You don’t have to invest in product development to start selling products online. In fact, there are many ecommerce business models that allow you to sell merchandise without ever even touching the products themselves.
Private labeling is one such business model. With private labeling, you work with a third-party manufacturer to create your own custom branded products. Private labeling is great for people and brands that already have established audiences and want to find a way to start generating passive income online via product sales.
Explore this article to:
- Know what is private labeling and how does it work
- Understand the advantages & disadvantages of private labeling
- Find private label manufacturers for creating a custom branded product line
- Get tips for starting a private label business
- Make note of some legal considerations
- Launch your private label brand
- Get answers to FAQs about private labeling
What is private labeling and how does it work?
Private label products, similar to white label products, are goods created by one company to be sold and branded by another company.
A business owner selling private label products is looking for a product they can put their own brand name on and sell as if it’s their own. Clothing and cosmetics are common private label products, as are condiments sold in grocery stores.
As per Statista, the global market for private label products is projected to hit $5.94 trillion by 2024. According to data, India has also been experiencing a rapid increase in the adoption of private labels as a business model.
Image source: Statista
Growth of private labelling in India
In India, about 38% of consumers have tried new products or brands during the pandemic. As per the same study by Statista, more than 58% of consumers shifted brands due the unavailability of the preferred names and 21% made swaps to avail better value or offers.
It’s safe to say that the pandemic has driven almost 20% of consumers to try and buy more private label products. As more consumers gravitate towards private labels across different categories, the gap between quality and affordability is getting bridged and retailers are now catching up with the trend to rapidly introduce new products and lines of their own brand.
Private Label Categories
Almost every consumer product category has both branded and private label offerings, including:
- Fashion and apparel
- Personal care
- Paper products
- Household cleaners
- Condiments and salad dressings
- Dairy items
- Frozen foods
Advantages of private labelling
Private labeling has a number of advantages that span beyond simplifying the product development process. Some of those advantages include:
- Control over production. You direct third-party manufacturers in terms of materials and ingredients, quality, and production rate.
- Control over pricing. As the seller, you determine your pricing strategy and have control over how you optimize production costs, which helps with creating a healthy profit margin.
- Adaptability. Smaller retailers can move quickly to get a private label product in response to rising market demand for a new feature, while larger companies might not pursue a niche product.
- Control over marketing and branding. You choose how to promote and package private label products before making them available for sale.
Disadvantages of private labelling
While there are many benefits to private labeling, it doesn’t come without its challenges:
- Manufacturer dependency. Because a third-party manufacturer handles production, you’re largely at their mercy. That’s why it’s so important to find a reputable and reliable manufacturer to work with.
- Difficulty building loyalty. It can take time to get traction when starting a brand from scratch. This is one reason why private label products are great for people and brand names who already have an established audience that trusts them.
- Poor consumer perception. Private label products commonly have a reputation for being cheap or low quality. However, that perception is changing. Many consumers around the world believe the quality of private label products is improving.
Private label manufacturers for creating a custom branded product line in India
While many private label manufacturers may seem similar, it’s important to vet them carefully to find the one that suits your business now and in the future. You have to consider what types of products you want to make and sell, where you want to sell and ship them, and how high you can price them.
Below is a quick overview of some of the best private label manufacturing services and product sourcing apps for all kinds of goods. Most here have a Shopify app you can use to connect directly to your online store.
You can find more than 100 million products on the Oberlo dropshipping app. With thousands of verified suppliers signed up on the platform, you can find anything from the category of electronics, fashion, beauty, toys and more to private label items and sell them under your brand.
With more than 350+ products to sell, Printrove is great for anyone who wants to sell their own customizations and designs. You can upload your designs for t-shirts, mugs, phone cases and other products, and get them printed as well as drop shipped on receiving orders.
From apparel and accessories to homeware, Printful is another promising print on demand app for you to start selling private label products. They offer 305 high-quality products that you can choose from to sell with your prints.
Tips for starting a private label business
When you sell private label products, you don’t have to worry about product development—or inventory investments in many cases. But before you begin, it’s important to consider a few things:
1. Find a niche market to sell products
There are lots of private label products you can sell, spanning pretty much every industry. Some of the most popular private label products are:
- Hair products
- Body products
- Pet products
- Baby products
- Beard grooming products
- Health products
To figure out specifically what to sell, explore different niche markets within those categories. When you sell to a niche market, you can use highly targeted marketing and advertising strategies to get your brand and products out there.
If you’re looking for inspiration, checkout the trending products to sell online.
2. Connect with the manufacturer
Once you know what you want to sell, look for manufacturers and suppliers who have those items.
Get your shortlist of manufacturers and contact them to see if they offer private labeling. If so, inquire about setting up an account. Since most manufacturers carry a variety of products, this strategy will allow you to quickly source a selection of products within the niche you’re exploring.
Also be sure to ask if the manufacturer has a minimum order value, as you’ll need to navigate if you want to hold the stock or set up a prepay account with the manufacturer.
3. Sample the goods
It’s important to test the product yourself before you make it available for purchase. While something may look great online, and even sound great once you’ve gotten in touch with the manufacturer, the reality may be completely different.
So you’ll want to do your due diligence to ensure the quality of products is up to your standards and expectations.
4. Set up an online store
You have your manufacturer and your products, now it’s time to set up your online store. With Shopify, you can choose from and customize free and paid ecommerce templates.
Once you’ve set up your online store, you can browse the Shopify App Store to find the apps you need to manage your private label business, including any of the options listed above.
5. Add your products to your store
When adding products to your store, you’ll want to do the following:
- Write compelling product descriptions. Product descriptions should be information- and benefits-oriented, as opposed to focused on listing features and specs.
- Get high-quality product images. Product photos give shoppers an idea of what the item looks like—it’s the best they can get without being able to see the product in person. Sometimes the manufacturer can provide images to you.
- Determine your pricing strategy. It’s important to price high enough to make a decent profit but not so high you outprice your customers.
6. Launch and market your store
When you’re ready to reveal your store and private label products to the public, it’s not as simple as turning on a switch. You have to build awareness and drive traffic to your site if you expect to make any sales.
For new stores, paid advertising on channels like Google, Facebook, and Instagram are a great way to get your name out there. Then you can supplement those efforts with email marketing, social media, content marketing, SEO, and customer loyalty programs.
Things to consider: Private label agreements
Private label agreements are legally binding documents on the manufacturer and the retail business owner. Under this agreement, the manufacturer agrees to produce/ manufacture the required products that will eventually be marketed under the branding of the retail business owner.
Private labeling is completely legal as long as both parties have agreed on the terms and conditions set between them.
Well-defined and structured private label agreement includes clauses such as payment terms, product orders, indemnification, laws governing infringing of intellectual property of each other and third parties, and more.
Before a product can be sold in the market, there are also some certification requirements to be fulfilled by the retailers.
One of the requirements is to fill the private label application to confirm the authenticity of the products being sold. The main reason for certification is to be able to verify the private label products as they can be identical to the original versions being sold in the market. The certification will confirm the products are authentic under a private label, and will also not condemn you as ‘fake versions of the originals’.
It is also important to note that there is no specific governing law for the private labels in India. But they can be derived from legal metrology laws that state the mandatory labels required on the packaged products.
Launch your private label brand
Starting a private label brand takes the hassle out of product development. You can start your own private label and work directly with manufacturers to create products your customers will want to buy—all with your unique branding and logo on it.
Private labeling is a great way to get started with selling your own products online.
Ready to start a private label brand? Sign up on Shopify to start an online store today.
Private labeling FAQ
How much does private labeling cost?
At minimum, it costs at least $1,000–$1,500 to start a private labeling business. Your biggest expenses will be associated with ordering samples and setting up the logistics of your business, including your website, payment processing, and order fulfillment. Learn more about working with manufacturers above.
How do I price private label products?
To price your private label products, consider manufacturer costs, shipping fees, and the expenses associated with selling your products (including website, marketing, and payment processing fees). Once you have a number, compare it to your competitors to see how you stack up. You can test to find out which price your customers are willing to pay while you still net a profit.
How do I create a private label?
Follow the steps outlined in the post above: Find a niche market to sell products. Contact the manufacturer. Order samples. Set up an online store. Input your products into your store. Launch and market your store.
Can you make money private labeling?
Yes, you can make money private labeling. Follow the steps in this article to find out how to make money selling private label products.