White Label Product

What Is a White Label Product?

White label products are sold by retailers with their own branding and logo yet the actual products are manufactured by a third party. White labeling happens when the manufacturer of a thing utilizes the branding mentioned by the purchaser, or marketer, rather than its own. The finished result seems like it has been delivered by the purchaser.

White label products are effectively spotted on store racks, as they have the retailer's own name (commonly known as the "store brand") on the label. For instance, Whole Foods Market's "365 Everyday Value" line of products.

Figuring out a White Label Product

White label products are manufactured by a third party, not the company that sells it, or essentially even markets it. The advantage is that a single company doesn't need to go through the whole course of making and selling a product. One firm can concentrate on delivering the product; one more on marketing it; and another can zero in on selling it, each according to its aptitude and preference. The major benefits of white label branding are that it saves companies time, energy, and money in terms of production and marketing costs.

One more big advantage of private label that's what brands is in the event that a supermarket has an exclusive deal with a manufacturer, the average transportation expenses may be lower than expected and the company would benefit from distributional economies of scale. Due to bring down transportation costs, the retailer could sell the product for less regardless procure a bigger profit margin.

Private label brands have become progressively well known, which proposes that consumers are becoming more sensitive to price and less faithful to their most loved traditional brands. In numerous countries, the growth of private label brands is harming national brands' (the manufacturers') market share.

Types of Businesses That Use White Label Products

Retailers

Albeit technically white label products might show up in any industry or sector, large retailers have done very well with them. Companies like Whole Foods and Walmart have benefited by selling their own branded products that have been made by different manufacturers.

Multinationals and Mass Merchandisers

In 1998, Tesco (TSCDY), a British multinational staple and general merchandiser, started segmenting its customers and creating brands that take care of each group. In the United States, retailers rushed to follow Tesco's precedent.

White labeling in the U.S. has functioned admirably for big-box retailers like Target Corporation (TGT), with no less than 10 distinct brands each taking care of a specific consumer group and product line, and together getting no less than $1 billion every year.

Gadgets Companies

Private label branding isn't limited to the supermarket segment. Major gadgets manufacturers of top-level [mobile phones](/cell phone) and computers frequently put their brand names on less expensive priced white label products to grow their offerings.

White Label as Services

White label products don't necessarily in all cases should be tangible things. Service offerings likewise have adopted white labeling. A few banks, for instance, utilize white label services like credit card processing when they don't have these services in house. Moreover, organizations that have no banking operations frequently stretch out branded credit cards to their customers, which is likewise a form of white labeling. For instance, L.L. Bean Inc. offers its consumers a branded credit card, however the card is really given by Barclays Bank (BCS). Macy's (M) likewise offers its customers a branded card, and theirs is given by American Express (AXP).

Advantages and Disadvantages of White Label Products

The concept of white labeling comes with various considerations, both positive and negative.

Advantages

• Extended product lines. Firms can utilize white label brands to grow their offerings and target customers decisively; thus, this could support their competitive advantage.
• Large contracts. Third-party producers get tremendous contracts, which could come with guaranteed sales and revenue.
• Discounted sales. Stores can support revenue selling white label products at a discount relative to national brands.
• Quality. White label brands can be just comparable to national brands, as they frequently utilize similar producers; high quality makes fulfilled customers.

Disadvantages

• Copycatting. Utilizing very much like bundling among brands is called copycatting, which can be unlawful now and again. Private label brands must separate themselves adequately so as not to misdirect consumers.
• Monopsony. A strong retailer could push out more modest competitors, bringing about a market condition where there is just a single buyer.
• Boundaries to entry. The developing dominance of white label brands could make it difficult for new firms to enter the market, diminishing overall competition.

Real World Example

One large retailer that is being creative with branding is Costco (COST), the U.S.- based warehouse club operator, with its Kirkland brand of private label products. Does this mean that Costco makes all of the Kirkland products you see on the racks? Not by any stretch of the imagination. They just contract with different producers that have agreed to put their products into the Kirkland bundling.

A Kirkland-branded product frequently sits next to the national brand (that really makes the product) on the shelf: indistinguishable products, various names, the national brand selling at a higher price. For instance, Costco sells Saran Wrap. Saran is a trade name right now owned by S.C. Johnson and Son. Yet, Costco likewise sells its own Kirkland Signature stretch-tite plastic food wrap.

Costco has additionally obscured the line between national brands and private labels by utilizing premium offerings and co-branding strategies with any semblance of Starbucks (SBUX), Quaker Oats, a subsidiary of PepsiCo, Inc. (PEP), and Tyson Foods, Inc. (TSN). Strangely, both consumer product executives and retail executives will generally accept that co-branding among retailers and traditional national brands is a mutually beneficial arrangement.

Highlights

• Big-box retailers have been effective in selling white label things that feature their own branding.
• A major benefit of white label branding is that it saves companies time, energy, and money in terms of production and marketing costs.
• Private label branding is a worldwide phenomenon that has been developing consistently since the late 1990s.
• White label products are made by one company and packaged and sold by different companies under different brand names.