Not many people know about this, but if you are an entrepreneur, I think you did, or you may have heard about it. But for everyone’s benefit, what is it exactly? Is it profitable? I strongly believe so. In fact, you’ve seen many companies doing it and you just don’t know that it’s the right term for it.
When we say private labels, these are products manufactured or provided by a company that has been labeled differently by another company’s brand. For example, in your favorite grocery store, you noticed that they are selling products branded with their store’s name like Kirkland from Costco or Archer Farms from Target. And these products are the same as other products that they sell on their shelves labeled with a well-known brand. If you don’t have a clue about private labeling, you might think that “Wow! This store is now manufacturing their own products. How did they put up a factory for it?” or you thought that it is just a generic brand ‘cause usually these products are much cheaper than branded ones. However, that’s often not the case. These products are private-labeled usually created by a well-known brand.
Sounds illegal? Like someone stealing a product and making it their own? Of course not. Like buying products in bulk with a wholesale company and selling it as retail, private labeling undergo negotiations and deals with the manufacturer too. And these products are subject to regulatory oversight.
Now, you might ask why companies allow that? Well, some companies actually don’t. Maybe for them, that if it’s your product your brand should only be the one using it. However, if you’re after more profit, think again.
Many companies allow another company to private label their own products because they must manufacture or buy in large quantities. And that means more profit and assistance for business growth. The companies who buy in bulk, on the other hand, do this because many consumers love these private-labeled products as it gives an alternative to branded ones. Some private label improved the packaging and selling strategy, therefore, are priced higher sometimes. As a matter of fact, chances are, you have bought private-labeled products and I think you know what those are now. Also, if customers love it, the only way to get it is from that specific company which generates more profit and creating loyal customers. So basically, all sides win in private labeling.
Nowadays, it’s hard to create your own products for your business from scratch because many well-known brands are everywhere, and customers are loyal to them. Aside from that, you also need to think about how much it’s going to cost you from manufacturing essentials to the distribution. Not to mention that it’s a big gamble to create your own. So, with private labeling, retailers have found it more profitable and cost-wise. However, let me say this, private labeling like all businesses is not perfect or it doesn’t guarantee big profits. There are pros and cons to this too. But with the right planning, research, and preparation, I believe many can succeed in this arena.