Written by Stephanie Chan
What is Private Label and Why Should You Care?
Are you already into selling private labels or are you just here to get started with it? Either way, you are catching a growing trend in the retail business that has potential to be even larger in the near future.
Why do you want to get into the business of selling private labels?
There are several reasons. Some advantages of private labels include the ability to control production and the distribution of products, which in turn increases control on pricing, and at the same time helps build value and loyalty from customers.
- It is a profitable business model
- You have more control over the brand, the product quality, the price
- Good for establishing unique brand and gain loyal customer base
Profitable Business Model
Compared to regional, national, or international brands, private label products are alternatives that offer a much more generous profit margin because the retailer has more control over the manufacturing process of the product and the flexibility to negotiate with the supplier to get the ideal pricing structure and profitability. Private Label Manufacturing has gained traction due to the increased demand of store brands.
In May of 2020, Nielsen reported that private label products across all retail outlets saw an increase of 15% compared to the same period last year. These store brands also saw a larger increase in dollar volume and unit volume in comparison to national brands.
One reason for this increase could be due to the outbreak of Covid-19 as well as an economic recession that severely impacted the consumer’s buying power and has turned some of them to cheaper alternatives, such as private label products.
More Control over Brand, Quality and Price
Unlike wholesaling or distributing, private labeling gives you the power as the merchant to dictate how the product will turn out, including the look, materials, and packaging. You will be able to create a product with your desired qualities.
Establish Unique Brand and Build Loyal Customer Base
More customers are now turning to private labels not just for a better price, but because of their great value as well. Saving money without sacrificing quality is why some shoppers choose store brands over national brands. With the ability to make products unique to your store, retailers can take the opportunity to build customer loyalty around their private label brand. According to a study done by eMarketer, some retailers are so successful with their private label brands that customers choose a particular retailer to shop at. And if the retailer already has a good reputation, 66% people assume that their private label brands are good as well.
What Are Private Label Manufacturers?
Private label manufacturers or private label suppliers are basically suppliers who work with retailers to manufacture and develop products based on the retailers’ designs and needs. They can also just be a white label product manufacturer that produces their own product but labels them under another retailer’s branding.
The difference between regular suppliers and private label manufacturers is the amount of flexibility when it comes to developing the product of your desires. They are generally willing to make small adjustments (such as color, pattern, size) changes to the designs as long as both sides have reached mutual agreement. Depending on the business nature of the private label manufacturers and the product category they specialize in, some may be providing the exact same product to different retailers with different labeling, while others may go as far as developing a brand new design if the retailer is ordering in large quantities, or if the item value is extremely high to justify the cost of development. This is something to consider when looking for private label manufacturers.
Top Private Label Companies
A lot of us may not realize, but many of the products we buy from name brands are actually produced by private label companies. Some of these private label companies stay in the shadow and produce products for brands without ever going public. But some of them may eventually decide to produce their own private label line up, like YG Laboratories, a leading skin-care formulator. Other leading private label companies can even make millions of dollars in sales each year, and they can be as big as some leading retailers. Ontex Group is a top skin-care private label manufacturer with over 11,000 employees and annual sales of $2.57 billion. As demand for private labels increases, especially in the CPG categories with improving consumer perception, we can expect to see more private label business blooming in the U.S. and the rest of the world.
Where to Find Private Label Manufacturers?
There are many ways to search for labeling manufacturers, depending on the type of product or geographic locations you are looking to source from.
Google/Baidu/Other Search Engines
As obvious as it seems, using Google and other search engines to find private label manufacturers or to look for directories is the easiest way to get started. However, Google’s search is very particular, and the key to finding what you want is all about knowing exactly how to nail down the keywords. If you want to find private label manufacturers in USA, Google is the recommended engine for that. For labeling manufacturers in other countries, use the local search engine and local language for optimal results.
To nail down keywords, know the product category, the product name (if you want to look for a very specific item), and the location of the manufacturer. The term private label of course should also be included. As mentioned in the previous section, you can use white labeling instead if you are just looking for generic non-branded products without the need to customize or re-design. Try different variations of the term “private label” as well to yield the best results.
Examples:
I am looking for a Chinese manufacturer for a new dog chew toy that is in the shape of our brand logo.
Custom Pet Toy – Private Label Manufacturers – China
Pet Toy – Private Label Company – China
Pet Toy – Private Label Products – China
Dog Chew Toy – Private Label Suppliers – China
Animal Supplies – Private Label – China
There are no definitive right or wrong answers to Google search. It’s a lot of trial and error before you find the right match. Be sure to mix and match and try different combinations with your keywords.
Online Directories
This is a more direct and faster way to find private label suppliers.
TradeBeyond
TradeBeyond is a sourcing community where retailers and private label suppliers discover and work with each other to develop innovative products. We have suppliers from various different countries such as the USA, China, and Indonesia that specialize in product categories such as home, toy, pets, apparel, electronics, outdoor, sport, and many more. You have a great chance to find the suppliers you want simply by registering for our service and looking at the private label manufacturers list for free. Not only that, but you can start working directly with the supplier on the platform without further steps.
Thomasnet
This is a free directory with mainly suppliers who are into private label manufacturing. You can assess and look for suppliers or specific products on this platform easily. Same as with Google, the private label manufacturers list will show up along with company information, certifications, and products after you type in the keywords.
Alibaba
If you are looking for private label manufacturers in the USA, Google and local online directories should suffice. Otherwise, Alibaba is a good place to look for overseas labeling manufacturers based in countries like China and India. Although most suppliers on Alibaba are normal suppliers, some do private label service as well. Keep in mind that there may be language barriers since many of the suppliers are from foreign countries.
What to Look for in a Good Private Label Manufacturer?
It is not hard to find a labeling manufacturer to make your product, but there are many factors to consider when you look for a good company to work with.
- Geographical Location
- Track Record
- Products that Fit Your Need
- Communication
- Cost
Geographical Location
This is an important thing to decide because the location will not only affect the logistic schedule and the collaboration process if the party is located in another time zone, but also the effectiveness of collaboration due to language, culture, and procedural difference. If you are a retailer looking to reshore or inshore your business, look for mainly local manufacturers.
Track Record
For suppliers located overseas, sometimes it is difficult to know whether they are trustworthy businesses. Check for the private label company’s verification on their website or whatever platform you find the company on. Online directories like TradeBeyond and Thomasnet list company’s verification documents directly on the platform that you can check. If you cannot find the verification documents, you should reach out to the company directly for the documents. For large private label companies, they should have reviews left by previous customers that you can reference. For smaller scale private label suppliers, it may take you longer to research, but it is an imperative step to protect your business.
Products that Fit Your Need
If you are looking to make a custom dog chew toy, there are thousands of suppliers that can make dog chew toys, but perhaps only less than ten that can produce it in a custom shape, with materials and a color of your choice. Remember the differing level of flexibility between a regular private label supplier versus a white label products manufacturer. If you connect with a manufacturer and later find out they cannot produce what you want, then you have wasted valuable time and resources.
Communication
Private label suppliers overseas are generally a lot cheaper than private label manufacturers in the USA, for example. But the communication will probably take longer and be less effective due to time zone difference and language barrier. Take this into consideration when balancing out cost and other factors.
Cost
Conduct a lot of research and compare the differences when you look for private label manufacturers so that you can get the highest profit margin out of the products you sell. Scale and location of the private label company will also affect the cost of the manufacturing. It also depends on which market you are selling too. Sourcing and selling private labels in the U.S. will make sense while sourcing in Europe and selling to China doesn’t make a whole lot of sense.
What to Do After Finding the Private Label Manufacturer?
Before you contact the company, research and truly understand that they have what you are looking for. After that, reach out to them through a written message because it will convey your intentions most clearly.
There are a few things to keep in mind when you write:
- Make it clear what it is that you want.
- Don’t hesitate to show images or sample photos from the internet.
- Use numbers when you need to be precise
- Keep it short and concise
- Elaborate as much as is necessary to prevent any misunderstanding
There are several things you should always ask about your product:
- Ask them if they can produce the exact design you are looking for
- Color, sizes, dimensions, and design variations are important
- What the Minimum Order Quantity is
- Logistics (Whether they can ship that specific product to the country you are selling the product in)
- Lead time and Production Schedule
- Payment Method
- Portfolio of Past Clients and Product
- Sample Product
- For auditing, ask for company address as well as supplemental information
After that, you are set to negotiate and sign a contract with the suppliers. Good luck on the journey ahead!
Summary
We touched upon topics from the nature of private labels and looking for private label manufacturers, to what to keep in mind after you find your ideal supplier. Private label manufacturing is a blooming and exciting business model that not only appeals to large retailers, but many smaller scale and even personal stores as well. With the changing consumer behavior trend, it is important to know about this and how the process works when you are ready to embark.