The white label business model isn’t a new or innovative mode. It has existed for a long time. Companies that use a white label business model sells products with their own brand and logo.
However, these companies do not manufacture their products themselves. Instead, they outsource the manufacturing process to another company.
Therefore, a white label business model is one in which companies sell products manufactured by other companies or businesses under their own brand name. Usually, the manufacturer is also responsible for applying the company’s label and brand to their products.
The process involved in the white label business model allows for a company to receive preprepared goods that they use their marketing or brand name to sell.
Usually, there is no mention of the original manufacturer of the product. Therefore, customers can’t tell the difference whether the company produced those goods or outsourced their production.
How does the White Label business model work?
The White Label business model is straightforward. A company, usually a retail chain, sells products to customers under its brand name. However, these products do not come from the company itself.
Usually, these companies outsource their products from third-party suppliers. It allows the company to focus on marketing goods and services rather than spend time perfecting the product.
White label products come with all the advantages that come with outsourcing. For example, a company can outsource its overall production process to another company or supplier for a lower price than it would take for it to produce it.
Similarly, the manufacturer also brings expertise that can help in the process. The company using this business model can then use its name and brand value to sell the products to customers.
The white label business model is also beneficial for the original manufacturer of products. The manufacturing company usually receives bulk orders for generic products and, therefore, can earn more from it.
Similarly, it doesn’t have to spend extra on marketing or developing a brand name. The company can focus on production, while another company sells the products.
White label business model is also common in online businesses. The model is the basis for some other widely used business model, such as dropshipping, although there are some differences.
Some websites use white labels to enable a successful brand to offer a service without having to invest in creating the technology or infrastructure required.
What are the advantages and disadvantages of the white label business model?
Given below are some of the most common advantages and disadvantages that white label business model companies must face using the business model.
Advantages
The white label business model allows companies to increase the visibility of their brand. For companies that offer multiple products or services, paying extra on white labelling on all products they offer is a great way to boost their brand.
It allows them to sell products manufactured by others under their name while increasing their range of products offered.
As mentioned, the white label business model also allows companies to outsource their production process, getting all the advantages associated with outsourcing.
These include saving time and money, increasing efficiency, focusing on critical tasks, obtaining expert work, and much more. The white label company can take a passive approach to production while focusing on marketing products.
The white label business model also allows companies to set their own profit margins. Once they get a product from a manufacturer, these companies can focus on earning profits from it.
It further allows companies to employ other strategies, such as a low-pricing strategy to attract more customers without having to worry about the costs.
Disadvantages
The most critical disadvantage of the white label business model is the loss of control that a company must suffer. It comes mainly because the company outsources its production process, therefore, losing control over it.
The company has less influence on the production process and must rely heavily on the manufacturer to get things right.
There is also a disadvantage for the manufacturer when dealing with white label companies. The manufacturing company sells its products to the white label company but cannot develop its own brand name.
In case the white label company stops buying from its manufacturers, they cannot sell the same products as they lack the brand name to market their products.
Examples
The best examples of the white label business model come from the retail industry. Companies such as Walmart, Costco, Tesco, Kroger, Whole Foods, etc. have a wide variety of products that they offer to their customers.
However, none of these company actually manufacture their products. Instead, they use third-party suppliers to make their products, which then these companies label and brand as their own.
Conclusion
In a white label business model, companies outsource their production process while focusing on marketing and delivering products to customers. The white label company buys products, often in bulk, from manufacturers and applies its own brand and label to the products.