What Is a Private Label? How Private-Label Products Work
Private-label products are produced by a third-party manufacturer based on retailers’ specifications. Retailers then market and sell those products under their own brand.
What is private label?
A private label refers to a product manufactured by one company and sold under another company’s brand name. Retailers often use their private-label lines to offer exclusive products, expand their catalogs, and undercut competitor pricing.
Private-label products can be similar to items that already exist on store shelves, but the exact manufacturing formula of the product must differ. For example, if a private-label business sells a box of chocolate chip cookies, the precise recipe won’t be found under any other label. The same applies to private-label brands selling electronics, jewelry, clothing, pet foods, etc.
How does private labeling work?
The private-label business involves two types of companies:
- Private-label manufacturers, which work with businesses to design and produce a product.
- Private-label sellers, which brand, market, and sell private-label products to retail customers.
A reliable private-label manufacturer will ensure product quality and keep production costs under control.
A savvy private-label seller will build brand equity among consumers, advertise, and set up a profitable pricing model.
Private labels vs. white-label products
Private-label goods shouldn’t be confused with white-label goods. White-labeling also involves a third-party manufacturer making a product on behalf of a retailer. However, white-label products are not custom-designed for a seller.
A white-label manufacturer makes large amounts of generic product, then sells it to individual retailers. Each retailer sells those products to consumers under a brand name.
In other words, private-label product lines are unique and sold exclusively through a single retailer, like Costco’s Kirkland Signature or Amazon’s Basics range. White-label products are generic and sold under the brands of multiple retailers.