Yaneek Page | White labelling a fast track to entrepreneurship

QUESTION: I’m a marketing associate working in corporate. My goal is to start my own thing, but I don’t have all the resources yet. A friend put me on to white labelling as a fast track. He said the main benefits are I can save time, need minimum funding, and I won’t need to make any of the products myself. What are your thoughts on this please?

– Reader

BUSINESSWISE: Your friend is steering you in the right direction, especially with your training and specialisation in marketing. White labelling is a business practice where a product or service is produced by one company, then rebranded under the business name and logo of another company. In practical terms, imagine I own a successful business that manufactures delicious tea, and you have a passion for selling tea but don’t have the technical knowledge, finances, or resources to manufacture it.

You could partner with me, as the established firm, buy my tea in bulk, package them, put on your own label, and sell to your own customers under your brand name at a profit. That is how white labelling would fast track you into becoming an entrepreneur.

This approach could save you a considerable amount of time, cash, resources, and the incredible hard work of building a tea-processing plant. The best part is that you can focus on what you do best: marketing and selling the products or services.

This isn’t an approach that is exclusive to small business. On the contrary, some of the world’s leading companies, such as Amazon and Walmart, buy products made by other companies then brand and sell them under their own name, which is often the preferred strategy to expand their product mix and leverage their brand equity.

In Jamaica, it is a model that has been adopted by one of the largest supermarket chains and is also utilised by a popular regional wholesale club.

It is important to understand why this model is advantageous to the manufacturer or producer: they sell more, to fewer customers, with the barest costs. It is a huge win for them because in the case of the manufacturing example I gave, they can focus squarely on sourcing raw materials, producing, product development and delivery, and so on, which, in turn, can result in greater return on investment.

However, as with all business ventures, there are risks in engaging in white labelling, and you need to be aware of them, assess them, and create a plan to manage them. The potential risks include:

- Lack of control over quality. With white labelling, you buy the product ‘as is’ and will have limited control over the manufacturing process and quality of the white-labelled product;

– Decreased brand differentiation as many sellers are in the market pushing the same white-labelled product. It poses a challenge for differentiation, however, your specialisation in marketing is well-suited to address this.

– Price competition because of multiple resellers selling the same product. This is likely to lead to price wars and lower profit margins.

– Product liability is significant because as a reseller, you may be held liable for any issues with the white-labelled product even though you were not responsible for manufacturing the product.

– Shortages and price changes are major risks. You have no control over the manufacturing process and would be vulnerable to price hikes, production delays, and shortages.

Private vs white labelling

One of the ways that some companies, particularly big brands, manage the risks of white labelling, is to use private labelling. Private labelling is when a company buys a product manufactured by another company and exclusively sells it under its own brand name, with its own specifications and requirements. Private label products is big business, accounting for 19 per cent consumer goods products in the United States. It requires substantial investment and complex contracting, with guaranteed large-scale minimum orders because the brand is hiring the manufacturer to produce for them with strict terms.

Here is how private labelling is advantageous:

1. Exclusivity: The retailer has exclusive rights to sell the product under their brand while with white labelling, there is no exclusivity.

2. Customisation: Private labelling allows for more customisation of the product itself, from ingredients to design. White labelling typically involves customising only the packaging and branding.

3. Control: Private labelling gives the retailer more control over the product’s development and marketing.

4. Cost: Private labelling is usually more expensive due to customization and exclusivity. White labelling is generally more affordable because the product is already manufactured.

Now that you understand how white and private labelling work, you will need to decide if those are approaches that work for you then select the products or services you want to sell. If you decide to go with white labelling, you must balance your passion with being practical.

Consider what you have a passion for, and will be personally driven to promote, as well as the top product categories of things that are often sold under white labels and private labels with high profit potential. These categories include beverages, such as coffee, tea, bottled water, and alcoholic drinks. Also, cosmetics and personal-care products, supplements and vitamins, home goods such as candles, and clothing apparel and accessories.

Remember, market demand is the master then marketing.

Good luck and one love!

Yaneek Page is the programme lead for Market Entry USA, and a certified trainer in entrepreneurshipyaneek.page@gmail.com