of white label products out there in market today. Let us get to know the main difference between private label and white label marketing:
The biggest difference between private label and white label companies is the exclusivity the former enjoys which is the privilege to modify and enhance the product according to their preferences and target market. You can even sometimes get exclusivity for a private label product. This freedom does not exist with white label products since they are only limited to repackaging their product under their own label. They cannot modify these products or alter them according to their preferences and the rights to sell these are not as exclusive. Of course, these terms are often used incorrectly, also because it’s hard draw the line sometimes.
Private Label versus White Label: The Pros
The biggest advantage of private label products is that they still have something unique about them. The general functionality might be well-known and common, but they often have a relatively unique product design or similar unique features that white label product usually don’t have.
Another advantage of private label products is they are generally cheaper compared to independently developed products due to returns to scale of the manufacturer that is making different versions of a similar product for several clients. Furthermore, private label products can easily target a specific market and modify their brand specifically for this market quicker. For example, a factory selling many different power banks can quickly and relatively cheaply adapt a standard model to the needs of a supermarket chain. It’s looks like a custom product, but it’s just the same thing altered individually for a specific client. Also, it comes with the exclusivity that this exact version is not sold to anyone else.
When it comes to white label products, they are cheaper compared to the private label route and with the right marketing strategy, they can still generate high profit margins out of generic products. The lowest possible price and fastest availability are the biggest advantages here. They can still embody brand recognition since they are allowed to repackage these same, non-exclusive white label products according to their preference and eventually create a following. If they become a hit in the market out of a single white label product, it would be easy for them to follow it up with a different one due to the power of brand recognition from consumers.
Private Label versus White Label: The Cons
The clear disadvantage for private label products is they can create a confusion among consumers once they alter a product already known in the market. It is a gamble which could either be a success or failure on their behalf and the brand doesn’t extend to this other product. We all know gamble is part of the business but it is very difficult for private labels to excel in a market given their product is not totally associated with their company. Another disadvantage is that they are more expensive than white label products.
For white label products, the clear disadvantage is that there can be the exact same product being sold at a lower price than you had in mind. Another disadvantage is that there is virtually no room for customization. Just re-packing and re-branding a product works well sometimes but certainly not always. It strongly depends on your target market and what products are already available there.
Knowing the difference between private label and white label manufacturing is indeed difficult since you cannot simply tell it based on the surface of a product unless it is a very popular or common product which you already know exists from another brand or you know the manufacturer. You really have to dig deeper like know its manufacturer and product details for you to be able to tell whether the product is either private label or white label. Everyone is following these two manufacturing principles, from Amazon to Walmart.