As an entrepreneur, building your brand is paramount. You have a desire to have your name on every item you sell in your store. However, it is hard to manufacture everything your customers need. Doing so would require a huge investment in establishing each manufacturing line.
For instance, if you deal with food items, you would need factories to produce each of them. Even if you are a billionaire, realizing this goal can be a challenge.
Fortunately, you have a shortcut to fulfilling your desires. The shortcut is white labeling. Many entrepreneurs use this model in boosting their brands. But what is the white label business model, and how does it work?
What is White Label Business Model?
The white label business model applies the same approach to private labeling. But for white labeling, you do not have input on the production process. This model involves selling products of another company under your brand name.
Unlike in private labeling, you buy the complete products, repackage, and brand them. In other words, you replace the owners’ label with your own and offer it to the customers. Usually, the manufacturers do this to enable them to benefit from the brand reputation of the labeling company. Hence, it is a superb way of boosting sales for unknown manufacturers.
How Does White Label Business Model Work?
White labeling works similarly to dropshipping. But in this case, you do not sell the products under the suppliers’ name. You change the labeling and sometimes the packaging and sell it as your brand. This model involves three parties which are the manufacturer/supplier, white labeling company or brand, and customer.
The manufacturer or supplier is the product creator. They design every aspect and feature of the product as well as manufacture it. After manufacturing, the company sells and delivers the items to the white labeling retailer or business. Also, the license them to change the labels on the delivered items. Manufacturers sell the items to the retailer at a lower price.
White labeling retailer is the next party in this model. Their role is to rebrand or change the products they receive from the manufacturers. Then they sell them as their own, carrying their brand name and other product descriptions. Also, they acquire the items at a lower price and sell them at a better one after the repackaging and rebranding process. As a retailer, you market the item or service as your own. This aspect allows you to charge any price to the customer.
The customer is the last party in this process. The customer places their order in the retailers’ store and pays for it. When they receive the item, they assume it is a retailer’s product as it carries the stores’ name. For this reason, many customers have no idea whether the products they buy from a store.
Example of White Labeling Business
White labeling is a model that many retailers employ in their operations. The model is common in many store brands. Walmart is a good example. When you visit many Walmart stores, you will find various items under the “Great Value label.” This labeling does not mean that Walmart is the producer or manufacturer of the item.
Rather, it is working with manufacturers and suppliers who produce these items and package the products under the Walmart brand. The purpose of this practice is to provide the customer with a variety for making a choice. For your information, the suppliers of the Walmart branded item may also be having products under their name on the same shelf.
Costco is another example that uses the white-labeling model. The company sells Kirkland signature batteries. Costco does not manufacture batteries. Rather, it sources them from Duracell and white labels them by changing the labeling to Kirkland.
Pros and cons of White Label Business Model
As you know, no business model is perfect. Each model has its benefits and shortfalls, and white labeling is not exceptional. Here are its pros and cons:
Pros
Fast solutions
Providing goods and services while building your brand is the desire of every business owner. You want to drive sales by selling items calling your brand name. in most cases, this dream is unachievable. Here is where white labeling becomes your savior.
By allowing you to use the products already in the market, this model saves your time and money. Your focus now turns to marketing and advertising rather than think about how you will create new products. So, it enables you to find fast solutions and boost your brand.
Save manufacturer’s cost
White labeling does not benefit the retailers alone. The manufacturers also get a share of the benefits. As the product creator, this practice saves you from branding and marketing costs. Your role is to provide the item and let the retailers do the rest. This way, it helps you improve efficiency and reduce your overall business costs.
Easy scalability
White labeling is the power gear to your business scalability. As you do not need to set up a manufacturing unit, you can establish new product lines under your brand. All you will need are the manufacturers of the items and get a white labeling license from them. So, no limitation on the number of products you can offer in your business which enhances its growth.
Cons
No credit for items sold
As noted, white labeling transfers the ownership of the products from the manufacturer to the retailer. This aspect means that everything goes to the retailer. So, as a manufacturer, you do not earn credit for your products or services offered.
Zero control on the quality of the product
For retailers, their role is labeling and repackaging the products. You do not have a say on what gets into the product. By this, it means that you have zero control over the product’s quality. Hence, it is of poor quality; you will hurt your brand in place of the manufacturer.
Conclusion
In a word, white labeling is a powerful way of establishing your brand. The model allows you to have products under your brand name in the market. This way, it helps you build some customer loyalty and increase your growth opportunities. However, it has a hurtful impact on the manufacturer, who never gets credit for their products. Despite this, white labeling benefits both the manufacturer and retailer.
