Private Label vs. White Label: Which One is Right for Your Business?

As cliché as it may sound, getting started is always the hardest part, and business is no exception. Let’s say you’ve got a great business idea. Your marketing, customer service, and logistics teams are all set. That’s great. But developing a brand-new product from scratch? That’s a whole new challenge, especially for small and medium-sized businesses that don’t have the budget for a dedicated R&D team or product engineers.

But here’s a little (or maybe not so little) secret: Many of the products you see from different brands may come from the same manufacturer. That skincare line you love, your go-to coffee beans, and even some of your favorite fancy-schmancy fashion brands are likely white-labeled or private-labeled. In other words, companies buy ready-made products, brand them as their own, and put them on the market.

Now, before you raise an eyebrow, this isn’t about counterfeits or dupes. Private and white labeling are legitimate and widely used business models. But are they ethical? The answer is yes… to a certain extent—and we’ll get into that.

In this article, we’ll break down everything you need to know about white labeling and private labeling—how they work, who’s using them, and whether they’re the right strategy for your business.

Starting something shouldn’t have to feel daunting, so follow along!

Understanding Private Label: How it Works and Why It Matters

Private labeling allows retailers to partner with manufacturers who produce the items, while the retailers sell them under their own brand. It’s a great way for small and medium-sized businesses to expand their product catalog, offer exclusive items, and compete on pricing—without the heavy costs of product development.

In a nutshell, there are two key players in this business model:

• Private label manufacturers: The companies that produce the products.
• Private label sellers: The retailers that market and sell these products under their business name. 

Private labeling is everywhere, and you might be using private-label products without even realizing it. Here are some of the main sectors where private labeling is most common:

• Grooming & Personal Care: Salons and spas sell branded shampoos, nail polishes, and skincare made by third-party manufacturers.
• Food & Beverage: Grocery stores offer own-brand condiments, snacks, and beverages as affordable alternatives to big-name brands.
• Clothing & Fashion: Clothing brands sell private-label items alongside designer brands. 
• Pet Food & Accessories: Pet stores sell branded food, toys, and treats sourced from the same suppliers as major pet brands.

Many people confuse private labeling with white labeling, but there’s a key difference. Private labeling lets businesses customize the product to fit their market needs. That means they can work with a manufacturer to make a unique product that’s exclusive to their brand.

On the other hand, white labeling involves manufacturers producing a generic product in bulk and selling the same item to multiple retailers, who then put their own branding on it. The product itself stays the same; only the label changes.

The Perks of Private Labeling

1. You get an original product without the cost of in-house manufacturing.

Private labeling lets you sell exclusive products without the hassle and expense of manufacturing them yourself. Unlike white-label goods, private-label products are unique to your brand. Meaning, no other retailer will have the exact same item (unless, of course, you choose to create something too similar to what’s already out there). 

If you’re looking to launch original product ideas or create signature items but don’t have the resources and infrastructure to manufacture them, private labeling is the way to go.

2. Skipping costly product-making processes means higher profits and better margins.

It’s not rocket science: private-label products can lead to higher gains. Since retailers don’t have to invest in research and manufacturing, private-label brands tend to be more profitable. You’re essentially cutting out the expensive parts of product creation and jumping straight into branding, marketing, and selling.

3. You can get products to market much faster than traditional product development.

Creating a new item can take anywhere from one to several years—from coming up with an idea to finally seeing those products on store shelves. But with private labeling, you don’t have to put your goggles on, stay in a lab (if you have one) for hours, or develop your own formula. Kidding aside, manufacturers handle everything based on your customization requests, cutting production time to just 4 to 12 weeks. This means you can quickly launch products that align with market trends and customer demand.

4. You can take advantage of unique marketing opportunities for personalized products.

What makes your product different from the rest? That’s your selling point, and it should be the main message in your marketing. Since private labeling allows product customization, you can differentiate yourself from your competitors with unique features and branding. You’re not just selling what everyone else has; you’re offering something special for your audience.

For example, if you have a coffee business, you could offer ethically sourced beans with a custom roast profile to cater to specific customer preferences. With a distinct product, your marketing becomes much more impactful. You could craft a clear, compelling message instead of blending in with all the other generic promotions out there.

The Flip Side of Private Labeling

Like any business model, private labeling has its challenges. Here are a few things to keep in mind before adopting this business strategy: 

1. Delays can happen, so plan ahead.

Finding the right private label manufacturer isn’t an overnight process. You’ll need to research different suppliers, check their facilities, and make sure they can meet your quality standards. That takes time. So, if you’re planning to launch a new product, factor in enough time to coordinate with manufacturers and avoid last-minute stress.

2. You can’t always order the exact quantity you want.

One downside of private labeling is that you can’t just start small and see how it goes. Most manufacturers have a minimum order quantity (MOQ), which means you have to commit to buying a certain amount before they even begin production. If you overestimate demand, you could end up with excess inventory. 

That’s why market research is important. Before placing an order, take time to understand your customers, track demand trends, and make sure you’re ordering what you can realistically sell. Social listening and sentiment analysis tools can help you gauge interest and make smarter decisions, so you don’t end up with stock you can’t move. 

White Labeling Made Simple: What You Need to Know

Now that we’ve covered private labeling, let’s explore what white labeling is and how it works.

White-label manufacturers produce products intended to be sold under different brand names. Unlike private labeling—where a product is solely created for one brand—white label products can be resold by many businesses with little to no customization.

Ever browsed Amazon and noticed multiple sellers offering almost identical phone cases or water bottles? Chances are, they all source from the same white-label supplier. The only real difference is branding, packaging, and sometimes minor personalization (or, in some cases, no changes at all).

This business model is widely used across food and beverage, skincare, fashion, and home & personal care. In addition to physical products, it’s been a staple in the tech industry, especially in SaaS (Software as a Service). In this field, a company develops core software features that are then rebranded and resold by various businesses, sometimes with added features or extra services.

Key Advantages of White Labeling: Why it Works

1. White labeling allows quick and easy market entry.

Since the products are already manufactured and ready to go, there’s no need to allot months on product creation. You simply pick a product, add your branding, and start selling. If you’re looking to jump on trends quickly, this is an excellent choice. 

2. Ready-made white labels mean lower costs and less hassle.

Compared to private labeling and making your own item, you don’t have to spend money on research, prototyping, or extensive testing. Your main focus (and expenses) will be on branding, packaging, and marketing. Think of it like buying wholesale blank T-shirts and printing your own designs: The product stays the same, but your branding makes it unique.

3. There's easy access to reliable manufacturers.

Finding a trustworthy manufacturer can be one of the hardest parts of starting a business. But with white labeling, there are plenty of suppliers offering ready-made products. 

The Downsides of White Labeling

1. If there’s no product exclusivity, don’t expect customer loyalty.

Since white-label products are available to multiple sellers with their brands slapped on those generic items, customers can easily compare prices and opt for the cheapest option. This makes it harder to build strong brand loyalty.

2. Standing out from the competition is a challenge.

With so many businesses selling similar products, creating a unique marketing message can be tough. And while exaggerated claims (case in point: greenwashing) aren’t the answer, white labeling may not be the best fit if your goal is to launch signature, one-of-a-kind products.

3. There’s limited to no control over product differentiation.

While white labeling helps you launch fast, your competitive edge relies more on branding, pricing, and marketing, since you have little to no say in how the actual product is made.

Answering the Hard Questions

▶︎ Are private and white labeling ethical?

Yes, as long as you’re honest with your customers. People buy affordable alternatives for a reason, and it’s your job as a seller to be transparent with your branding and packaging.

▶︎ Do customers really care about who manufactures the products and how? 

Yes, and the numbers back it up. In a 2020 McKinsey U.S. consumer sentiment survey, over 60% of respondents said they’d pay more for sustainable packaging. A NielsenIQ study found that 78% of US consumers prioritize a sustainable lifestyle. This shows that more buyers are concerned about how products are made, from ethical sourcing to environmental impact.

Beyond sustainability, many consumers are extra cautious about product ingredients, especially in skincare and cosmetics. The popularity of ingredient-checking sites proves that buyers want full transparency about what they’re putting on their skin.

▶︎ Does white-labeling a software make you less of a founder?

Not at all! Being a founder isn’t about coding from nothing—it’s about spotting a market need, building a brand, and scaling a business. Many successful tech companies have leveraged existing technologies and focused on branding, marketing, and customer experience to grow.

▶︎ Does private label mean low quality? 

There’s a common misconception that private label products are cheap knockoffs or low-quality alternatives. But that’s far from the truth. This myth comes from the fact that private-label products are often more affordable and don’t always have the flashy packaging of big-name brands.

But consumer behavior is changing fast. More shoppers are realizing that private label products offer great quality at a lower price, making them a smart choice. In fact, according to NIQ’s consumer outlook, 50% of global consumers are now buying more private label products than ever before.

TL;DR: Key Considerations to Choose the Right Model for Your Business

If you’re lost or overwhelmed with the information, here’s a quick guide to help you:

Now that you’ve weighed the key factors, it’s time to map out your business strategy and take action. Launching a new product doesn’t have to be overwhelming—just pick the model that fits your needs, give it a try, and see where it takes you.

And don’t forget to check out BoxHero! We’ve been trusted by 200,000 businesses across 100 countries to streamline inventory management. Want to hear what they have to say? Read our testimonials and see how BoxHero can help your business grow! 😊