Private Label

Private Label

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Find a domain, explore stock images, and amplify your brand
Use Shopify’s powerful features to start selling
Sell online with an ecommerce website
Sell at retail locations, pop-ups, and beyond
Transform an existing website or blog into an online store
Provide fast, smooth checkout experiences
Reach millions of shoppers and boost sales
Sell your products wholesale to retailers from across the US
Reach buyers in new markets with international selling tools
Get paid faster, avoid monthly fees, and manage your finances
Learn everything there is to know about running a business
A private label product is manufactured by a contract or third-party manufacturer and sold under a retailer’s brand name. As the retailer, you specify everything about the product – what goes in it, how it’s packaged, what the label looks like – and pay to have it produced and delivered to your store. This is in contrast to buying products from other companies with their brand names on them.
For example, Target sells a variety of branded snacks from companies like General Mills and Frito-Lay, but it also sell its own chips and crackers under the Archer Farms brand – Target’s private label brand.
Hair salons often create their own branded line of shampoos, conditioners, and styling products for their customers to buy and take home. Restaurants often decide to private label condiments or mixes that have become popular with customers. Maid services could private label a line of household cleaners and pet stores could private label a line of pet foods and grooming tools.
Almost every consumer product category has both branded and private label offerings, including:
While private label products are in the minority, comprising 15% of U.S. supermarket sales , according to the Harvard Business Review, some private label categories are seeing strong growth , according to a Nielsen Report.
Retailers interested in filling their shelves with products featuring their brand name have good reason. Some of the biggest advantages of private label products include:
The disadvantages of adding a private label line are few, as long as you have the financial resources to invest in developing such a product. The main disadvantages include:
Although private label products are typically sold at a lower price point than their name brand brethren, some private label brands are now being positioned as premium products, with the higher price tag to prove it.
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Private Labeling 101
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Ecommerce Learning Center » What is Private Labeling?
The majority of retailers, online and offline, obtain products from suppliers. Few brands manufacture and sell products directly to consumers. Many companies sell products without their name and branding unless they’re using private label products.
Let’s take a closer look at what private labeling is, how it works, its pros, cons, and more. By the time you reach the end of this article, you’ll know if this is the business model you want to use.
A third-party manufacturer produces a private label product. It is sold under a retailer’s brand name.
The retailer controls everything about the product. From its specifications to how it’s packaged, and everything in between, you choose it all. Once they’ve been produced, the products are shipped to the retailer for sale.
From the consumer’s point of view, the private label products are the company’s “own brand” of products.
If you’ve ever shopped at a big box retailer, you’re already familiar with some big-name private label lines. Many national brands are private labels.
Walmart has several private-label goods sold under their own brands, including:
Amazon also has its own private label brands (over 100 of them!) across several product categories, including:
Other major retailers like Target and Walgreens also have their own private label brands. Grocery stores also use private labeling. If it’s a generic product in a major retailer or a store brand, it’s likely a private label product.
According to the Private Label Manufacturers Association , the private label market share accounts for nearly 1/4 of unit sales in the United States. What’s more? The rate is growing faster than national brands.
A private label manufacturer works with a brand to sell products under the manufacturer’s name. The manufacturer isn’t given any credit on the label. The products may be sold independently, or to support other products.
Let’s say a coffee company sells its coffee to other companies so that they can use it as an ingredient. That’s a private label agreement.
That coffee brand doesn’t get mentioned on the final product’s label. But, they still get increased sales. The increased revenue helps to reduce costs across customer-facing product lines. It also makes it easier for the coffee company to pay the farmers who handle the coffee plants.
The brands using the coffee can say that it benefits farmers in another country. That marketing point helps to drive additional sales from their built-in audience.
Private labeling works well for products that add value to other products. The coffee brand sells to ice cream manufacturers to make coffee-flavored ice cream.
If you want to start an ecommerce business but don’t have experience, private labeled products can help. In fact, your ecommerce platform may have features that make running your private label brand even easier.
Which do you think a customer is more willing to buy? A product they’ve never tried before that they see at their favorite retailer? Or a product they’ve never tried before, from a business they’ve never heard of?
That said, your product has to be able to sell itself without brand advertising or promotions.
As a retailer, you have control over every part of your private label line. You can define the ingredients or components. You can control things down to the color and shape of the product.
You control how the product is branded and marketed, too. When you sell branded products, people aren’t becoming loyal to your company. They are dedicated to the brand and their favorite items.
Since the private label products bear your branding, you can build loyalty. Over time, you can establish brand equity. That equity is valuable should you decide to sell your business.
Retailers control the entire supply chain, so there’s total control over product pricing. And with that pricing control comes a better profit margin compared to resale products.
The cost of making your products is usually more affordable than buying premade products. As a result, you can make more money on each sale.
Many private label businesses operate as a wholesaler for their own brand name. This lets you offer limited access to other retailers. Those retailers pay a premium acquisition cost for the right to carry your brand in their stores. You’ll generate additional income and increase your brand exposure.
If you don’t want to go the wholesale route, you’ll have exclusive rights to your product. It won’t be sold anywhere other than your store. Private labeling makes it easy to separate yourself from the competition. Many private labels succeed because good marketing creates demand for the product.
There are many good things about starting a business with private label products. But, there are also some disadvantages to be aware of.
Most people will trust a brand they’ve used for a while. Many customers aren’t as likely to trust your smaller, lesser-known brand. It’s important to research customer preferences. When you create a new product line, knowing what your customers want is key.
While you can someday build loyalty to a private label brand, building a brand from scratch takes time. You may struggle initially to grab hold of your target audience and convince them to become repeat buyers.
Remember, your private label brand competes with established brand names in any particular niche.
The long-standing brand names have advantages over your private brand. You’ll find them in a broader range of stores – whereas your private label lines will only be on your shelves. Plus, a national brand or intentional brand will always have a bigger marketing and promotion budget.
Most manufacturers have minimum order amounts they require you to meet before they work with you. They have to use their resources, including production capacity. It doesn’t make sense for them to go through all the work to produce a handful of any given product. They, too, are in the business of profit. In many situations, the minimum order amount is larger than what you would otherwise order.
Most retailers will only order what they know will sell. If they don’t have any experience with similar products, it can be challenging to know what will sell. If they order more than they need, you may be left with a lot of unsold (dead) inventory.
You’ll want to find a niche market to sell products. The good news is, you can find something to sell in nearly any industry. Many products span multiple product categories. Popular products for private labels include:
To be successful with a private label business, you need a solid manufacturer. They must produce a high-quality product at an affordable cost. When you search for private label manufacturers to partner with, there is a lot to think about.
Not all private label manufacturers are created equally. If you want to sell private label cosmetics, you’ll need a company with plenty of experience with it. If you order from a general company, the products could be hit or miss. You’re far better off with a company that only produces the kind of product you want to sell.
If you’re unclear about the private label products you’re looking for, you will struggle to find the right producer. If you know you want beauty products, get specific. Do you want lotions? Body sprays? Face creams? Cleansers? All of these products can succeed under private label brands.
Look at what competing brands offer customers. How can you make your products different? Choose a supplier that not only has the products you’re looking for but can help separate you from the rest of the crowd.
As you search for private label products, you may find that what you see online looks great. But without ordering a sample of the private label products you intend to sell, you’re running a huge risk. Something can look great online and be a huge disappointment in reality.
You’ll want to test the private label products yourself before making a big order and trying to sell them. Many private label goods look incredible online. You may be sold once you talk to the manufacturer, whose job is to convince you to hire them. They want to secure as many private label accounts as possible – and they may embellish a bit.
You don’t want to spend money private labeling a product just to have a bunch of upset customers who didn’t get what they expected. That will destroy your brand reputation before you even had a chance to build one.
The most successful private label brands not only have great marketing. They also start with a quality product.
Order samples of any products you’re considering, so you can get an idea of their actual size. Use the product yourself to make sure it is what you expect it to be. If you don’t feel confident enough to attach your private label to it, keep searching.
There are plenty of private labeling companies to work all around the world. Domestic companies are located in the United States (or the country you live in.)
Overseas are international companies. In most cases, however, you’re working with an Asian manufacturer. Many retailers use companies based in China, Taiwan, and India.
Going on price alone, you’ll want to use an overseas manufacturer. Overseas options will always be cheaper than American companies. But that’s not the only factor to consider.
The distinction between white label products and private label is subtle. Private labels are sold exclusively for one company, such as the Equate brand in Walmart. A white label product is a generic product sold to many retailers, like generic acetaminophen (Tylenol).
With a private labeling relationship, you control the specifications, ingredients, etc. You just pass off the manufacturing to someone else with the facility and supplies to do it.
Let’s say you have a lasagna recipe that’s been passed down for generations. You want to turn it into a business. You locate a manufacturer who can mass-produce lasagnas with your exact recipe.
The manufacturer makes and bakes your lasagnas, puts them in the packing you designed, and then sells and ships the lasagnas to you. At that point, You can either sell the lasagnas at your own website or sell your lasagnas to wholesalers, who then turn around and sell them to grocers. Or, you can do a mixture of the two.
A white label relationship removes control over the ingredients and specifications. You’re only in control over what the label itself looks like.
White label products are manufactured by a third party and sold under your brand name. They are also manufactured and sold under countless other brand names.
Let’s continue with the lasagna example. In this case, you want a lasagna that looks like you made it. You don’t have a recipe or the ability to mass-produce your lasagna. So, you find a manufacturer who specializes in making lasagnas. They take their lasagna, bake it, package it,
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