Private label products have been causing quite a stir in business circles for some time now. But are there any perks to private labeling your products as a business? Or is it a way of opening a hole that will drain all your profits out? Let’s take a look at this trend and see if it is a profitable idea or a profit-sucking one.
Private Label Products – What Exactly are They?
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Private-label products or services are products or services that are typically manufactured or provided by one company for offer under another company's brand.
These are available in various industries from food to cleaning chemicals and even to services such as web hosting. Oftentimes, these private label products are cheaper alternatives to well-known brand names but some private label brands are finding success in competing with premium brands.
Private label products are usually successful with big, established retailers, but smaller retailers and service providers are also making headway in this niche.
But as a business, are there any perks to private labeling products? Especially as a small start-up company? With huge websites and other avenues of marketing products, like direct mail, it is becoming easier for individuals and small companies to develop, create, label, and distribute their own branded products.
These advancements in technology have opened up a huge market that was almost exclusively monopolized by huge corporations. So are there really any perks and advantages of producing your own private label products?
Let’s try and see if we can find a solid answer to this question, shall we?
Are there any Perks to Private Labeling Products?
Now that you have seen what private labeling is (and its appeal, hopefully), let me show you a few perks or advantages that private labeling your products bring.
Perk #1: More Control Over Your Product
Private label products give you more control over the pricing, marketing, sales, and distribution of your product.
Since your private label product is your own, you get more control over your product. You decide on who your target market is, your marketing strategy, and most importantly your pricing. This is important as it affords you the flexibility you normally wouldn’t have if you were to get your products from a wholesaler.
As for product launches, it becomes easier for you as there is less bureaucracy involved. Many good products have ended up being forgotten because the creator didn’t have any control over their product. It may seem trivial and petty, but having certain levels of control is very important for the survival of some products.
And control is what private labeling offers you.
Perk #2: Exclusivity
One of the biggest perks of private label products is the exclusivity they inherently come with. Because it is your private label, the rights to selling it are all yours. This means if you market one product well, it will create demand, which in turn will make a name for your product or product line.
Not only will it give your private label more exposure, but demand for your top performing private level will also bring you more customers who will also buy your other branded goods.
Perk #3: Build Your Own Brand
Branding is one of the most critical and difficult parts of establishing a business. With private label products, it is easier to separate yourself from your competitors and build a name for yourself.
Especially if you have already carved out a piece of the market for yourself, it is easier to use private labeling to build and establish a competitive brand for yourself.
Again, if your product is good enough and you market it well, private labeling your products can help you become an established and trusted name in your category.
Perk #4: Gather a Following
Every business needs one thing to survive and thrive long-term – a strong loyal customer base.
Private labeling your products is one of the best ways to build a strong customer base that will be loyal to your business. This is because with private label products, you create your products specifically tailor-made to your customers’ taste and requirements.
Your customers will feel attached to your brand because they are getting what they want and also because of the exclusivity factor – everyone likes to feel they are among the select few to own a product.
Especially if you are selling high-end products or services, private labeling can actually help you build that loyal customer base and fan a fire of word of mouth marketing for your product.
Perk #5: Increase Your Profit Margin
Private label products usually have higher profit margins than branded resale products. The reason for this is mainly two-fold:
With the unstable economy and with people spending less, it is imperative that businesses find ways of cutting costs while increasing the profit margin.
Private labeling is one of the best ways to do that. And that is why supermarkets and hardware stores are capitalizing on private label products to offset the minimal gains they get on top industry brands that come with high costs of acquisition.
Perk #6: Faster Update or Upgrades to Products
One way of building customer loyalty is by getting their feedback and implementing it quickly. One thing customers love is a product that moves with the times and gets updated quickly.
Private label products have a smaller production chain and thus new products can be developed faster and if an update is needed, feedback is collected and implemented quickly. And because inventory is usually small, updating a product doesn’t lead to much of a loss.
With larger chains, on the other hand, the feedback loop and development of a new or upgraded product takes a longer period of time to bear the results customers want leading to customer dissatisfaction.
Because of the faster response time, private label products have an edge over their big-name branded counterparts, thereby giving you an advantage in the market.
Perk #7: A Shorter Supply Chain
Big name brands have a long supply chain that involves many moving parts. This is a disadvantage that can be felt when one part of the supply chain has a breakdown as everything will come to a stop.
Private label products, however, have a shorter supply chain, which, in most cases, only involves the supplier and the retailer.
This short supply chain increases the efficiency of supply and also cuts down on other expenses, making it easier and cheaper for both the retailer and the customer to source the product.
Not only will a short supply chain reduce the costs of the product but it also ensures a fresh product in terms of fruits, vegetables, and other perishable products.
Private Label Products – It’s Not All Roses
With all the good things that have been said about private label products, it may be tempting to think that it’s an easy path to take that doesn’t have any drawbacks.
But it does.
Like all things in life, private label products do have their drawbacks, some of which include, but are not limited to:
Are They Worth the Investment?
Despite the risks that come with private label products, the pros are definitely worth it. It may take a bit of time, energy, and resources to develop and market your product, but if you put in your due diligence (especially when it comes to quality), private label products can actually sell as well as branded products.
Especially these days when brand loyalty is declining, people are simply looking for quality products that serve their purpose well.
So if you are considering private label products, take the plunge. After all, business is all about taking risks.