In Terms of Private Labeling – A Retailer or Start-up Purchases products from manufacturers and then markets those products under their own brand.
A private label product is sold under a retailer’s brand name and manufactured by a contract manufacturing or third-party manufacturer. As a retailer you have full choice to customize your products, you have to specify each and every detail about the product – how its design, packaging, label, product textures, herbs, ingredients, and luster. After customized your product and packaging, pay to have it produced and delivered to your Warehouse.
Hair salons, restaurants and Hotels often create their own private label branded line of shampoos, conditioners, and styling products become popular with customers to buy and take home. Maid, Hospitality & Maintenance Services also choose a private label line of household cleaners – home care products.
Private Label Categories growth is seeing strong growth in recent years in premium and super-premium goods. Private label products market comprises 20% of Indian Market. Almost every consumer product category has both branded and private label offerings, including: Skin Care Cosmetics, Health Care, Grooming, Personal Care, Food & Beverage, Clothing, Paper products, Household cleaners, Condiments, salad dressings, Dairy items, Frozen foods.
The continuous growth of private labels has encouraged more e-commerce and retailers to launch their own brand as a startup, it has provided new opportunities for small and medium-sized manufacturers in a whole spectrum of industries.
The three main factors that lead private label brands to success: The right product, a competitive price, and a strong marketing program.
Select the products for private labels which have a large sales potential and growth. Ensure the manufacturer delivers the product quality as better than the leading brands, must be flexible enough to ramp up production quickly to meet increases in demand or to change the product’s formulation according to the retailer’s wishes, and on-time delivery.
Private Label Advantages
Private label products advantages are include:
- Control on production – Third-party manufacturers work at the retailer’s direction, offering complete control over product ingredients and quality.
- Control on pricing – Retailers are flexible to decide their own product cost and profitable pricing.
- Adaptability – Start-ups or retailers have the ability to move quickly to get private label products in production in response to increasing market demand for a new feature, while larger companies might not be interested in a niche product.
- Control on branding – Private Label Start up or Retailers are free to create their own identity design from logo to whole packaging design as per their market segment or trending.
- Control on profitability – Thanks to control over production costs and pricing, retailers therefore control the level of profitability its products provide.
Private Label Disadvantages
Almost there are no disadvantages of private label products line, as long as you have the financial resources to invest in developing such a product. The main disadvantages include:
Dependency on manufacturer – As all the production and packaging process is on third-party manufacturer’s hand, it’s important to find manufacturing partners with well-established companies and trust worthy. Otherwise, you could miss out on opportunities if your manufacturer runs into problems.
Difficulty building loyalty – Launching own brands have the upper hand and can often be found in a variety of retail outlets. Your product will only be sold in either your stores or your franchise store or your online marketplace, which will have the limiting customer access to it. Of course, limited availability could also be an advantage, giving customers a reason to come back and buy from you.
Although private label products are typically sold at a lower price point than their name brand brethren, some private label brands are now being positioned as premium products, with the higher price tag to prove it.