Private labeling is a business model that allows retailers to take existing physical products developed by manufacturers and putting their own branded labels and packaging on it. The manufacturers allow retailers to then sell it under their own brand. Some popular companies that use private labeling are Costco and Amazon. Costco has their own private label brand, Kirkland Signature. They have a myriad of products that they typically sell at a lower premium than "fully branded" products. Amazon recently created its own private label brand called Amazon Basics. They source products from existing manufacturers and put their own label on the products, resold as if they designed and manufactured the products themselves.

Generic Products and Slight Alterations

With private labeling, there are generally two routes that a retailer can take; generic products rebranded or slight alterations to a manufacturer's existing product with rebranding. The first option allows manufacturers to sell their mass-produced generic products to any other retailers, but it's usually the cheapest option. It makes it harder to compete on product features and your only competitive advantage is branding and marketing. The second option allows you to create products that are distinctly your own and contractually only sold to you (given a manufacturer doesn't break predetermined contractual agreements), but usually at a higher cost.

Contract Manufacturers and In-house manufacturing

Other notable options that are outside the scope of private labeling is contract and in-house manufacturing. When you want to create a unique product that isn't in production by existing manufacturers, you'll want to use contract manufacturing or in-house manufacturing. There are many nuances to creating your own product like design, engineering, prototyping, and manufacturing, but we'll stick to the manufacturing side.

Typically, if you're low on budget but you want to create your own product, contract manufacturing is the way to go. You don't build your own manufacturing facility, you just outsource the production to a contract manufacturer. You give them the details of your product and they'll make it to your specs.

In-house manufacturing is another option, but it's usually the most expensive in the short run. It's when you buy the necessary equipment and machinery to produce your own product at scale. However, the upside to in-house manufacturing is flexibility, quality control, production output, and higher proprietary security.

Difference Between Private Labeling and White Labeling

It's important to try to distinguish two terms that have become almost synonymous, private labeling and white labeling. There doesn't seem to be a centralized definition for either, but we'll try to build some fences around each term so that there won't be confusion, at least when we refer to one or the other on Unwage.

In our context, private labeling is distinctly physical products that can be resold under a different brand other than the originating manufacturer. White labeling is a similar concept but it's for intangible products like software and services. There are software development companies and service providers that create "white-labeled" software/services intended for resellers to brand as their own.

Private Labeling for the Little Guys

Now you might be thinking, "Can only the big players like Costco and Amazon use the private labeling model?" The answer is a resounding no. Even aspiring entrepreneurs with relatively little capital can start their own private label brands.

There are many manufacturers in various categories around the world that provide private labeling services. Here are some below: