For anyone not involved in business, it’s easy to assume that every company offering a product or service produces it on their own. This is not the case. In the business world, white labels exist, enabling companies to provide products and services beyond their production capabilities.
But what does white label mean in business and why should your company consider it? Let’s unpack these questions in detail.
White label: a definition
A white label is when one company makes a product or service and sells it to another company, which then sells it to the public under their branding. The public is none the wiser, which suits both companies.
A white label can be anything: yoga mats, messaging apps, even coffee beans. A marketing agency that wants to expand—and meet their client’s demands—might outsource white label backlinks to a third party. Again, public knowledge of this relationship is largely irrelevant; as long as the product or service meets the public’s expectation of that brand, there’s rarely an issue.
White label vs private label: what’s the difference?
Enough research on white labels will lead you to private labels, so let’s clarify the difference. The main difference is a white label product or service is generic; a private label isn’t. The same white label can be used by different brands, whereas a private label is made for one brand only. The tradeoff for this exclusivity? Your private label will cost more but you’ll have more say in its development.
A private label you’ll likely know of (and possibly have bought from) is Kmart’s incredibly successful in-house lifestyle brand, Anko.
Why should I use white label services or sell white label products?
Before we state the case for using white label services or selling white label products, it’s critical that you thoroughly assess whether their addition helps or hinders your brand’s overall business strategy. Implementing products or services into your business without researching the possible effects is an uncalculated risk; not the kind worth taking in business.
Advantages
There are many advantages to offering or selling white labels; here are a few of the more common benefits:
Fewer costs
Fewer production costs. Having someone else build a product for you removes a weighty amount of production from your schedule. Think supply chain logistics, think warehousing, think product development. Not to mention a far smaller workforce. If your business is new, these are costs worth saving on
Quick release
Let’s return to product development. Say your brand wants to take advantage of the current trend of reusable drink bottles. Developing a worthy market entrant might take years—but not if you source a white label supplier to produce your bottles. That way, you can focus on a strategy to rival reusable bottle market leaders Yeti.
Less risky
If you decide to develop the reusable bottles yourself and the public still buys Yeti, you’ve risked a lot for no reward. Using or selling white labels removes this risk, at least on the production side. A reputable white label supplier can produce prototypes that you can see before you buy, even test the market with. Do everything yourself and you won’t have that luxury.
Disadvantages
There are also some potential disadvantages to consider when looking into white label options:
Control
The biggest disadvantage of using white labels? Control: plain and simple. A significant portion of a product’s lifecycle happens without you, or with minimal input or influence from you. For some things, this won’t matter. If your coffee beans arrive undamaged and taste good, you have little to worry about.
Less knowledge and involvement in the manufacturing process isn’t necessarily a positive for products like electronics, particularly if you offer warranties for them. If you take this path, do everything you can to understand the production process and offer the right advice and support.
Production flexibility
If you’re a niche brand that prides itself on being different from the rest, the lack of production control might hinder your approach. White label suppliers tend to produce in bulk, and slightly different products and services require slightly different modifications during manufacturing—and modifications cost more.
Also, changing your mind on a whim isn’t an option when you outsource products and services. Not unless you want to cause a rift with your supplier.
Supplier conflict
Being fussy or unpredictable isn’t the only way to fall out with your supplier. Sometimes, your vision and their reality simply don’t align. Of course, this is common and natural in business; it’s certainly not the end of the world. If the situation is irrevocable, you will need to find a new supplier. Disruption ensues
Why should I offer white label products and services to other companies?
In many ways, the benefits of offering white label products and services are the flipside to using them. Instead of saving on production costs, you’ll save on advertising; effective business-to-business marketing will be your main promotion channel.
If you offer white labels and offer them well, your business will live the life of a quiet achiever, gaining success without public scrutiny. You’ll build a reputation in the industry as a trusted supplier, gaining more customers and developing a broader range of offerings.
Again, the disadvantages are the opposite. You’ll have no say in the direction your products and services take once they leave your hand—a disadvantage one could argue is cosmetic and nothing more.
It’s hard to ignore the benefits a business enjoys when it embraces white labeling. As a strategy, it’s agile and versatile; you can respond quickly to market trends without disrupting your operations, adding to your production costs, or risking a warehouse filled with failed stock. Any one of these pitfalls could prove fatal to your business.
Our advice? Do your due diligence. A supplier with prices too good to be true will likely have products too poor to sell. It’s your reputation on the line, not your suppliers, so don’t settle for anything less than exceptional. The key is finding a supplier that understands your company’s mission and objectives almost as well as you do. When you find them, foster that relationship and success will flow in both directions.
