What Exactly Are Private Label Products?
A private label product is a product that is manufactured by a company and sold under another brand’s name. You will typically find a lot of manufacturers offering private labeling to retailers to sell their own ‘store brand.’ Below, we will be going over more information on private label products, some of the advantages of selling private label products, and even some of the disadvantages in doing so.
More Information On Private Labeling:
You will find private label products being sold in virtually every industry. For instance, when you visit the grocery store, you will see a lot of products being sold with the grocery store’s label on it. This is only becoming increasingly prevalent as stores look to boost their earning potential and look to generate some form of customer loyalty. After all, if a consumer is buying nothing but branded products at grocery stores, they are not necessarily going to generate any sort of retailer loyalty. Instead, they will go to whichever retailer offers those brands and products at the best price.
Advantages Of Private Label CBD Products:
1. Cost
One of the major advantages of opting to private label various products for a brand would have to be the ability to minimize costs. Having to develop a brand new product is something that requires a significant amount of capital. Because of this, retailers and sellers often look for existing products that they can effectively re-brand or re-label in order to sell under their own brand’s umbrella. The money that you end up saving by doing this can be substantial if you are talking about something very expensive or complex to design or manufacture.
2. Retain Control Over Branding
With private labeling, you will be able to retain total control over branding. Because you can alter the logo and even alter the packaging, you won’t be strictly limited with branding aspects that you might want full control over.
3. Less Competition
The truth is, you will have direct competition in the form of other private label brands selling the same product you are selling. However, you won’t have the same level of competition that you might have if you were selling a branded product. Branded product manufacturers have distribution agreements with various companies which means you will be competing with a lot of other sellers on virtually any marketplace you sell on. Because you will be selling the same products, you won’t be able to differentiate with specs, packaging, or anything else. Instead, you will be forced to compete based on pricing which means lower profits for everyone involved.
4. Create A Loyal Following
With your own brand, you will be able to get more and more customers loyal to your brand and your brand only. With private label products, you can build a brand that is centered around your vision which can help you garner much greater customer loyalty than you would be able to get from selling established branded products. Being able to gain customer loyalty can help you increase margins on your items and it can help you increase customer retention efforts which can minimize the total cost of advertising and marketing. After all, you will be able to decrease your customer acquisition costs because you will be retaining more customers with greater brand loyalty.
Disadvantages Of Private Labeling CBD Products:
1. Dependent On The Manufacturer
When you opt for this type of model, you end up dependent on the manufacturer if they are the only company that produces what you are looking for. Along with this, you will end up having to deal with quality control issues that may crop up and other issues that you might not have if you developed a product from scratch. Having your product or product line dependent on a single manufacturer can be very risky considering they can increase the price at will. Thus, you need to develop a good relationship with the manufacturer and ensure that you have proper legal agreements that help mitigate risk associated with production run cost increases and more.
2. Breaking Through Established Brand Loyalty
One of the biggest downsides to selling private label products is having to gain the mind-share and breakthrough customer loyalty barriers that you wouldn’t have to by selling established brands. However, it is becoming increasingly easy to reach a new and accepting audience directly through digital platforms, social media, and more. While it does cost more getting unknown and unestablished branded products sold, it can be advantageous when you are looking to offer a unique brand that can get customers coming back directly to you.
3. With private labeling, you will have to meet a minimum quantity for your production run. Our MOQ is a LOW 25 Units per SKU to get you started fast with multiple products. As a retailer or a brand that isn’t looking to all-in on something, you will be able to ‘test the waters’ by slapping your label on it, but you will still be paying for each production run. That being said, there are ways to effectively minimize the total cost for each production run by negotiating with the manufacturer or vendor. If you decide that you want to customize something that requires more than slapping a logo on the product, you are likely to have even greater minimum quantity production runs. Therefore, it might become cost exorbitant for some businesses or brands depending on whether or not they are making any significant changes to the product or the materials of the product.
In the end, private labeling is one of the best ways to test out products without having to go ‘all-in’ on creating brand new products. Along with this, it is a good way for retailers or businesses to generate much more customer loyalty to their own brand rather than having to compete strictly based on having the lowest price. By being able to increase brand awareness and generate brand loyalty, you can maximize profits throughout your business because you will have greater customer retention and decreased customer acquisition costs. While you will have a greater risk of ending up with ‘dead inventory’ with products that don’t sell as well as you thought, you will have lower inventory costs, less competition, and you will have the ability to retain control over the entire branding process with private labeling.
