If the question is whether or not you should create your own product from scratch, you’ll need to learn more about private-label and white-label models. What are these labels and what is the difference between them? What kind of labeling will fit your goals better? To answer these questions we need to figure out the characteristics of both models and key differences between them.
White-label vs private-label
Before we define the differences and similarities between white-label and private-label models, let’s start with some basic definitions.
What is a private-label?
With a classic private-label service, a manufacturer sells a unique product to a single retailer with no intention of selling it to others. A private-label agreement is set up with the manufacturing company under which a retailer should specify the kind of product they need and which components it should include.
Apart from this, with private-label the retailer decides on the design and branding, while the manufacturer focuses on meeting those requirements and making a product that can’t be sold to anyone else except to the retailer who ordered it. For instance, if you want to produce scented candles under a private-label, you can define their color, shape, size and scent, and the producer will create an exclusive candle according to these specifications.
What is white labeling?
This is the practice when you get a ready-made product and add your branding to it: your company name and logo, wrapping, etc., so that it looks like you have created it yourself. In fact, you just resell the product developed by another producer who had total control of the specifications and other details. As a retailer, you won’t be able to change the product, but you can fully control the branding and design.
White-labeling is about selling generic solutions to a number of retailers, which means that the same product will be sold by different sellers. Though white-labeling was originally used to sell physical goods, it has also become popular in the digital tech field, where white-label platforms and applications are offered.
This approach is often used with Software-As-A-Service (SAAS) solutions when a company sells software products to be rebranded later. In this case, there is no need to build it from scratch, spending extra time and money, because a ready-made solution with all the necessary functionality can be acquired instead. That is why many e-commerce platforms have similar features that only differ in style.
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The Difference between white-label and private-label
The main difference between private and white-labeling is that a private-label product is original and is being sold to one retailer only, while white-labeling is about selling generic creations to a group of retailers with the right to customize the style, e.g., attaching your company’s logo and branding.
What are the key areas of difference?
With a private-label service, you have more options in terms of customization compared to a white-label. You can request exclusive modifications that will be made in the production process. Thus, a retailer specifies all the requirements before a manufacturer makes an item. In the case of white-labeling, you do not interfere with the creation process and get the final product that can’t be customized. However, it can be rebranded according to your preferences. So, you can’t change the product, but you can package it as your brand.
Private-label means you get a distinctive product for which you can set your own price, and the main value it offers is exclusivity. White-label is about general products that undergo rebranding – what you get from the manufacturer is not unique in terms of its specifications, but you can always have it in a different style.
The ability to customize private-label products raises the cost. However, it is a good choice for making your brand identity unique, and that can increase profits in the long run. White-label products are more affordable for both retailers and consumers, but also less customizable.
If choosing white labeling, brands will need to think in more detail about their marketing strategy. This is because WL products could well be sold to multiple retailers, meaning this type of model does not help the retailer gain a marketing edge. In other words, it will not stand out from the crowd of similar offers and will require more creativity to sell.
Return on investment
As mentioned above, exclusive products sold under a private-label normally require more investment, while generic white-label products might be cheaper. However, in the long run, their ROI indicators can be higher than white-label solutions because of lower competition and additional value from exclusive features.
Usually, retailers that choose white-label solutions reach the market faster as they may already have all the necessary licenses at hand or a legal right to conduct certain activities. Using private labeling can mean it takes longer for retailers to reach the market as they will have to follow the required legal processes and obtain the licenses before selling unique products.
But there are also similarities between these two models. The first thing is that both models rely on the creation of a product by a third-party producer, and in both cases, retailers won’t have to deal with the development process themselves. Another similarity is that retailers can fully control the marketing strategy and develop the brand image they wish regardless of their chosen model. Moreover, in both cases, manufacturers that create a product don’t put their trademarks on it, so the customers can’t identify the original producer of the product.
Which model to choose?
To choose between private-label and white-label models, you should consider the following factors:
- Control: Do you want to maintain control over the core technology and service offering, or are you willing to give up control in exchange for broader distribution?
- Branding: Do you want your brand to be visible to end-users, or do you want to allow other companies to rebrand your product as their own?
- Investment: How much investment have you already made in product development and branding? If you have already invested significantly in these areas, private labeling may be a better choice.
- Goals: What are your business goals? If your goal is to expand your reach and distribution channels, private labeling may be a better choice. If your goal is to focus solely on product development, white labeling may be a better choice.
Ultimately, the choice between private-label and white-label models depends on your specific business needs and goals. It’s important to carefully consider these factors before making a decision.
What’s great about both private-label and white-label is that with each of the two models, brands don’t have to make much effort to obtain a product. They don’t need to develop anything and can delegate this work to a contractor specializing in a given solution. But how do you know which model fits your situation better? Let’s consider the pros and cons of private-label and white-label to help you determine which of the two might be the right choice for your business.
When does private-label work best?
If you are going to sell something specific and want your product to have exclusive features, this model is for you.
- you can control the specifications and quality of the product while it is being created
- you set your prices as the owner and provide customers with something valuable.
- It’s rather expensive and time-consuming, and there is a chance you won’t be able to enter the market quickly.
When do you need a white-label?
If there is no need to sell something unique and you want to start selling as fast as possible without much investment, white-labeling will suit you.
- it is cost-effective
- you can start selling faster and easier
- you will raise your brand awareness
- your product won’t be unique
- you will have to stand out from your competitors and work hard on your marketing strategy.
White labeling in ad tech
The upsides and downsides you may experience with white-label products depend on the niche you are about to offer your solution in. If we talk about digital business, particularly advertising technology, retailers can implement WL solutions with less investment, time and effort needed, and offer their clients something valuable even though it might not be seen as exclusive.
If you deal with white-label ad tech solutions, you probably can’t regard them as something generic and feature-limited. You can see far more benefits from WL platforms because this industry has its own specificity. For instance, when you buy white-label software like DSP (demand-side platform), you will be able to install and deploy it pretty quickly and with no extra effort. In addition, the fact that it is the same product for every retailer doesn’t mean it is of low quality. In fact, you get tested software with minimum risks of bugs and malfunctions. The point that a single product is used by many companies is not regarded as a disadvantage. Conversely, if one solution is for many, then it should be user-friendly, so the manufacturer (the developer) does their best to create a platform that will be intuitive and easy to work with. In some cases, the functionality of a WL platform may be customized and adjusted through an admin panel, so there is a chance to scale the platform.
Taking it into account, using the example of a white-label DSP, we can sum up the benefits you get if you choose this solution:
- Easy and fast installation and the ability to get everything set up within a few weeks
- Well-tested technology with no bugs and low risks of crashes
- Possible customization (many manufacturers provide flexible options and let retailers request specific modifications, or retailers can adjust a platform via a dashboard)
- Effective tools for media buying that can help you cut the spend by up to 50%
- Easy data transmission from trusted SSP partners
So, white-labeling in digital business is about getting a ready-made platform that has been tested on many other companies and thus can be polished and tailored to the retailer’s needs. Unlike private-labeled products, white-label solutions can be set up relatively quickly because the product is completely pre-made and requires only an installation process that should take under four weeks. With private-label digital products, you will have to wait for months while developers complete all the work, and it will also require much more investment.
Private-label in ad tech
In the context of ad tech, a private-label model could refer to a situation where an ad tech company (e.g., a demand-side platform or a data management platform) offers its technology platform or services to another company (e.g., an agency or a publisher) who then rebrands it and resells it to their own clients under their own brand name.
Private-label allows the reseller company to offer a comprehensive ad tech solution without investing in the development of their own technology, and also allows them to maintain control over the client relationship and pricing. The private labeling company benefits from increased reach and revenue through the reseller’s distribution channels.
In the private-label model, the original company still maintains control over the core technology and service offering, while the reseller company is responsible for providing customer support and managing the client relationship. The private-label model can be beneficial for both parties, as it allows for increased revenue and market share without the need for significant additional investment in product development or sales and marketing efforts.
Now you have hopefully found out everything you wanted to know about private-label and white-label and have enough information to make the right choice for your business. If you have a particular idea in mind and are ready to invest more time and money in the first stage, you should request a product under the private-label and sell a unique solution expecting a high return on investment in due course.
But if you want to start selling faster, don’t need a product to be exclusive, and are ready to compete with other retailers by implementing creative marketing and advertising of your product, white-labeling is the best idea. Also, it will be a winning choice if you are about to offer digital solutions and provide your customers with tested technology and multiple features that can be leveraged easily. Consider the advantages and disadvantages of these models and make your business a success!