Private Labelling Exposed: What Big Retailers Don’t Want You to Know!

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Ever wondered how a store can have its own range of products, from electronics to edibles, without a factory in sight? The answer lies in private labelling.

At its core, private labelling is the practice of selling exclusive products sourced from third-party manufacturers under one’s own brand name.

The private labelling approach offers businesses the opportunity to present a product as their own without the complexities of manufacturing it themselves. It’s a strategy that enables businesses greater control over branding, design, and pricing and also provides a competitive edge in a saturated market.

In this article, we’ll delve deep into the world of private labelling, exploring its various facets and revealing its essence and undeniable influence on today’s retail world.

What is Private Labelling?

Private labelling is the practice where products crafted by one company, often known as the manufacturer, are branded and sold exclusively by another company under its distinct brand name and identity. This model allows the selling company to market the product as though it were its own production, even when the actual production is the responsibility of the original manufacturer.

Private labelling isn’t confined to just physical products. The digital landscape, too, is ripe with opportunities for private labelling. From e-learning platforms to digital health tools, many online services and software solutions are created by tech specialists and then rebranded and retailed by other enterprises. This allows these businesses to offer cutting-edge digital services without requiring in-house creation.

At its heart, private labelling establishes a collaborative partnership, marrying the manufacturing expertise of one entity with the creativity, branding and marketing acumen of another. It’s a mutually beneficial arrangement: manufacturers find avenues to distribute their products, while sellers can diversify their product range without delving into the intricacies of product creation.

Our guide on what is labelling can be of assistance if you want to learn more about labelling in general.

What are the 4 Types of Private Labels?

Private labels have evolved to cater to diverse market segments and consumer preferences. Private labels can be broadly categorised into four types.

Generic Private Brand
Copycat Brand
Premium Store Brand
Value Innovator

Generic Private Brands

Generic private brands, also called economy-labelled products and private value brands, are the most basic form of private labels, often characterised by their no-frills packaging and branding.

The primary focus here is on affordability. Generic-label products are typically priced lower than their branded counterparts, making them appealing to budget-conscious consumers.

Think of the plain-packaged products in supermarkets with simple labels like “Salt” or “White Bread”. While they lack the marketing flair, they serve a segment of the market looking for basic functionality at a lower cost.

Copycat Brands

As the name suggests, these products closely mimic the packaging and branding of leading market products. They’re designed to capitalise on the popularity of established brands by offering a similar look and feel, often at a reduced price.

For instance, if a popular cereal brand has a distinctive colour and design, a copycat label might produce a similar design, subtly reminding consumers of the original.

Copycat brands are also sometimes called private imitation brands.

Premium Store Brands

Premium store brand labels offer high-quality products under the store’s brand. These products aim to rival or even surpass the quality of leading national brands. Retailers use premium labels to attract a more discerning clientele, willing to pay a bit extra for perceived superior quality.

An example might be a supermarket’s “Gold” or “Platinum” range of products, suggesting a higher production standard and ingredients.

Private select brands are another name for premium store brands.

Value Innovators

Value innovators are game-changers and aim to provide the best value for money. Value innovator labels don’t just replicate or tweak existing products; they introduce innovative features or benefits, setting them apart in the market.

While they offer competitive pricing, their main draw is the unique value or innovation they bring to the table. Whether it’s a new flavour combination, a unique design, or an eco-friendly twist, these products aim to break the mould and offer something fresh to consumers.

Value innovators are also called exclusive-labelled products and private exclusivity brands.

Here’s a table that compares various characteristics of the four primary private label types: generics, copycats, premium store brands, and value innovators.

Characteristics	Generic Private Brands	Copycat Brands	Premium Store Brands	Value Innovators
Customer Perception	Basic, no-frills option	Familiar feel, similar to leading brands	Exclusive, top-tier quality	Superior value for the price
Value Proposition as a Consumer	Cheapest priced product	Similar quality but comparative lower price	Sold as one of the best product in the market	Presented as the best value/price of generic product, but with the same quality as the brand leader
Primary Objective	Offer basic products at the lowest price	Mimic established brands at a reduced cost	Stand out with unique, high-quality offerings	Deliver great quality at a compelling price point
Pricing Strategy	Significantly discounted	Slightly discounted compared to leading brands	Comparable to or exceeding leading brands	Significantly discounted
Packaging Design	Simple, often plain	Resembles leading brands	Distinctive and premium	Cost-efficient yet appealing and unique
Shelf Placement	Lower shelves or less prominent areas	Adjacent to leading brands	Prominent, eye-level positions	Strategically placed for visibility
Marketing Approach	Minimal to none	Regular promotions, mimicking leading brands	Limited promotions, more brand-centric	Highlighted in-store, value-focused
Target Audience	Budget-conscious consumers	Those seeking familiar quality at a better price	Shoppers looking for exclusivity and premium quality	Value-seekers who don’t want to compromise on quality
Examples	Basic store brands (e.g., plain packaged rice, pasta)	Store brands resembling popular products (e.g., store-brand cola)	Exclusive store lines (e.g., gourmet chocolates, organic products)	Brands offering top value (e.g., certain furniture lines, fashion basics)

What is a Private Label Brand?

A private label brand is a company (manufacturing entity) dedicated to producing goods tailored for other businesses to sell under their own branding. These manufacturers often collaborate closely with the selling businesses, ensuring the products align with specific standards, requirements, or market niches.

Unlike conventional brands that both produce and market their offerings, private label brands concentrate solely on the manufacturing aspect. Their expertise lies in creating products that seamlessly align with the visions of other companies. Once the product is crafted, the responsibility of branding, marketing, sales, and even post-purchase customer interactions rests with the businesses that sell it.

Consider the scenario of a supermarket chain offering its own brand of olive oil or organic snacks. While the supermarket is responsible for the branding and marketing, the actual production is handled by a private label manufacturer.

In a nutshell, private label branding is about collaboration and specialisation endeavour. It’s a symbiotic relationship where manufacturers focus on what they do best – creating quality products, while their business partners rein on branding and customer engagement, ensuring that the end consumer receives a product that’s both high in quality and resonates with the brand’s identity.

Who Uses a Private Label?

Private labels are embraced by diverse entities seeking to offer products under their own brand without the intricacies of manufacturing. Key users include:

Retailers: Supermarkets, department stores, and boutique shops often have their own range of private label goods, from groceries to apparel, offering quality items at competitive prices.
E-commerce Platforms: Online sellers, especially on platforms like Amazon or eBay, leverage private labels to offer exclusive products, differentiating themselves from other sellers.
Restaurants and Cafes: Many eateries have their own branded condiments, coffee blends, or even packaged snacks sourced from a private label business.
Health and Beauty Brands: From skincare lines to organic shampoos, many brands in this sector use private labels to quickly launch and test new products in the market.
Start-ups and Entrepreneurs: Those looking to enter the market with a unique product but lacking manufacturing facilities turn to private labels to kickstart their ventures.

In essence, private labels cater to any business aiming to expand its product line, enhance brand loyalty, or enter new markets without the overheads of product creation.

How Does Private Labelling Work?

Private labelling is a dynamic business model that offers retailers the unique opportunity to stamp their brand identity on products they haven’t manufactured. At the heart of this model lies a symbiotic relationship between the retailer and the third-party manufacturer.

The retailer exercises full control over product specifications, from the ingredients in a skincare product to the design of a clothing item. Once these specifications are set, third-party manufacturers step in, crafting the product to the retailer’s exact standards and delivering it ready for sale.

The essence of private labelling revolves around two pivotal roles: the private label manufacturers, who are the backbone, ensuring product quality and cost-effectiveness, and the private label sellers, who breathe life into the product with their specifications, branding, marketing, and pricing strategies.

However, it’s crucial to distinguish private labelling from white labelling. While both involve third-party manufacturing, white labelling takes a more generic approach. A white-labelled product isn’t tailored for a specific retailer.

Instead, it’s a generic product that multiple retailers can brand and sell as their own. Think of it as the bottled water industry, where the same water can be sold under myriad brand names.

For a deeper dive into the nuances of white labelling, explore our comprehensive guide on what is white labelling. It sheds light on the intricate details, helping you understand the full spectrum of white labelling practices.

How to Start Private Labelling?

Embarking on the journey to sell private label products can be exciting and challenging. Here’s a step-by-step guide to help you navigate the process and set the foundation for a successful private-label venture:

Market Research: Begin with a thorough market study and identify a niche or product that has demand but isn’t oversaturated in the market. Understand consumer habits, buying patterns, and the top-selling products in your domain. Utilise tools like Google Trends, market reports, and consumer surveys to gauge interest and potential. Remember your chosen product should not only be in demand but also possess a unique edge, whether in pricing, packaging, or features.
Product Selection: Once you’ve identified a niche, decide on the product or range of products you want to offer. This could be influenced based on current market trends, gaps in the market, or areas where you believe you can offer better quality or value.
Manufacturer Hunt: Research and vet potential manufacturers specialising in your chosen product category. Consider factors like their track record, quality of products, scalability, and pricing. Platforms like Alibaba or ThomasNet can be starting points, but always ensure you research their reputation, request samples, and verify their credentials.
Product Customisation: Engage with your chosen manufacturer to customise the product. This could involve specifying ingredients, label information, design elements, or other unique features.
Legal Considerations: Ensure you know of any legal ramifications around labelling, potential trademark or patent conflicts, or trade regulations, primarily if your manufacturer is based in another country. Consider consulting with legal experts or patent lawyers if necessary.
Sampling and Testing: Before committing to a large order, request samples. Test these for quality, and ensure they align with your brand’s standards and the promises you intend to make to your customers.
Negotiate and Finalise Terms: Discuss and negotiate terms with your manufacturer regarding pricing, minimum order quantities, delivery timelines, and payment methods. Ensure everything is documented in a formal agreement.
Quality Control: Implement a robust quality control process. This might involve visiting the manufacturing facility, setting clear quality standards, or hiring third-party inspection services to ensure the product meets your specifications.
Marketing and Launch: Develop a marketing strategy to promote your private label product. This could involve online advertising, social media campaigns, influencer partnerships, or traditional marketing methods. Once everything is in place, launch your product to the market.
Feedback and Iteration: After the launch, gather feedback from customers and make necessary iterations to the product or marketing strategy. This continuous feedback loop will help improve your offerings and ensure long-term success.
Continuous Improvement: The world of private labelling is dynamic. Stay updated with market trends, customer preferences, and technological advancements. This will help you innovate and stay ahead of the curve.

Starting a private-label brand requires a blend of research, planning, and execution. While the process might seem daunting initially, with the right strategies and partners, it can lead to a rewarding and profitable venture.

Advantages of Private Labelling

Private labelling has gained significant traction among businesses across various industries, reflecting its growing importance in today’s market landscape. Here are some key benefits of private labelling that make it an attractive business model.

Brand Differentiation

Unique Value Proposition: Private labelling allows businesses to design and offer products distinct from established brands or other private label brands. For instance, Trader Joe’s, a popular grocery chain, has carved a niche for itself with its own private label brands products that stand out in the market.
Exclusivity: Private label products provide an exclusive offering that isn’t available elsewhere, enhancing brand loyalty and differentiation.
Reduced Competition: By offering unique products under their own brand, retailers can reduce direct competition, as no other retailer will have the exact same product.

Quality and Control

Customised Quality Control: With a direct relationship with manufacturers, private label owners can demand specific quality standards, ensuring that products align with their brand’s reputation.
Complete Product Development Control: From the ingredients to the packaging, private label sellers have a say in every aspect of their product, ensuring it aligns perfectly with their brand vision.

Financial Benefits

Pricing Control: Private label sellers can set their own price points. By controlling manufacturing costs, they can optimise profit margins.
Higher Profit Margins: By controlling the entire supply chain, from production to retail, businesses can achieve better profit margins than selling products from established brands.
Wholesaling Opportunities: Many private label businesses also act as wholesalers for their own brands. For example, a private-label skincare brand might start wholesaling its successful products to other retailers, allowing them to generate additional income and increase brand exposure.

Brand Growth and Market Presence

Branding and Marketing Control: Private label brands have the autonomy to choose their marketing campaigns, packaging designs, and promotional strategies. They aren’t bound by the marketing decisions of national brands.
Building Brand Equity: As consumers become familiar with a private label brand and its offerings over time, the brand can accumulate significant equity. This equity can be beneficial in terms of customer loyalty, brand recognition, and even in valuation if the business is ever sold.
Rapid Market Entry: Instead of spending time on product development and testing, businesses can quickly launch a product in the market by leveraging the expertise of established manufacturers.

Adaptability

Nimbleness and Adaptability: Unlike larger established brands that might take longer to implement changes, private label brands can quickly adapt to market feedback. This adaptability allows businesses to make swift alterations to products, pricing, or marketing strategies and leads to better customer satisfaction as they can quickly address feedback or concerns.

Disadvantages of Private Labelling

While private labelling offers businesses the opportunity to carve out a unique space in the market with tailored products, it’s not without its challenges. Here’s a closer look at some of the drawbacks of private labelling businesses might encounter in their private labelling journey.

Initial Investment: Starting a private label brand requires a significant upfront investment. This includes costs related to product development, sampling, initial inventory purchase, and branding efforts. This initial investment outlay can be a barrier for businesses operating on a tight budget.
Customer Perception: New or lesser-known private label brands may face scepticism from consumers who are more inclined to trust established brands. Therefore, researching customer preferences and ensuring that the product aligns with their expectations is crucial.
Building Customer Loyalty: While private labels have the potential to build brand loyalty over time, the initial phase can be challenging. Competing with established brands with a broader presence and larger marketing budgets can be daunting.
Minimum Order Quantity (MOQ): Many manufacturers require a minimum order quantity, which might be larger than a new business typically orders. This can lead to overstocking and potential financial strain.
Risk of Inventory Overhead: Predicting the exact demand for a new private label product can be tricky. Overestimating demand can lead to excess inventory, tying up capital and potentially leading to losses if the products don’t sell as expected.
Packaging Challenges: Private label sellers are responsible for designing and producing packaging. This not only adds another layer of decision-making but also incurs additional costs. Moreover, creative packaging, such as eco-friendly options, might offer a competitive advantage but requires more effort and investment.
Quality Assurance Challenges: While businesses have control over product specifications, ensuring consistent quality can be challenging, especially if the manufacturing is outsourced overseas. Any lapse in quality will tarnish the brand’s reputation.
Liability and Responsibility: Since the product is sold under the private label brand’s name, any issues or defects with the product can lead to direct repercussions for the brand, including potential legal liabilities.
Legal and Compliance Issues: Depending on the product and region, there might be specific regulations and standards that the product needs to adhere to. Ensuring compliance can be complex and might require additional resources.
Dependency on Manufacturers: While private label sellers have control over product specifications, they are dependent on manufacturers for production. Operational disruptions at the manufacturer’s end, be it due to strikes, natural calamities, or financial issues, can ripple through the supply chain, impacting product availability.
Brand Reputation at Stake: With private labelling, the responsibility for the product’s success or failure lies squarely on the brand. Even if a product’s shortcomings stem from the manufacturer, the brand bears the brunt of any negative consumer feedback, risking its reputation.
Limited Product Knowledge: Since the business isn’t involved in the nitty-gritty of product manufacturing, there might be limited in-depth knowledge about the product. This can be a disadvantage when addressing customer queries or concerns.

When to Consider Private Labelling?

Private labelling isn’t a one-size-fits-all solution, but it can be a game-changer for businesses under the right circumstances. Here are some scenarios when launching a private label line might be a strategic move:

Established Brand Identity: If your business already has a strong brand identity and a loyal customer base, selling private label products can further solidify your brand’s presence in the market.
Market Gap Identification: When you’ve identified a gap in the market that isn’t being addressed by existing products, private labelling can be an avenue to fill that void with a tailored solution.
Exclusive Product Offerings: To differentiate your business from competitors and offer exclusive products not available elsewhere, private labelling can be the key.
Customisation and Innovation: When you have innovative ideas for products unavailable in the market, private labelling allows you to bring those unique concepts to life.
Brand Expansion: If you want to expand your product range without the extensive costs and time associated with product development, private labelling can be a quicker route to market.
Geographical Expansion: If your business is venturing into new geographical markets, selling private label products tailored to local preferences can pave the way for a successful entry.

Private labelling comes with its set of pros and cons. However, by carefully assessing a business’s current position, goals, objectives, and the market landscape, and with strategic timing and meticulous execution, private label lines hold the potential to propel a business to new heights of success.

How to Design Labels for Private Label Products?

Designing labels for private label products requires a delicate balance between style and clarity. The ultimate objective is to capture your brand’s essence while ensuring every detail on the label is crystal clear to the consumer. A minimalist design often strikes the right chord, allowing consumers to quickly understand your product’s core benefits.

Start with a deep understanding of your brand’s values and the story you want to tell. While relevant imagery can enhance your label, remember that simplicity is paramount. Every element on the label, from the product name and barcode to the list of ingredients or care instructions, should be easy to read.

Moreover, it’s imperative to ensure your label conforms to any industry-specific or regional regulatory regulations and standards. For those keen on mastering the nuances of label design, we recommend our detailed guide on best practices for designing perfect labels and barcodes.

In our technologically driven era, harnessing advanced software can immensely enhance the label design journey. Platforms like Seagull Scientific’s BarTender Software not only simplify the design phase but also guarantee accuracy and regulatory compliance.

BarTender Software provides an array of features customised for efficient label design, from pristine print quality to integrated barcode solutions. By leveraging such sophisticated tools, businesses can guarantee their labels are not just aesthetically pleasing but also practical and compliant, amplifying their brand’s market footprint.

At Triton, we take pride in being a trusted provider of BarTender Software. Addressing a spectrum of business requirements, we present all four on-premise versions: Starter Edition, Professional Edition, Automation Edition and Enterprise Edition. For those who appreciate the convenience of online solutions, Triton offers BarTender Cloud, a solution that revolutionises label design in a cloud-based environment.

By partnering with Triton and harnessing BarTender Software, you guarantee that your private-label product not only stands out on the shelves but also upholds the highest quality and compliance standards.

How to Print Labels for Private Label Products?

The label on a product is more than just a sticker; it’s a representation of the brand’s quality, commitment, and identity. The right printing technique is crucial in ensuring this representation is impeccable. Among various printing methods, thermal printing emerges as the gold standard, renowned for its sharpness, clarity, and resistance to smudging.

Thermal printing is of two types – Direct thermal and thermal transfer. Our comparison guide on direct thermal vs. thermal transfer will help you understand the differences.

At Triton, our passion lies in offering the best in thermal label printing. Our curated collection features state-of-the-art thermal printers from industry leaders like Epson, Element, Senor, Honeywell, Zebra and TSC and coloured label printers from OKI.

We cater to businesses of all sizes and sectors, ensuring everyone finds the perfect printing solution. Our diverse range includes direct thermal printers, thermal transfer printers, barcode label printers, desktop printers, industrial printers, mobile printers and receipt printers.

But the essence of a great print lies in its consumables. Recognising this, we’ve curated a selection of premium print consumables, including thermal transfer ribbons, thermal labels, thermal carton labels, thermal carcase tags, food-compliant thermal inserts, receipt rolls and shipping & freight labels, all meeting the industry’s highest standards.

At Triton Store, we are committed to providing quality, not just products. Our commitment extends beyond sales, offering unparalleled customer support. Our dedicated team is always a click away, available via our live chat widget below, eager to guide you through your purchasing decisions.

Frequently Asked Questions

Is Private Labelling Illegal?

No, private labelling is not illegal. It’s a legitimate business model where a company manufactures products to be sold under another company’s brand.

Are Private Labels Good or Bad?

Private labels can be both good and bad, depending on various factors.

On the positive side, private labels often offer consumers more choices at competitive prices. For businesses, it provides an opportunity to differentiate their offerings and potentially achieve higher profit margins.

On the downside, if not managed properly, private-label products might not match the quality of established brands, leading to potential customer dissatisfaction.

What Is the Purpose of a Private Label?

The primary purpose of a private label is to allow businesses to offer products under their own brand name without investing in manufacturing. This enables them to control product specifications, pricing, and branding, allowing for differentiation in the market. It also often leads to increased brand loyalty among consumers and can result in higher profit margins for the business.

How Do Private Labels Differ from National Brands?

Private labels, often referred to as store or in-house brands, are products manufactured by one company but sold under another company’s brand, typically a retailer’s brand. In contrast, national brands are products produced and branded by the same company and available across various retailers.

While a national brand often invests heavily in marketing and brand building, a private label relies on the retailer’s reputation and customer loyalty.

Can Private Label Products Compete with Established Brands?

Absolutely! Many private label products have successfully competed with, and in some cases, even outperformed, established national brands and branded products.

The key lies in understanding consumer needs, ensuring product quality, and effective branding and marketing. With the right strategies, private label products can carve out a significant market share and build a loyal customer base.

Final Words

Private labelling has emerged as a powerful strategy for businesses aiming to carve a niche in today’s competitive marketplace. By offering tailored products under their own brand, companies can differentiate themselves, control quality, and potentially reap higher profit margins.

While the journey of private labelling comes with its set of challenges, from initial investments to ensuring consistent product quality, the rewards can be substantial. As with any business venture, success in private labelling requires thorough research, strategic planning, and a commitment to delivering value to consumers.

Whether you’re a budding entrepreneur or an established business, embracing private labelling can open doors to new opportunities, foster brand loyalty, and drive growth. As the market continues to evolve, businesses that leverage the power of private labelling, backed by informed decisions and quality assurance, are poised to thrive.

We hope this article was useful.

Thanks for reading!