white-labeling

What Is White Labeling? White Labeling Business Model In A Nutshell

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:

  1. First, a manufacturer creates a white label product that has no name, label, logo, or branding.
  2. 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. 
  3. 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.
  • Pet accessoriesthe online pet care market is worth around $232 billion, so there is an opportunity for eCommerce pet accessory companies to profit. 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. 
  • Responsive expansion – 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. 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
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.

Business Models Related To White Labeling

Private Labeling

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.

C2M Business Model

consumer-to-manufacturer-c2m
Consumer-to-manufacturer (C2M) is a model connecting manufacturers with consumers. The model removes logistics, inventory, sales, distribution, and other intermediaries enabling consumers to buy higher quality products at lower prices. C2M is useful in any scenario where the manufacturer can react to proven, consolidated, consumer-driven niche demand.

B2B2C Business Model

b2b2c-business-model
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.

Account-Based Marketing

account-based-marketing
Account-based marketing (ABM) is a strategy where the marketing and sales departments come together to create personalized buying experiences for high-value accounts. Account-based marketing is a business-to-business (B2B) approach in which marketing and sales teams work together to target high-value accounts and turn them into customers.

Retail Business Model

retail-business-model
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.

Wholesale Business Model

wholesale-business-model
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.

Direct-to-Consumer Business Model

direct-to-consumer
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.

Marketplace Business Models

marketplace-business-models
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.

E-Commerce Business Models

e-commerce-business-models
We can classify e-commerce businesses in several ways. General classifications look at three primary categories:
– B2B or business-to-business, where therefore a business sells to another company.
– B2C or business-to-consumer, where a business sells to a final consumer.
– C2C or consumer-to-consume, or more peer-to-peer where consumers sell to each other.

Marketing vs. Sale

marketing-vs-sales
The more you move from consumers to enterprise clients, the more you’ll need a sales force able to manage complex sales. As a rule of thumb, a more expensive product, in B2B or Enterprise, will require an organizational structure around sales. An inexpensive product to be offered to consumers will leverage on marketing.

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