What is a white-label product?

Retailers that sell white-label goods use their branding and logo, although a different company makes the goods. When a product’s maker utilizes the branding that the buyer or marketer requests rather than using their own, this is known as “white labeling.” The finished product has the appearance of being the buyer’s creation.

Because white-label items display the retailer’s name (sometimes called the “store brand”) on the label, they are easy to identify on shop shelves. Consider the “365 Everyday Value” product range at Whole Foods Market.

Recognizing a White Label Good

A different company than the one that markets or even sells white-label goods produces them. The benefit is that many businesses handle various product development and sales aspects. Depending on their competence and inclination, three firms may concentrate on numerous aspects of the product: manufacturing, marketing, and selling. The main advantages of white-label branding for businesses are the time, energy, and financial savings on manufacturing and marketing expenses.

Another significant benefit of private label brands is that the firm may have cheaper average transportation costs and distributional economies of scale if a supermarket has an exclusive agreement with a manufacturer. The shop could offer the goods for less and yet have a more significant profit margin due to decreased delivery expenses.

The popularity of private-label goods indicates that customers are becoming less devoted to their preferred established brands and more price-conscious. The rise of private-label brands in several nations negatively impacts the market share of national brands or manufacturers.

Retailers are among the business types that use white-label products.

Large stores have found success with white-label items, even though they may be found in any business or area. Selling their own branded goods that other manufacturers make has helped businesses like Whole Foods and Walmart.

Chain Stores and National Chains

The British multinational supermarket and general merchandiser Tesco (TSCDY) started segmenting its clientele in 1998 and creating brands specifically for each category. Retailers quickly adopted Tesco’s model in the United States.

Big-box retailers like Target Corporation (TGT), with at least ten distinct brands targeting a specific customer segment and product line and generating at least $1 billion in revenue annually, have found great success with white labeling in the U.S.

Electronic Businesses

The grocery industry is one of many to use private-label branding. Significant electronics makers of high-end computers and mobile phones often place their brand names on lower-priced white-label items to increase their product offerings.

White-label offerings in the Service Sector

It’s not necessarily necessary for white-label products to be actual goods. White labeling has also been used in service offerings. For instance, since they don’t have in-house credit card processing, several banks employ white-label services. Additionally, companies without banking operations often offer their clients branded credit cards, another example of white labeling. For example, L.L. Bean Inc. provides its customers with a branded credit card, while Barclays Bank (BCS) issues it. Additionally, American Express (AXP) offers its customers a branded card that Macy’s (M) provides.

White-label Label benefits and Drawbacks

There are several factors to consider when considering white labeling, both advantages and disadvantages.

Positives

• increased product offerings. White-label brands allow businesses to target clients carefully and increase the range of products they provide, which may strengthen their competitive edge.
• Big agreements. Large contracts are awarded to third-party manufacturers, often with income and sales guarantees.
• Reduced prices. Retailers may increase their earnings by offering white-label items at a lower cost than major brands.
• Goodness. Since they often work with the same providers, white-label brands may be just as excellent as national brands; happy consumers result from outstanding quality.

The drawbacks

• Copieding. Copycatting is the practice of companies using identical packaging, which, in some circumstances, may be prohibited. Private label companies need to set themselves apart enough to avoid misleading customers.
• Monopoly. There can be only one buyer in the market due to a substantial store driving out weaker rivals.
• Obstacles to entrance. There may be less competition overall if new businesses find it challenging to enter the market due to the increasing dominance of white-label companies.

Real-World Illustration

With its Kirkland line of private label goods, Costco (COST), an American warehouse club operator, is one major retailer using innovative branding. Does this indicate that Costco creates all of the Kirkland items you see on the shelves? In no way. They only get into agreements with other manufacturers who consent to package their goods in Kirkland packaging.

On the store, a Kirkland-branded product is often placed next to a national brand (the company that manufactures the product)—the two brands are similar, but the national brand is more expensive. Costco, for instance, carries Saran Wrap. S.C. Johnson & Son is the current owner of the trade name Saran. However, Kirkland Signature stretch-tite plastic food wrap is a product that Costco also offers.

Through premium offerings and co-branding strategies with companies like Starbucks (SBUX), Quaker Oats, a division of PepsiCo, Inc. (PEP), and Tyson Foods, Inc. (TSN), Costco has further blurred the line between national brands and private labels. Interestingly, CEOs in charge of consumer products and retail businesses generally agree that co-branding between conventional national brands and retailers benefits all parties involved.

Conclusion

• The same company produces white-label goods that other businesses package and market under various brand names.
• It has been profitable for big-box stores to provide white-label products with their branding.
• Since the late 1990s, private label branding has become a global phenomenon that has grown gradually.
• White-label branding offers businesses several advantages, including reduced production and marketing expenses, time, and energy expenditures.