A white label product is any that is manufactured by one company and sold under a different brand name by another company. Services can also be white-labeled. In this case, the company purchases a service from another company and then sells the service as its own. White labeling, therefore, involves the production of a good or service that is rebranded and sold under the name of another company. The strategy is named after the white label on a product’s packaging that can be customized with the selling company’s trade dress.
Understanding the white label business model
Some key components of white labeling:
The white label business model involves a company selling products with its own branding that were manufactured by others.
The white label business model has been successfully implemented in many industries. These include coffee, pet accessories, fitness apparel, website hosting, and accounting.
The white label business model reduces costs for the reseller and allows them to rapidly expand their product range to take advantage of market trends. The model also facilitates a long-term relationship between both parties.
The white label business model is a business-to-business (B2B) approach involving a manufacturer and a reseller.
There are three core components of the model:
First, a manufacturer creates a white label product that has no name, label, logo, or branding.
The manufacturer then sells the unbranded product to a reseller who is free to customize the product to suit their brand. In some cases, the same white label product may be sold to multiple resellers.
The reseller then sells the now branded product to its customers. For the white label business model to be effective, it is important customers are unaware of this process.
White label business model product examples
White label products tend to be concentrated in banking, retail, eCommerce, and digital marketing, among many others.
With that in mind, here are a few profitable white label product examples:
Coffee beans
Some coffee producers work with other businesses to produce custom blends and branded packaging.
White label coffee beans normally require a significant investment, but many have found success dealing with reseller Dripshipper which is also fully integrated with Shopify.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
White label products are well suited to pet service businesses that may need to secure alternative revenue streams because of COVID-19.
Accounting
White label products and services are also offered to accounting companies.
Businesses such as BooXkeeping offer accounting-as-a-service, while others such as Bean Cruncher Accounting offer white-label API integration to create more robust and diverse client-facing products.
Fitness apparel and accessories
The pandemic also caused an increase in home fitness items.
Multiple print-on-demand manufacturers are now producing white-label fitness equipment, t-shirts, socks, yoga mats, and water bottles.
Social media fitness influencers can strengthen their brands and make money at the same time by selling customized, white-label goods.
Website hosting
While hosting is an extremely competitive market, it is also very lucrative with Business Insider expecting it to be worth $154 billion in 2022.
New entrants can still enter the market by bundling multiple white label products together, including hosting, design, SEO services, and add-ons such as live chat software, form builders, and appointment software.
Benefits of the white label business model
The white label business model is a win-win situation for the manufacturer and the reseller. To see what we mean, consider the following benefits:
Cost reduction
The most obvious benefit for the reseller is that the white label business model saves time, money, and effort.
It is ideal for companies with no manufacturing experience or those who want to avoid the expenses associated with product development.
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The model also allows a company to rapidly expand its product offering to take advantage of market trends and boost brand visibility.
Since the product is already manufactured, more resources can be directed toward marketing and distribution.
Long-term relationships
Provided consumers remain unaware of the agreement, the while label business model promotes a sustainable relationship between the manufacturer and the reseller.
Both parties share mutual business interests and both have well-defined roles and responsibilities.
Understanding white labeling
The so-called “store brands” found in supermarkets and other retail outlets are in the majority of cases white-label goods.
In this situation, the manufacturer produces the good for the retailer because the latter has an established presence in the marketplace and can sell the good for a more attractive price.
In essence, white labeling allows the manufacturer to leverage the brand awareness and distribution channels of other companies to increase its sales volume.
For the retailer, avoiding the manufacturing process means more resources can be directed toward marketing.
Businesses types that utilize white label products
White label products tend to be concentrated in the following business types:
Retailers
Companies such as Walmart and Whole Foods offer an extensive range of white label products in various categories.
Walmart in particular has found success selling these products in collaboration with celebrities and social media influencers.
With over $555 billion in net sales in 2021 the company operates a differentiated Omni business model with three primary units comprising Walmart U.S, Walmart International, and Sam’s Club (approximately 12% of its net sales) a membership-only warehouse clubs. Together with Walmart+, a subscription service including unlimited free shipping, unlimited delivery from its stores, and discounts launched in 2021.
One example is actress Drew Barrymore, who has released a line of cookware in addition to clean beauty products.
Electronics companies
Manufacturers of smartphones, computers, and other electronics also participate in white labeling with affiliated retailers.
The approach has been effective in the electronics industry since many consumers are sensitive to price and look for cheaper alternatives.
Mass merchandisers and multinationals
Big-box retailers such as Target are also proponents of white labeling.
The company uses white-label goods to target specific customer segments across various categories such as clothing, home décor, art and craft supplies, family-friendly food staples, and homeware basics.
The difference between white labeling and private labeling
White labeling is often used interchangeably with private labeling, but there are subtle differences between the two strategies.
White labeling
As we noted earlier, a white label strategy involves the brand being removed from a product or service and replaced by the brand of the purchasing company.
For example, Walmart’s Great Value white label brand is produced by manufacturers willing to display that company’s brand instead of their own.
The retailer of a white label product only has control over what the label looks like.
In other words, the manufacturer determines how the product is made, how it is packaged for sale, and what ingredients it contains.
For this reason, the manufacturer may also sell the same product to multiple retailers to be on-sold under multiple brand names.
Private labeling
Private labeling involves one company selling the products of another company using its own branding and packaging. In most instances, a retailer purchases products from a manufacturer that are then sold to consumers with the manufacturer’s brand and packaging visible. In private labeling instead, the retailer might have a third-party manufacturer produce goods and sell them under the retailer’s brand. Therefore the manufacturer acts as a private label, not showing its brand toward consumers.
A private label strategy also involves a retailer contracting another manufacturer to produce goods on their behalf.
However, the retailer of a private label product has control over every aspect of the process except the manufacture of the product itself.
This means they control the product ingredients, packaging, distribution, and even production volume.
In addition to being sold directly to consumers, private label products can also be on-sold to wholesalers.
Key takeaways
White labeling involves a product or service that is sold and rebranded under the name of another company. Manufacturers produce goods for the retailer because the latter has an established presence in the marketplace and can sell the good for a better price.
White labeling is common amongst retailers, electronics companies, mass merchandisers, and multinationals. Walmart and Target are two examples of companies with a diverse white label product range.
White labeling is often confused with private labeling, but there are subtle differences between the two approaches. White-label product retailers have control over the product label, with the manufacturer controlling all other aspects and potentially selling the same product to multiple companies. Private label product retailers have much more control over product development and the product itself may be on-sold to other wholesalers.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
