White label vs. private label: Is a white-label business model right for you in 2023?
By Brock Andony Recently, there has been some confusion in differentiating the terms “white label” and “private label”. What is white label vs private label? Are they the same? Is there any major difference between them at all?
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In this article, we’re going to explore the history of white-label vs private label business models, some examples, and key differences between the two models. Then we will analyze how both white-label vs private label business models present opportunities for you to create or grow revenue.
Table of Contents
- What is private labeling?
- What is white labeling?
- What’s the main difference between private label and white label?
- Similarities: White-label vs. private label
- Opportunities for resellers
- A white label business model vs. a private label business model: Which is right for you?
- White label at Vendasta
What is private labeling?
Private labeling is a business model in which a manufacturer of products is responsible for creating physical goods and selling these unbranded products to resellers. The resellers, armed with an understanding of their target audience, rebrand these products to align with their own company's identity and sell them to the end consumer.
This manufacturer-reseller partnership is a practical, cost-effective solution that allows each party to concentrate on their areas of expertise. By enabling the manufacturer to focus on producing quality goods, and the reseller on marketing, branding, and customer relations, the private label model effectively splits the value chain. This division helps to mitigate risk and reduce the costs associated with owning the complete production-to-consumption process.
The beauty of private labeling lies in its simplicity. The manufacturer doesn't have to worry about building a consumer-facing brand or negotiating retail contracts. On the other hand, resellers can enter the market swiftly, equipped with ready-made, rebranded products, without the burden of manufacturing. This convenient relationship encourages a focus on core competencies and allows each business to thrive.
Private label brands: History
Private labeling has been a major factor in the fashion industry over the years. It’s a common practice where retailers create their own brands with similar styles of clothing at a competitive price point (usually to offer a similar style of shirt or dress but for a much cheaper cost.) The image below on the left is a Versace dress that retailed for $1,685, while Neiman Marcus offered a similar style for $130. While not exactly the same garment, you get my point.
Source: mybeaubaby
3 Private label examples
Due to the private label business model, many of the most successful manufacturers in this space are not well-known or recognizable to consumers. The resellers of these products instead get all of the brand recognition.
Here is a list of the products that you will see the most often in a private label capacity:
- Personal Care
- Cosmetics
- Beverages
- Paper Products
- Salad Dressings and Condiments
- Cleaning Products
- Frozen Foods, etc.
Did you notice a trend here?
Key characteristics of private label companies include:
- Private labeling is generally bound to a market of physical products. If there’s something that you can hold in your hand, and you can slap your brand on it for reselling, then that’s a private-label product.
- Private labeling can also deal with large amounts of customization. When a reseller is purchasing a product from a private label manufacturer, quite often these manufacturers will customize the product or build an entirely unique product for certain resellers. What this means is that one private label manufacturer might make very different products for two different resellers or brands.
Private label example: Dollar Shave Club
Dollar Shave Club is a company that delivers razors and other grooming supplies but does not produce any of its own razors. Instead, they purchase their razors from a private-label manufacturer, then place their branding on them. This differs from other companies and competitors like Schick that instead manufacture and sell their own products rather than just the latter.
Private label Example: AmazonBasics
AmazonBasics is Amazon’s private label brand that offers a wide range of consumer goods. The brand focuses on providing high-quality products at an affordable price point. The product portfolio is diverse, ranging from kitchenware and home essentials and tech accessories to office supplies and beyond. Obviously, it wouldn’t be feasible for Amazon to run its own factories manufacturing such a wide array of products. Instead, they use private label manufacturers. What makes AmazonBasics stand out is its ability to leverage the vast user data available through Amazon’s platform, tailoring its offerings to meet the broadest consumer demand.
Private label Example: Kirkland Signature
Kirkland Signature is Costco's private label brand named after Costco's home city, Kirkland, Washington. It includes a broad spectrum of products, including groceries and clothing. Despite being private-label, the quality of Kirkland Signature products is often considered comparable to national brands, while being offered at a lower price point. This private label example illustrates that just because a business doesn’t control their manufacturing doesn’t mean they don’t deliver their customers the highest quality.
ALSO READ: The Ultimate Guide to White Label Products & Solutions
What is white labeling?
In the white-label model, a software manufacturer creates a generic, unbranded piece of software, which is then purchased and rebranded by a reseller. This rebranding allows the reseller to sell the software as if it were their own creation. White labeling operates in the digital space similarly to how private labeling operates for physical goods.
White-label companies are the silent creators behind numerous software solutions that are widely used by businesses. These can include a range of SaaS solutions, from website building and ad management platforms to email marketing solutions and beyond.
The distinct advantage here lies in the reseller’s ability to offer a product that adheres to their brand identity and positioning the market, without hefty investment in research, development, and maintenance. At the same time, the software manufacturer can leverage their technological know-how and investments, focusing on crafting superior solutions while worrying less about sales and marketing.
My colleague Zach illustrated this concept in the video below:
As Zach demonstrated, the white-label reselling process looks something like this:
White label business: History
Back in the Stone Age, before records were released to the general public, the final album artwork was not yet designed and printed, so promotional copies were sent to DJs in a white sleeve. DJs would then drop these beats at the radio station or nightclub to gauge interest and better estimate how many records to make.
As was mentioned above, it is key to recognize that this origin also involves an identical product being “white-labeled.”
3 White label examples
As we now know, white-label companies predominantly exist in the software and technology fields. Some popular white-label manufacturers (or as famous as you can be without having virtually any B2C brand) would include:
- BuildFire (for mobile apps)
- SEOReseller (for SEO, duh)
- Vendasta (hey, that’s us!)
Key characteristics of white-label companies Include:
- “White label” is essentially the tech industry’s adaptation of private labeling. Where private label products might exist in industries such as fashion or other physical goods, white-labeling predominantly exists with rebrandable technological products and solutions.
- White-label products also tend to be much less customizable than their private-label peers. If we revisit our razor example, the private label manufacturer likely makes other unique razors that they sell to other companies.
For some context, if we take a white-label software producer, it’s pretty safe to assume that the software being produced is not customized for any of the purchasers, but that purchasers are instead competing with the exact same software. This is because software production is inherently accompanied by high capital investment and overhead costs, whereas the production of plastic razors requires much less capital investment in comparison.
White label business: Vendasta
At Vendasta, we are a white-label producer of marketing automation software. We sell our unbranded, in-house products and services to marketing agencies and media groups who can resell our software to local business clients, under their own brand.
White label business: BuildFire
BuildFire provides an intuitive platform for the development of mobile applications. Businesses can use BuildFire’s platform to build custom-branded apps without the need for extensive coding knowledge, significantly simplifying the app creation process. The platform includes a wide range of pre-built functionality and features, allowing businesses to create tailored mobile experiences for their users. By white labeling BuildFire’s software, businesses can reap the benefits of having a branded app-building platform while saving on time and development costs.
White label business: Printful
Printful straddles private label vs. white label businesses, since it consists of both a software platform and physical product manufacturing operation by offering on-demand printing and drop-shipping services. Ecommerce businesses can leverage Printful’s platform to sell a wide range of custom-branded products, from clothing items to home decor, with their designs printed on them. Printful handles the printing, packing, and shipping processes, allowing businesses to operate without the need to maintain inventory or manage logistics. This gives business owners the freedom to focus on their branding, design, and marketing, while Printful ensures smooth logistics and high-quality production and delivery of their products.
What’s the main difference between private label and white label?
There are a couple of key differentiators when comparing white-label vs private-label business models. White-label offerings are predominantly in the technology sector and involve less customization and greater complexity.
Key differentiators:
- Type of good: Private labels traditionally represent tangible products or consumable goods that consumers can physically purchase and use. These are goods that end-users directly interact with, from grocery items to clothing or home goods. Conversely, white label products are predominantly software or other non-perishable goods, like digital services, applications, or platforms. These are intangible assets that bring value through their usage rather than their physical presence.
- Degree of customization: Private label products offer a considerable degree of customization. They can be tailored for different sellers per their individual branding requirements and preferences. This allows resellers to maintain a unique product identity and cater to specific target audiences effectively. White-label products offer comparatively minimal customization. Typically, a largely standardized product is sold to resellers who can then rebrand it as their own. This uniformity provides a consistent user experience while streamlining the product development and delivery process for the original software developer.
- Production process: The production process for private label products requires traditional manufacturing methods, since they’re physical goods. Private label products are typically mass-produced in factories, which involves logistics planning, quality control checks, and sometimes, significant capital expenditure. White label products, especially when it comes to SaaS, don’t require mass production. Once the software is developed, it can be replicated and distributed digitally at minimal additional cost.
- Upfront investment: Private label brands often require a significant investment in inventory management. Retailers need to ensure they maintain sufficient stock levels to meet customer demand. White-label services and software, primarily being digital goods, bypass this requirement. There’s no physical inventory to manage, making the business operation more streamlined and cost-effective.
- Promotion strategies: Private label vs white label products have different customer engagement strategies. For private label products, customer engagement might involve sampling at stores, gathering customer feedback on product quality, and in-store promotions. With white label products and services, customer engagement is often digital and might involve software demos, online reviews, user experience feedback, and digital promotional campaigns.
Similarities: White-label vs private label
There do, however, exist some similarities in the way white label vs private label operate and do business. Some of the noteworthy similarities include the B2B2B business model and the ability for these products or offerings to be rebranded by the reseller.
Some key similarities include:
- Allow for specialization: White-label vs. private-label models both enable manufacturers to focus on the core aspect of production or development. This clear delineation of roles allows manufacturers to invest time and resources into creating high-quality products or services, while resellers can concentrate on selling and marketing those products, capitalizing on their market knowledge and customer relationships.
- They create possibilities for startups: Both approaches serve as an incubator for new businesses. The reseller-dependent framework empowers aspiring entrepreneurs to start businesses without the substantial financial burden or risk associated with product manufacturing or software development. The barrier to entry is significantly reduced, making these models attractive options for startups and smaller businesses.
- They require resellers to differentiate: Private-label and white-label models create market competition between resellers. Given that different resellers can sell the same base product, it’s their marketing strategies, customer service, pricing, and branding that make the difference. This dynamic encourages marketing innovation and enhances consumer choices.
- They require mutual trust: Both private label and white label business models operate on a foundation of trust and mutual benefit. Producers must trust resellers to present their products appropriately, while resellers rely on producers for consistent quality, supply, and technical support. This interdependence fosters long-term business relationships, contributing to the growth of both parties.
Opportunities for resellers
When it comes to white-label vs. private-label, both business models offer a pristine opportunity for businesses and entrepreneurs that are looking to diversify their current offerings, penetrate new markets, or simply supplement existing revenue streams.
However, white-label software and service opportunities will ultimately be easier to leverage, as there is no physical rebranding or built-in distribution network necessary to sell and fulfill product orders.
Let's take a closer look.
Private label business: Opportunities for resellers
For entrepreneurs, there are tons of great products and great producers out there to get you started in the sale of goods.
Here is your workflow: determine a product or product category, find a suitable private label manufacturer, create and build a brand, and sell your selected private label product under your brand.
For established businesses, private labeling can equate to more diversified revenue streams. Consider our dress example once again. The Versace dress is sold at a price point that would only appeal to a smaller, upper-class demographic. By targeting this demographic, Versace might have great success with market penetration but fail to sell any dresses to a larger middle or lower-class demographic.
However, if a brand like this were able to use another brand under the same corporate ownership to sell a “knock-off” or “less extravagant” version of the dress, Versace would be able to penetrate two entirely different markets with nearly the same product. The best way to do this would be to recruit a private-label manufacturer that would be able to produce larger quantities of the desired product at the desired price point.
White label business: Opportunities for resellers
For entrepreneurs, most white-label tech companies (or at least the good ones) have free pricing tiers so that you can try the product and get on your feet before you have to pay for your usage. This means there are boundless opportunities for entrepreneurs that are interested in getting into the tech space.
Here are some opportunities that might be of interest:
- White-label content creation. You can easily use sites like ProBlogger to outsource writing to eager freelancers and sell it with a margin as if it were your own.
- SEO white-label services, reporting, etc. All the craze over the past few years has been surrounding the art of mastering search engine optimization. There are tons of sites out there that will perform white-label audits or reporting that you can then white-label to your clients.
- White-label agency. What if you want to do it all? Companies like us at Vendasta enable our resellers to become a full-service marketing agency at the click of a button.
Let’s take one of our favorite verticals at Vendasta as an example—TV companies. Television companies sell television ads, as one might assume. They are good at selling these ads, but the reality is that digital ads are beating out TV. See below: For established businesses, leveraging white-label providers can prove to be a highly effective way to introduce new offerings at a low cost, and skip the overhead that would normally be associated with R&D and extensive product development.
But why couldn’t these TV companies offer their clientele digital ad services as well? With white-label providers, they can—all under their existing branding.
With a white-label provider, the TV company would be able to bundle its traditional TV advertising spots with other digital media like display advertising, social media management, websites, and more. That way, they can increase their revenue in other channels without cannibalizing their TV ad revenue.
A white label business model vs. a private label business model: Which is right for you?
When comparing white label vs. private label, which is most suitable for digital agencies? If your agency sells digital marketing solutions, a white label business model is best suited to the unique requirements of this business. Let’s take a look at some of the ways in which partnering with a white-label platform can help you—and your SMB clients—achieve your business goals.
Efficiency and speed to market
White label solutions allow your agency to provide a broader range of services faster. There's no need to spend limited time and resources in developing a product or service from scratch. Instead, you can leverage ready-made, quality-assured solutions and focus on what you do best: marketing and selling. This quick turn-around can help you maintain a competitive edge in an always-evolving digital solutions landscape.
Cost-effectiveness
For many SMBs, budgets have to be carefully considered. White label solutions enable agencies to offer cost-effective services, which are very helpful for these lean businesses. As a reseller, you can provide access to professional-grade software or services without the high developmental costs typically associated with them. These savings allow room for a healthy margin while also offering clients a high return on their investment.
Focus on core competencies
White label solutions allow marketing agencies to focus on their core competencies. Instead of spreading resources thin over product development, you can concentrate on areas where you excel—strategizing, branding, and customer engagement. This enables you to enhance the service you provide to SMBs, improving client satisfaction and retention.
Expand your service portfolio
Adopting a white label business model can open up opportunities to broaden your service portfolio without diluting your focus. This is particularly appealing to SMB clients who prefer to consolidate their spend by using a single agency for various needs. Offering a comprehensive suite of services, such as SEO, email marketing, social media management, and more, under your agency’s banner increases client stickiness and helps you establish a stronger business relationship.
Scalability
White label solutions are designed to be scalable, an essential factor for any growing marketing agency. As your client base grows and their needs evolve, white label solutions can be easily upgraded or scaled up to match those needs. This scalability helps you keep pace with your clients’ growth and success, cementing your role as a reliable partner in their journey.
Bolster your brand
Since these solutions are branded as your own, successful implementation and satisfied clients enhance your reputation and credibility in the marketplace. Over time, your brand becomes synonymous with high-quality, comprehensive services, helping attract more SMBs to your agency.
White label at Vendasta
Vendasta develops business and marketing solutions for agencies and media companies to then resell to the local business market. Vendasta was one of the pioneers in the “white-label” digital marketing space and is currently partnered with well over 60,000 resellers across the globe, serving over 5.5 million small business clients.
Vendasta was built with a reseller focus. Whether you are an entrepreneur or an established B2B seller, we have a pricing tier built to suit your unique needs.
If you are interested in becoming a reseller, check out the Vendasta Marketplace where you will find 100s of ready-to-sell apps and services.