If you’re interested in the idea of a product business, but don’t have the capital or desire to build a product from scratch, white labeling may be the ideal route for you. White or private labeling is the process of procuring a mass-produced product from a manufacturer but differentiating it with branding and marketing.
White labeling occurs in nearly every industry, including food and beverage, fashion, and home goods. With some diligence, time, and effort, you can launch a white-labeling business by going through the following steps:
Find a Profitable Niche
Choosing the right product is essential to creating a successful white-label business. You can start your research with a niche that you are familiar with. For example, if you often buy accessories for your puppy, you may have an idea of the types of products other dog owners need and purchase.
You can also look for products that have stable sales. You can review the best-selling items on mega eCommerce retailers such as Amazon or Alibaba. While you may not want to enter a niche with too much competition, you could use this information as a starting point by noting the gaps that need to be filled.
For example, you may notice that desk lamps are a high-selling item. However, all the options seem limited to either white or black. Since neutral tones are very popular, you could white-label desk lamps that come in a range of subdued colors.
Calculate Your Margins
When you white label a product, you buy the item in bulk from the manufacturer. While this will lower the cost per unit, you will have to sell each item at a specific cost in order to recoup your investment and make a profit.
The initial cost of the product is just one consideration. You will also have to include the cost of packaging, branding materials, shipping, and marketing. Some of these costs can be reduced. For example, you can compare UPS vs FedEx rates and lower your shipping costs.
Other expenses are just the cost of doing business, and you will have to price your products accordingly. While the exact pricing model will depend on your product or niche, it is common for white-label businesses to offer products at a 100 to 500-percent markup.
Connect with Suppliers
Many manufacturers specialize in white-label products. These companies are adept at shipping out high-quality products in large volumes. You can decide to pre-order batches of your products or use a print-on-demand service.
Pre-ordering items comes at an upfront cost. However, you can perform quality control and ensure that every item is up to your standard before shipping it out to customers.
With the print-on-demand option, you do not carry items in stock. Instead, the vendor creates and ships out the order only after a customer has made a purchase. This can cut overhead costs. However, you would have much less control over the product quality or consistency.
Many suppliers not only provide the products, but can also cover back-end processes, such as inventory management, sales records, and order fulfillment.
Craft a Brand
Since branding is one of the main differentiating factors for your product, it is important that your brand voice is clear, unique, and relevant to your target market. The first step to branding is identifying your audience.
Let’s say you decide to sell dog accessories, such as leashes and food bowls. Does your target customer want unique items, or do they value function over style? Will your products work for dogs of all sizes, or will you niche down to toy breeds or very large dogs? All of this data is key to creating your branding.
From there you can identify your value proposition. If you decide to target function-minded dog owners, your branding should demonstrate the utility of your products. Perhaps your accessories are made from germ-resistant materials or can collapse and fit neatly into a bag. Play up these features in your branding so that you attract the right customers.
When crafting your brand, you should also choose colors and fonts that represent your values. This should be consistent across all of your marketing channels so customers have a cohesive experience interacting with your brand.
Select a Platform
You can sell your private label product in retail or online. If you go into stores, look for shops that would attract your ideal customer. If you find a retailer who will buy your product in bulk, you can lower the markup a bit.
You can also sell directly to consumers through your own website or a third-party site like Amazon. eCommerce platforms like Shopify also allow you to quickly set up a virtual storefront that can process payments and handle fulfillment processes.