What is white labeling?
White labeling is when one company makes a product, but another company sells it under their own name. The first company does all the hard work of creating the product, but they don’t put their brand on it. Instead, they leave it blank for the second company, who then adds their logo, packaging, and style. To customers, it looks like the second company made the product, even though they didn’t.
White labeling is becoming super important for businesses today. Why? It helps companies expand their product range quickly without needing to spend time or money on making new things from scratch. Imagine a store that sells beauty products—they can buy face creams made by a third-party company, slap their own brand on it, and start selling it as if it’s their own unique product. This way, businesses can respond to market trends fast and keep their customers happy by offering more products without the extra work of manufacturing.
With industries like retail, cosmetics, and even software getting into white labeling, it’s a huge opportunity for businesses of all sizes. Whether you’re a small brand looking to offer more items or a large company needing to keep up with competitors, white labeling provides a flexible, cost-effective way to stay ahead. It’s a smart solution that many companies rely on to keep growing in today’s fast-paced market.
How white labeling works
White labeling is pretty straightforward. A manufacturer makes the product, but instead of putting their own brand on it, they leave it blank. Then, a retailer (like a supermarket, online store, or beauty brand) buys that product, adds their own branding, and sells it as if they made it themselves. This way, manufacturers stick to what they’re good at—producing the actual product—while the retailers focus on branding, marketing, and getting it in front of customers. Both sides benefit from doing what they do best.
Key players: Manufacturers, retailers, and consumers
In white labeling, there are three main players involved: the manufacturer, the retailer, and the customer. The manufacturer makes the product but remains invisible to the customer. They’re kind of like the behind-the-scenes hero. The retailer is the one who buys the product, brands it, and sells it to consumers. And the customer, who sees the retailer’s branding, assumes the retailer made the product. The consumer usually has no idea that another company actually produced the item.
The white label supply chain: from creation to branding and selling
The process begins with the manufacturer, who designs and produces the product. Let’s say it’s a skincare cream. The manufacturer creates the cream, packages it in simple, unbranded containers, and ships it to the retailer. The retailer then takes that unbranded product and adds their own packaging, logo, and any marketing materials they need to make it fit their brand’s image. Once that’s done, the retailer sells the product in their stores, whether it’s a physical location or an online shop, under their brand name.
How products are rebranded
Rebranding is the secret sauce in white labeling. This is where retailers make the product look like their own. They might design new packaging, create ads or social media campaigns, and market the product to their target audience. Even though the product inside the packaging might be identical to what another brand sells, how it’s presented can make all the difference. Think about generic store brands at the supermarket—they may be the same as name brands inside, but the branding changes how we perceive them.
The difference between white label and original products
Original products are created, branded, and sold by the same company from start to finish. White label products, on the other hand, are made by one company but branded by another. The main difference is ownership of the brand. For original products, everything—product creation, branding, and selling—is done in-house. With white label, it’s a team effort between the producer and the retailer.
Who uses white label products?
White labeling is used by tons of industries, from food to software. Let’s take a closer look at where you’re most likely to find white label products.
Food and beverage
Ever noticed how big supermarkets have their own store brands? These private-label food products—whether it’s pasta, cereal, or snacks—are often white-labeled. A food manufacturer makes these items, but the supermarket brands and sells them as their own. The benefit? The store can offer cheaper alternatives to big-name brands without needing to run its own factory.
Beauty and cosmetics
In the beauty industry, white labeling is huge. Brands that sell skincare products, makeup, or hair care often work with manufacturers that create the formulas. The brand then focuses on packaging and branding, giving the impression that they developed the product from scratch. White labeling allows beauty companies to quickly expand their offerings and keep up with trends like organic or vegan products.
SaaS
Software companies, especially in the Software as a Service (SaaS) world, use white labeling to offer customizable tools to businesses. For example, a company might create a project management tool but sell it as a white-label solution. Other businesses can then rebrand the tool and offer it to their customers as if they built it. This is super common with tools like customer relationship management (CRM) systems or marketing platforms.
Health and wellness
The health and wellness market is another space where white labeling thrives. Many brands that sell vitamins, supplements, or fitness products actually source their items from third-party manufacturers. These products are rebranded with the retailer’s own name and sold as premium or specialty goods, even though they may be identical to what other stores offer.
Home care products
Even in the home care market, white labeling is widespread. Cleaning products, tools like brooms and mops, or even air fresheners are often produced by one manufacturer and then sold under various store brands. This allows retailers to offer a wide range of home care items without the hassle of producing them.
White label vs. private label
White labels and private labels may sound similar, but they work differently. White labeling is when one company makes a generic product and sells it to various retailers, who then add their brand name to it. This product can be sold by multiple businesses under different names but is essentially the same item. On the other hand, private labeling is when a product is made exclusively for one brand. In this case, the product is unique to that retailer and cannot be found anywhere else under different labels.
White label
White label products are sold to multiple companies, which means customization is limited. These products come “as-is,” allowing retailers to simply brand them with their own logo and packaging. This is common in industries like software or consumer goods, where the core product doesn’t need much adjustment. For example, a skincare cream could be sold by several brands with only minor differences in packaging.
Private label
Private label products, however, are exclusive to a single retailer and can be customized to fit that brand’s exact needs. These products often involve more collaboration between the manufacturer and the retailer to create something unique. An example would be Trader Joe’s products—they can’t be found anywhere else because they’re made specifically for the store and feature exclusive ingredients or packaging tailored to their brand identity.
The advantages of white labeling
White labeling offers several advantages for businesses looking to expand their product lines without hefty investments in production.
Speed to market
Since the product is already made by the manufacturer, businesses can quickly introduce new items to their shelves. There’s no need to go through the lengthy process of product development, which is a huge time-saver.
Reduced R&D costs
Companies don’t have to pour resources into research and development. By skipping this costly step, they can focus on building their brand and marketing the product instead.
Focus on branding and marketing
Because the product itself is ready to go, businesses can concentrate their efforts on creating a strong brand identity around the product, crafting campaigns, and engaging with their target audience.
Profitability
White labeling can lead to significant profits. Since manufacturing costs are often shared across multiple retailers, the margins on white-labeled products can be better than those on custom-made products.
Flexibility
With white labeling, businesses can easily test new products or expand into new markets. If a product doesn’t perform well, they haven’t invested heavily in its development and can pivot to something else quickly.
Scalability
As your business grows, white labeling allows you to scale your product offerings without worrying about production bottlenecks. The manufacturer handles the bulk of production, so retailers can scale their product lines with ease.
The disadvantages and challenges of white labeling
While white labeling has its perks, it also comes with some downsides that businesses need to consider.
Lack of differentiation
Because white-labeled products are sold to multiple retailers, they tend to look similar across the board. This makes it harder for businesses to stand out, as customers might find nearly identical products elsewhere under a different brand.
Dependency on third-party quality
Retailers are putting their reputations in the hands of the manufacturer. If the quality of the product doesn’t meet expectations, the retailer is the one who will be held accountable by customers, even though they didn’t make the product themselves.
Market saturation risks
When multiple retailers are selling the same white-labeled product, it can lead to market saturation. Consumers may become overwhelmed by too many identical options, making it hard for any one brand to stand out.
A great example of white labeling gone wrong is when a product becomes too common, leading to intense competition. Imagine a beauty brand that starts selling a white-labeled face cream only to find that five other brands are selling the exact same cream. Consumers may lose interest in the product, and the brand might take a hit. To avoid these pitfalls, businesses should invest heavily in their branding, marketing, and customer service. They can also work with manufacturers to slightly tweak the product, such as changing the packaging or adding a small unique feature that differentiates it from competitors.
Examples of successful white label businesses
Many companies have found success by using white labeling as a core part of their business strategy. Let’s explore a few examples.
Costco
Costco’s Kirkland brand is a prime example of white labeling done right. Kirkland products are made by third-party manufacturers, but Costco adds its own branding and sells these items at competitive prices. Customers trust the quality of Kirkland products, even though the actual manufacturer remains behind the scenes.
Starbucks
Starbucks has partnered with white-label coffee roasters to supply its branded coffee sold in grocery stores. These roasters provide high-quality coffee, but it’s Starbucks’ name on the package, creating a win-win for both the roasters and Starbucks.
Tech companies
In the tech world, white labeling is common in Software as a Service (SaaS). Many tech companies create software platforms that they sell to other businesses, which then rebrand the software as their own. This model allows small businesses to offer powerful tools to their clients without building them from scratch.
Summing up
White labeling offers an efficient way to expand your product offerings without the heavy lifting of manufacturing. It’s a great option for businesses looking to enter new markets or add new products without high upfront costs. However, it comes with challenges like lack of product differentiation and dependency on third-party quality. Ultimately, whether white labeling is right for your business depends on your brand’s goals, your ability to market the product well, and your appetite for competition. If you’re willing to invest in strong branding and can handle the risks, white labeling could be a smart way to grow your business.
FAQs
Can a small business use white labeling?
Yes, small businesses can use white labeling. It allows them to offer products without the cost of manufacturing. This is especially helpful for startups looking to expand their product line quickly without needing large budgets.
Is white labeling legal?
Yes, white labeling is completely legal. However, both parties—the manufacturer and the retailer—must have a clear agreement about branding and product quality to avoid any disputes.
What is the typical cost of white labeling?
The cost varies depending on the product, industry, and customization level. Generally, it’s cheaper than developing your own product from scratch since a third party already does the manufacturing part.
Can you white label services, not just products?
Absolutely! Many companies white label services like software platforms, marketing tools, and even customer support solutions. It works similarly where a service is rebranded and offered by another business.
How does quality control work in white labeling?
Quality control is managed by the manufacturer, but retailers should have regular checks in place. It’s important to choose a trusted manufacturer and have quality control terms outlined in the agreement to ensure consistency.