White Labeling
a practice that eases your start-up stage
Recently, we talked about OEM (Original Equipment Manufacturer) and VAR (Value Added Reseller). Today we would like to introduce the practice of white labeling. This practice among manufacturers and marketers is actually very common, you find white label products in every supermarket, even in your fridge.
A white label product is manufactured by one company but packed and sold by other companies. Those various companies sell the same product under different brand names. For example, the practice of labeling and branding the same raw product like a strawberry yogurt suggests the end consumer strawberry yogurt „A“ from company „A“ is different to strawberry yogurt „B“ from company „B“. So the end product appears in a way that it looks like it has been manufactured by the marketer.
This practice is very common especially for supermarkets like discounters, as manufacturers of white label products are specialized in producing strawberry yogurt in a cost saving way while the marketer can concentrate on the investment in marketing and selling the product. Another benefit of white label products for marketer is, that it enables them to expand their offerings and increase revenue.
White label products in supermarkets are well displayed and easy to spot on store shelves as they are the marketers’ products sold with their own brand attached, often commonly known as store brand. Those products are sometimes sold at a discount relative to other well-known brands. Another reason for this practice is that many online businesses do not have sufficient resources or do not intend to invest in infrastructure, technology or personnel but aim to create products and services in order to launch successful brands. White label manufacturers are often commonly seen bigger than marketers due to the volume they manufacture for various marketers.
The practice of white labeling can also be described as a form of out-sourcing. In addition to that, it is common practice that manufactures of high-end electronic products invest in technology and design but also put their brand name on cheaper electronic products (generics) from other manufacturers. Hence, it enables them to expand their offerings, even though the products are the same.
Another type of white labeling is used from banks. There are some banks that offer credit cards to their customers where the credit card processing is outsourced as not every bank has such service in house. There are also cooperations like electronic super stores and specific banks to offer customers the purchase of products on easy installment terms. So it appears that the financing is conducted and operated through the electronic super store but in fact it’s the bank.