White label product
Private label products are sold by retailers under their own brand name and logo , but the products are manufactured by a third party. White labeling occurs when the manufacturer of the product uses the brand requested by the buyer or retailer instead of their own. The final product appears to have been produced by the buyer. In this article we will elaborate what is a white label product.
Private label products are easy to recognize on store shelves because the label bears the retailer’s own name (commonly known as the brand name ).
- Private label products are manufactured by one company and packaged and sold by others under different brand names.
- Large retailers successfully sell private label products.
- Private labels are a global phenomenon that has not stopped growing since the late 1990s.
- The main advantage of white labeling is that it saves companies time, energy and money in terms of production and marketing costs.
WHITE LABEL PRODUCT DESCRIPTION
A private label product is produced by a third party , not the company that sells or even markets it. The advantage is that a company does not have to go through the entire process of creating and selling the product. One company can concentrate on the production of the product, another on its commercialization and another on its sale, each according to its experience and preference. The main advantage of a private label is that it saves companies time, energy and money in terms of production and marketing costs .
Another great advantage of private labels is that if a supermarket has an exclusive agreement with a manufacturer, average transport costs may be lower than usual and the company will benefit from distribution economies of scale . Due to lower transportation costs, the retailer could sell the product at a lower price and still make more profit.
Private labels are becoming more common, suggesting that consumers are becoming more price sensitive and less loyal to their favorite traditional brands. In many countries, the growth of private labels is hurting the market share of national brands.
TYPES OF COMPANIES THAT USE WHITE LABEL PRODUCTS
Although private label products can technically appear in any industry or sector, the big distributors are doing quite well. Companies like Walmart and Whole Foods have benefited from selling their own branded products created by other manufacturers.
2-Multinational companies and mass merchants
In 1998, Tesco (TSCDY), a British multinational food and general goods company, began segmenting its customers and developing brands to suit each group. In the United States, retailers have been quick to follow Tesco’s lead.
White labeling in the US has worked especially well for big box retailers like Target Corporation (one product line and collectively they bring in at least $1 billion a year.
The private label is not limited to the supermarket segment. Large manufacturers of high-end mobile phone and computer electronics often put their brands on cheaper white-label products to broaden their offerings.
4-White label in the form of services
White label products do not always have to be tangible. White marks are also used in service offerings. Some banks, for example, use white-label services, such as credit card processing, when they are not available. In addition, non-bank companies often offer branded credit cards to their customers, which is also a form of white label. For example, Macy’s (M) offers its customers branded cards, which are issued by American Express (AXP).
ADVANTAGES AND DISADVANTAGES OF PRIVATE LABEL PRODUCTS
The white label concept has many factors, both positive and negative.
1-Expansion of product lines
Companies can use private labels to expand their offer and strategically target customers; in turn, this can reinforce your competitive advantage.
Third-party manufacturers receive huge contracts that can be accompanied by guaranteed sales and income.
Stores can increase their revenue by selling private label products at a discount compared to national brands.
Private labels can be just as good as national brands because they often use the same manufacturers; high quality generates satisfied customers.
The use of very similar packaging between brands is called imitation, which can be illegal in some cases. Private labels must be sufficiently differentiated so as not to confuse consumers.
A strong retailer can crowd out smaller competitors, creating a one-buyer market environment.
The growing dominance of private labels can make it difficult for new companies to enter the market, reducing global competition.