With an estimated value of $277 billion in 2025, the private-label market is growing at four times the rate of national brands. Shoppers who want better value, unique products, and trustworthy brands are driving the rise.
For merchants, this shift represents an opportunity. By outsourcing inventory management and product manufacturing to an established supplier, entrepreneurs can focus on other aspects of the business. Many retailers employ this business strategy through a supplier relationship called private labeling.
Read on to learn what private labeling is and how to create a private-label line of products for your store.
What is a private label?
Private labeling is selling a product manufactured by another company under your company’s brand name. As the retailer, you provide specifications to a third-party manufacturer to produce the products, which you then market and sell under your own brand.
Retailers use private labeling to:
- Sell exclusive products that customers can’t buy elsewhere
- Improve profit margins by avoiding brand markups
- Stand out from competitors with differentiated offerings
- Scale faster without investing in their own manufacturing
Private labeling is different from reselling branded products. When you resell, you’re offering items made and branded by another company—often at prices set by the brand itself. With private labeling, you own the brand, control pricing, and shape product marketing.
In short, reselling means selling someone else’s brand. Private labeling means building your own brand, but without building a factory.
What is a private label product?
A private-label product is an item made by a third-party manufacturer but sold under your brand.
The product itself already exists in some form, but you customize key elements, including:
- Ingredients
- Materials
- Features
- Packaging
- Labeling
Your customized private label product should align with your brand persona and customer needs. In practice, private labeling varies by product category. Here are some examples:
- Beauty and skin care. You work with a cosmetics manufacturer to create a moisturizer using a custom formula, fragrance, or ingredient mix, then package it with your own brand name.
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Supplements. You tweak a supplement supplier’s base formulations by adjusting dosages, flavors, or delivery formats (e.g., capsules versus powders).
Food and beverage. You introduce a unique recipe or flavor profile to a private-label food product, such as cookies or sauces, while relying on an existing production process. - Electronics. You sell wireless earbuds with customized features, branding, or accessories, even though an established factory produces the core hardware.
- Apparel and accessories. Your clothing brand customizes fabrics, cuts, colors, sizing, and labels while outsourcing manufacturing.
What makes a product “private label” isn’t inventing something entirely new—it’s taking a proven product and making it your own. This approach lets you launch faster, test new ideas, and build a recognizable brand without owning the manufacturing process.
How does private labeling work?
Private labeling is growing faster than traditional branded products. In the first half of 2025, private-label dollar sales rose 4.4%, compared with 1.1% for national brands, a clear signal that shoppers are increasingly choosing store and independent brands over big-name ones.
Behind that growth is a simple business model involving two types of companies:
- Private-label manufacturers, which design and produce products based on a retailer’s specifications
- Private-label retailers, which brand, market, and sell those products directly to customers
As the retailer, there aren’t many barriers to entry. Instead of manufacturing, you partner with a supplier that already produces similar products—you customize elements like ingredients, materials, packaging, or features. A reliable manufacturer is critical here, since production costs directly affect pricing, margins, and scalability.
Many entrepreneurs don’t jump straight into private labeling. A typical path is to test demand first using dropshipping.
This approach lets you sell products without holding inventory, helping validate market interest before investing in custom manufacturing. Once you’ve identified successful products through dropshipping, you can then work with manufacturers to create private-label versions.
Private labels vs. white labels
Private-label goods are often confused with white-label goods. White labeling also involves third-party manufacturers making products on behalf of retailers. However, white-label products are not custom-designed.
A white-label manufacturer produces large quantities of generic items and then sells them to individual retailers. Each retailer sells those products to consumers under a brand name.
In other words, private-label product lines are unique and sold exclusively through a single retailer, while white-label products are generic and sold under multiple retailer brands.
Private label vs. dropshipping
Private labeling and dropshipping are often compared because both models let you sell products without manufacturing them yourself. The difference comes down to control, investment, and long-term brand value.
Here’s how they stack up:
| Factor | Private label | Dropshipping |
|---|---|---|
| Inventory investment | Higher upfront investment to produce and hold inventory | Little to no upfront inventory investment |
| Profit margins | Higher margins due to custom branding and direct supplier inventory | Lower margins due to competition |
| Brand control | Full control over branding, packaging, and positioning | Limited control—products and packaging are supplier-defined |
| Product exclusivity | Exclusive products sold only under your brand | Non-exclusive products sold by many stores |
| Time to launch | Slower; requires sourcing, customization, and production | Fast; products can be listed and sold quickly |
| Suitability | Best for building a long-term brand with differentiated products | Best for testing ideas or launching with minimal risk |
How to decide which model is right for you
Both models work; the right one for you depends on your goals and business stage.
Choose dropshipping if you want to:
- Test product demand quickly
- Start with minimal upfront costs
- Launch fast without managing inventory
Choose private labeling if you want to:
- Build a recognizable, defensible brand
- Improve profit margins over time
- Sell exclusive products
Dropshipping can help you validate ideas early, while private labeling can turn winning products into long-term brand assets.
5 benefits of private labeling
The private-label business model benefits manufacturers and retailers alike. Advantages of private labeling include:
- A unique value proposition
- High profit margins
- Customized pricing control
- Customized marketing control
- Adaptability
1. A unique value proposition
Private labelers design and sell distinct products. As a private-label entrepreneur, you can develop original product ideas and build brand recognition for a signature item.
Some (often larger) retailers use private labeling to create value product ranges and undercut competitor pricing. However, smaller businesses may choose private labeling to develop premium products they couldn’t afford to produce themselves.
2. High profit margins
Private-label products often deliver higher profit margins than resale products, for a simple reason: you’re buying directly from manufacturers and selling under your own brand.
Without brand markups or intermediaries, production costs decrease, especially when you order in large quantities or use standardized manufacturing processes. You’re also free to set your own prices without competing against identical products sold by dozens of other retailers.
That pricing freedom matters. Unlike reselling national brands, where prices are often fixed and competition is fierce, private-label products allow pricing based on perceived value, brand positioning, and customer loyalty.
As a result, private-label products can carry about two times the gross margin of national brands. Those more substantial margins give merchants room to reinvest in marketing, improve packaging, test new products, or simply run a more profitable business.
Factors affecting private label profit margins
Several factors influence how profitable a private-label product can be:
- Product category. Some categories naturally support higher margins than others. Beauty, supplements, and specialty foods often command premium pricing, while commoditized products—basics like sugar or gasoline—compete more heavily on price.
- Order volume. Large production runs typically reduce per-unit costs. Higher minimum order quantities can unlock better pricing from manufacturers, improving margins over time.
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Customization level. Basic customization lowers costs, while advanced formulas, unique materials, or premium packaging increase production costs—but can also justify higher prices if positioned well.
Balancing these factors helps merchants maximize margins while staying aligned with their brand and customer expectations.
3. Customized pricing control
Private-label sellers and producers can tweak manufacturing costs and price points on their product lines. And they can experiment with different pricing strategies to maximize profit margins.
4. Customized marketing control
As a private-label retailer, you create your marketing campaigns. You don’t have to adhere to campaigns run by national brands.
5. Adaptability
It can take months or years for an established brand to change a product formula, pricing, or marketing strategy. Private-label sellers, on the other hand, can pivot quickly. They can respond to customer feedback or low sales and adjust.
Private label drawbacks
Despite its benefits, private labeling does come with tradeoffs. Common challenges include the risk of product inconsistencies, less flexibility for rapid innovation, and the work required to build a brand from scratch.
Understanding these limitations early helps you set realistic timelines and plan for upfront costs. It also makes it easier to reduce risk by ordering samples, lining up backup suppliers, and launching products in phases.
Dependence on third-party manufacturers
One of the most significant tradeoffs with private labeling is that you rely on someone else to make your products. If your manufacturer faces production delays or quality issues, it can quickly lead to stockouts, unhappy customers, and pressure on your brand’s reputation.
The risk isn’t limited to late shipments. Suppliers can also raise prices, change ownership, adjust minimum order quantities, or stop producing a product altogether. When that happens, you may scramble to find alternatives or rethink your product lineup.
Many merchants reduce risk by ordering samples often, keeping a small inventory buffer, and building relationships with backup suppliers. Clear communication and solid agreements go a long way in keeping your supply chain and your business on track.
Less flexibility for innovation
Private labeling makes it easier to launch products, but it can limit innovation, especially early on. Many manufacturers offer a set range of formulas, materials, or components, which means you won’t always have full control over every design detail.
Those limits don’t just apply to product design. In categories like beauty, food, supplements, or electronics, innovation is also shaped by regulatory, compliance, and quality-control requirements.
Safety standards, certifications, and testing rules can restrict how far and how fast you can make changes.
That said, innovation isn’t off the table. You can mitigate product design issues by developing a close working relationship with your manufacturer, which can also lead to bespoke research and development.
How to choose the right private label manufacturer
- Research your market and product needs
- Find manufacturers
- Evaluate manufacturers
- Request samples
- Negotiate terms
If selling private-label products is right for you, here’s how to find a suitable partner:
1. Research your market and product needs
Understand your target audience and what they want. Analyze competing products in your market:
- What features do customers love?
- What complaints do they have?
Detail your product requirements, including materials, design features, and any special manufacturing processes, such as fabric treatments for clothing or flash freezing for food items.
Determine your initial order quantity and budget. Consider per-unit costs and related expenses such as warehousing, shipping, customs fees, and testing, if required.
2. Find manufacturers
Online platforms often offer the fastest way to find private-label manufacturers. Each platform serves a slightly different purpose, so knowing how to use them can save time and reduce risk.
Alibaba
One of the largest global sourcing platforms, Alibaba connects merchants with manufacturers across nearly every product category.
How to use it: Look for suppliers with verified profiles, clear minimum order quantities (MOQs), and strong reviews. Always request samples and confirm certifications before placing a large order.
ThomasNet
A directory of North American manufacturers and suppliers, often used for industrial, electronics, and regulated products.
Why use it: Ideal if you want domestic manufacturing, shorter lead times, or stricter quality and compliance standards.
Faire
A wholesale marketplace focused on independent brands and manufacturers, commonly used for lifestyle, home, beauty, and gift products.
Who it’s for: Best for smaller order quantities and curated product lines. Many suppliers already support private labeling or light customization.
Trade shows
Trade shows are another option. You can meet manufacturers face-to-face, see real-life sample products, and get a feel for how you might work together.
What to look for: Industry-specific shows often feature manufacturers who understand your market’s requirements and standards.
Search engines
Finally, don’t overlook Google.
How to search: Search for your product type and include terms like “private label” or “manufacturer” to find options.
3. Evaluate manufacturers
Quality control should be at the top of your evaluation list. Ask potential manufacturers about their quality assurance procedures and what certifications they hold. The International Organization for Standardization (ISO) and Good Manufacturing Practices (GMP) certifications, for example, demonstrate commitment to consistent quality standards.
Must-have conversations
Have detailed discussions about:
- Their ability to meet your design requirements
- Typical production volume and lead times
- Available customizations
- Manufacturing processes and equipment
- Quality control checkpoints
Common red flags to watch for
As you evaluate options, be cautious if a manufacturer:
- Avoids sharing certifications, test results, or quality-control details
- Refuses to provide samples or rushes you into a large order
- Communicates inconsistently or supplies vague answers
- Offers unusually low pricing compared to competitors
- Can’t clearly explain lead times or production capacity
Manufacturer due-diligence checklist
Use this quick checklist to compare potential partners:
- Can they provide samples that meet your quality standards?
- Do they hold relevant certifications for your product category?
- Are MOQs and lead times realistic for your business stage?
- Is communication clear, responsive, and transparent?
- Do they offer flexibility as your brand grows?
Compare pricing structures and minimum order quantities between manufacturers. Remember that the lowest price isn’t always the best deal. Be sure to factor in quality, reliability, and communication, too.
4. Request samples
A good manufacturer will expect you to order samples, so don’t skip this step. Product samples show exactly what you’ll be selling to your customers.
When requesting samples:
- Ask for samples made with the exact materials and processes intended for production
- Order samples from multiple manufacturers to compare quality
- Test the samples thoroughly for durability and functionality
- Check packaging options if relevant to your product
5. Negotiate terms
Once you’ve identified your preferred manufacturer, it’s time to negotiate. Discuss pricing tiers, payment schedules, and delivery timeframes. Be clear about your expectations and what happens if products don’t meet quality standards.
Be sure to document all your agreements. Your contract should cover:
- Pricing and payment terms
- Production timelines
- Quality standards
- Intellectual property rights
- Confidentiality requirements
- Dispute resolution procedures
💡 Tip: To protect your business from potential issues, consider hiring a legal professional to review contracts, especially for large orders or deals with overseas manufacturers.
Is private labeling right for your business?
Private labeling can be a powerful growth strategy, but it isn’t the right fit for every business at every stage. The decision often comes down to your resources, goals, and how quickly you want to move.
Private labeling may be a good fit if you:
- Have upfront capital to invest in inventory, samples, and production
- Have done market research to confirm demand and your target customer’s expectations
- Understand your product category, or are willing to learn the details around quality and compliance
- Can market your brand effectively, through content, ads, email, or social media
- Are comfortable with longer timelines for sourcing, sampling, and manufacturing
- Want to build a long-term brand with exclusive products and higher margins
You may want to explore alternatives like dropshipping or reselling if you:
- Need to launch quickly with minimal upfront investment
- Prefer lower operational complexity in the short term
- Want to test demand before committing to custom products
For many Shopify merchants, the path isn’t either/or. Starting with dropshipping or resale can help validate ideas, while private labeling makes sense once you’re ready to invest in differentiation, stronger margins, and long-term growth.
6 examples of private-label products
You may be surprised to discover how many consumer products and national brands are made by private-label manufacturers. The model exists across most product categories, including:
1. Coffee
Private-label coffee has exploded on the internet. Many brands use coffee dropshippers that ship batches to customers as soon as they order. You can also explore dropshipping apps to test coffee products before developing your own private-label line.
2. Pet food
Many pet stores, especially online ones, sell private-label pet foods made by big manufacturers that serve multiple clients.
3. LED lights
Online marketplaces are filled with private-label LED lights, each with a slightly different design but sourced from a few manufacturers.
4. Phone accessories
It’s likely that the third-party accessories you buy for your phone, chargers, phone cases, etc., were made by a private-label manufacturer and sold under another company’s brand name.
5. Apparel
Many online clothing retailers use private-label garment manufacturers for shirts, dresses, skirts, shoes, handbags, and more. These clothing manufacturers can print custom designs on apparel. They may also offer custom tailoring and leatherworking.
6. Personal care products
Many personal care products, from mouthwash to makeup, are manufactured by companies that serve private-label sellers. The formulas for these products are customized for specific clients but produced on the same assembly lines.
3 examples of private-label brands
Here are three examples of large retailers that have launched successful private-label brands.
(It’s worth noting that you don’t necessarily need to offer private labels under a separate brand. Smaller businesses may incorporate private-label products into their existing product line.)
1. Kirkland Signature
Launched in 1995, Kirkland Signature is Costco’s private-label brand. It includes a wide range of products produced by various national manufacturers and is known for offering impressive value.
Take Kirkland Signature vodka, for example, which has been compared favorably to high-end brands like Grey Goose. Or consider its extra virgin olive oil, which is USDA-certified organic.
Kirkland is an example of a private-label product line that has grown to national status and become synonymous with its retailer. As of 2025, Kirkland products account for around a third of Costco’s annual sales.
2. Amazon Basics
Amazon Basics launched in 2009, allowing Amazon to compete with other retailers on its own marketplace.
The private-label line offers affordable electronics, home goods, pet supplies, and other items, often at the lowest price points in their respective categories.
Some of the most popular Amazon Basics items are device charging cables. These cables are praised for affordability compared to those from official manufacturers such as Apple, which place high profit margins on their accessories.
Another well-known Amazon Basics private-label product is its microfiber sheet set, which has more than 460,000 reviews.
3. Harrods label
Unlike Amazon Basics and Kirkland Signature, which harness private labeling to lower prices, luxury UK department store Harrods uses its private-label brand to offer premium goods.
Harrods’ brand covers a range of products, including gourmet food and beverages, high-end fashion, accessories, and home goods.
It sources its teas from around the world, packages them in distinctive Harrods-branded tins, and sells them at higher prices than similar products from other retailers.
Key takeaways: What is a private label?
Private labeling makes the most sense when you want to move beyond selling commoditized products and start building something you own.
For early-stage businesses, it’s often the next step after validating demand through resale or dropshipping. For both growing and established brands, private labeling can improve margins, strengthen brand loyalty, and create long-term differentiation.
More key points to remember:
- Private-label products are made by third-party manufacturers and sold under your brand. This structure gives you control over marketing and pricing.
- Retailers use private labeling to create exclusive products. You can create items customers can’t find elsewhere, often at better margins than national brands.
- What started with big retailers has expanded to smaller businesses. Manufacturers increasingly support lower MOQs, customization, and premium product positioning.
- Rising consumer adoption is fueling growth. Private-label sales growth outpaces national brands as shoppers seek value, quality, and brands they trust.
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What is a private label FAQ
What is an example of a private label?
The Costco house brand Kirkland Signature has become a world-renowned private label. Costco sells items of similar quality to its competitors’ at lower prices.
What is the difference between private label vs. branded products?
A traditional branded product is one manufactured and sold by the same company. These companies often spend years cultivating strong brand identities, and their products must meet their established standards.
By contrast, the private label business model involves one company making a product and another branding and selling it.
Is an LLC required for private label businesses?
No, an LLC isn’t required to start a private-label business.
Many entrepreneurs begin as sole proprietors or partnerships, especially when testing products or launching with a small budget. That said, forming an LLC can offer benefits as you grow, including personal liability protection, structured finances, and credibility with suppliers and customers.
If you plan to invest in inventory, work with manufacturers, or scale your brand, it’s often worth talking to a legal or tax professional to decide when an LLC makes sense for your situation.
Why would a store have a private label?
Many stores turn to private labels to avoid the complexities of manufacturing. For example, some of the most profitable grocery store products are private-label goods, from pasta to jelly to eggs, all under the same store brand. The store isn’t burdened by operating a wheat refinery, a jelly factory, and a hen house. Instead, different suppliers provide the goods while the retailer focuses on sales and marketing to achieve higher profit margins.
How do you start your own private-label business?
Starting a private label begins with brainstorming private-label product ideas. Once you’ve found a promising product category, you’ll need to research private-label manufacturers in that sector. Contact manufacturers directly and learn about their pricing and manufacturing processes to determine a fit.
You’ll handle branding and marketing separately, either on your own or with a specialist. With your manufacturing and branding teams in place, you’re ready to launch your private-label products.
