White Label Product Definition
White label products are the products that are sold in the market with the brand and logo of the retailers. However, it’s a third party that actually produces these products. White labeling takes place when the person who produces the item utilizes the branding based on the buyer’s or promoter’s request, and not its own. And, the end result or the product seems to be one manufactured by the buyers itself. One can conveniently look for these products on the shelves of convenience stores, with the name of retailer on it. For example: Items with the brand “365 Everyday Value” at Whole Foods Market.
A Little More on What is a White Label Product
The manufacturers or producers of white label products are third parties rather than the firm that is selling, or promoting it. Because of the optimum distribution of roles, it doesn’t remain the sole duty of a company to carry out all the tasks right from production to selling on its own. Depending on the skills and experience, one company takes the charge of manufacturing the product, the next company plans to market it well, the other company works on its selling strategies. Private label brands exclude any kind of marketing costs involved. Also, a convenience store with a brand new offer could result in lower transportation costs on an average, thereby, enabling the firm to gain benefit from economies of scale in terms of distribution. As the transportation expenses are less, the retailer could offer the product for less for sale, and procure higher profits.
Private label brands have gained worldwide recognition, stating that the ultimate consumers are turning out to be more conscious about price, and are compromising on loyalty for the brands they used to cherish before. There are many nations where the development of private label brands is negatively affecting the market share of producers’ brands.
What types of businesses follow white label brands?
Retailers: White label products, in spite of being available in every field or industry, are mostly used by big retailers.
Multinationals and mass merchandisers
A British multinational grocery and general merchandiser, Tesco (LSE: TSCO) started classifying its target customers, and creating brands considering the preferences of each segment. Also, the U.S. retailers followed this Tesco’s lucrative approach quite quickly. White labelling in the United States has proved to be in favor of big retailers such as Target Corporation that has more than 10 different brands, curated for different customers, and which when combined result in over $1 billion per annum.
The Electronics Industry
Besides big-sized retailers, private label branding works well with the electronic producers of popular smartphones, computers, and tablets. In order to increase their sale, they place their brand names on low-priced white label goods.
Key points to remember:
- White label products are produced by one firm, and then, the other companies package and sell these products under their own brand names.
- Big-box retailers have successfully sold white label products that showcase their own brand.
- The concept of private label branding, being famous all around the world, has been developing quickly since the 1990s.
White Label as a Service
It is not necessary for white label products to be tangible in nature. There are many services who use this approach of white labeling. For instance, financial institutions consider using white label services for processing credit cards when they cannot manage arranging the in-house facility. Also, organizations that don’t specifically deal in banking usually issue branded credit cards to their clients. This is again an example of white labeling. Macy’s provides a branded card, originally issued by American Express, to its customers. Then, L.L. Bean Inc. also proffers a branded credit card, originally issued by Barclays Bank, to its customers.
White label branding helps a company in saving its energy, money, and time associated with marketing expenses.
Advantages and disadvantages of white label branding
The advantages of white label branding are:
- More product lines: Companies consider using white label brands for amplifying their customers and product offerings, which ultimately give them a competitive edge.
- Big contracts: Third-party manufacturers receive big contracts, and get an assurance about sales and revenue.
- Discounted sales: For increasing revenue, stores can prefer selling white label products at discounted prices.
- Quality: Since white label products are manufactured by similar producers, there is no significant difference between their quality and that of the national brands. As the products are of premium quality, it results in maximizing customers’ satisfaction.
Disadvantages of white label products
- Replicating: Private label brands usually use the same kind of packaging for different brands, which is also known as copycatting. This can be unlawful in some situations. It is important for these brands to be unique so as to be easily identified by customers.
- Monopsony: There can be cases when a strong retailer can use its power for eliminating the less competitive firms, and creating a market condition with just one purchase therein.
- Barrier to entry: With the white label brands becoming more dominant, new or budding organizations can find it difficult to enter the market.
Example- Costco Wholesale Corporation
Costco, the famous warehouse operator in the U.S., is another example of a big retailer who keeps innovating and experimenting with branding strategy with its Kirkland brand of white label products. Now, it doesn’t mean that you can see all Kirkland products on Costco’s shelves. They just enter into a contract with several manufacturers who are fine with putting their items into the Kirkland packaging.
Usually, the Kirkland product is found next to the national brand’s product. So, it’s more of the products with same attributes, and distinct names, with the national brand being more expensive. For instance, one can find Saran Wrap and Kirkland Signature stretch-tite plastic food wrap at Costco.
For minimizing the line of difference between white labels and national brands, Costco has started using top-notch offerings and following co-branding approaches with the similarities of Quaker Oats, Starbucks, etc. As per the retail executive officers, this co-branding strategy formed between traditional national brands and retailers is favorable for both.
References for “White Label Product”
Academic research for “White Label Product”
Correlates of store brand proneness: some empirical observations, Dick, A., Jain, A., & Richardson, P. (1995). Correlates of store brand proneness: some empirical observations. Journal of Product & Brand Management, 4(4), 15-22.
Supplier selection and evaluation process for a furniture retailer, Kankaanpää, E. (2018). Supplier selection and evaluation process for a furniture retailer.
Financial plan for a start-up, Lång, E. (2018). Financial plan for a start-up.