Private labeling has turned into a viable way of starting a career on Amazon as a seller. Even Amazon itself has a lot of private label brands. It's also a great way to build an eBay store, although it's still in its infancy on this platform.
This is why many businesses are considering the idea of going for a private label. However, getting into this line of business isn't simple.
Although it has many advantages, there are other factors to think of. Read on to see how it's beneficial to the company and whether it's the right choice for you.
Private labeling is the selling of products under a different brand. Manufacturers will supply the product. Then, a company will slap their own packaging into it and sell it as their own.
It offers many advantages, which we'll discuss below.
Other than private label branding, companies can go into other ventures like wholesaling. What makes private label the better choice? Read below for some reasons why your company might prefer to take this route.
Getting into private labeling means you have your own products as opposed to selling wholesale, wherein you're selling other brands. Moreover, you won't have to spend time and money into the research and development phase of the products you're selling.
Instead of going through several supply chain touch points, your products will come from the manufacturer itself. Well, how is this advantageous?
When you buy from a wholesaler, the products go through several people before they reach you. The supply chain usually consists of the manufacturer, then the distributor, then a regional wholesaler, then your business.
At each step, each seller will have to make a profit, and so the price goes up for you. There can be more touch points in a supply chain, which means lower margins for you.
Being the first touch point after the manufacturer means higher chances of larger profits. This also removes the limitations set by the wholesaler - in fact, you can set the limitations yourself.
The distributors and wholesalers can set limitations on the supply of the product. You'll then have to deal with a limited quantity of products, even when you want to stock up on more.
They will also be the ones to decide which products to sell and when to sell them. In other words, you have no say in the quantity and timing of the products you're selling.
If you do private labeling, though, you're the one who controls these things. You can have a direct communication with the manufacturer regarding the number of units you want them to produce. You can also dictate when you want them.
As we've said earlier, the prices go up as the products go through multiple touch points. This will limit how much you want to sell the product. Even if you want to go low, you can't because you still have to make a profit.
Pricing is especially harder when you're trying to compete with other sellers. It's likely that you're not the only one buying the product from a supplier. You'll have to compete with the supplier's clients, as well, which means you can't go high either.
Some wholesalers also have a minimum advertised price (MAP). This refers to the lowest price you can advertise the product for. If you break it and sell for a lower price, you risk your relationship with the supplier.
By having your own brand, you don't get to worry about such things. You can set a higher price on your products or you can do flash sales as you please.
If you want to sell wholesale, you don't want to bound yourself to the limitations set by a supplier. After all, you have to set a low price to sell your products in bulk. You must also have sufficient inventory to meet the demands of your clients.
It's certain that the advantages of private labeling is tempting, but is it right for your company? First, you need to see if the advantages above align with your company's goals. Is it important that you:
If these are important factors for you, then private labeling may be the perfect choice for you. However, there are a lot of other things to consider as well, such as the following:
One mistake a company may do is to look for private label manufacturers. However, what they should be doing is looking for the right products to sell. It's better to choose the products first and then look for a manufacturer willing to supply you with unlabeled products.
You're going to be selling them as your own, so you will also be in charge of the packaging. You'll have to learn what makes a good packaging and how you can appeal to your customers with it.
The packaging affects a consumer's decision, making it an important aspect of your products. It should be of high-quality, and it should make a buyer want to try your product with only one look. There are a lot more to learn about this, so we recommend reading up on this topic more.
You'll then have to market them yourself. This might be more difficult than selling already established brands.
In selling other brands, the company behind itself are most likely the one in charge of marketing. This means that for your own brand, your company will have to devise your own private label strategy.
If you're ready for these things and more, then going for a private label may be the right move. This means you'll have to jumpstart your strategy now. We'll take one worry off you by offering packaging design solutions perfect for your brand.
Contact us now to know more about how to create an effective packaging.
Are you looking to launch your new product with packaging that meets all of these goals? If so, then Jansy Packaging is ready to hear from you. Our team has worked with Starbucks, Victoria's Secret, LG, Oakley, QVC, and many other companies to design, develop, and produce packaging that made an impression on their customers.