You don’t have to invest in product development to sell products online. Many ecommerce business models allow you to sell merchandise without touching the products themselves.
Private labeling, or what is also known as a white-label business, is one such business model. With private labeling, you work with a third-party manufacturer to create custom-branded products. Private labeling is excellent for people and brands that already have established audiences and want to find a way to start generating passive income online via product sales.
What is private labeling, and how does it work?
Private-label products, similar to white-label products, are goods that are created by one company with the intention of being sold and branded by another company. This business model allows the seller to put their own brand name on the product and market it as if it’s their own. However, it is important to note that private-label goods should not be confused with white-label goods.
While both private-label and white-label products involve a third-party manufacturer producing goods for a retailer, there are distinct differences between the two. White-label products are not custom-designed for a specific seller. Instead, a white-label manufacturer produces a large volume of generic products that are then sold to various retailers. Each retailer can then sell these products to consumers under their own unique brand name. This means that white-label products are essentially generic and can be found under different brands in the market.
On the other hand, private-label products are exclusive to a single retailer and are custom-designed to meet their specific requirements. These unique product lines are sold solely through the retailer, creating a sense of exclusivity and differentiation. Examples of private-label products include Costco’s well-known Kirkland Signature range or Amazon’s popular Basics line.
Total retail sales in the US for private label products hit $5.47 trillion in 2019 and are projected to hit $5.94 trillion in 2024, according to data from Statista. That’s no surprise, considering you see private-label products in most major retail stores. Target has its Archer Farms private label; for example, Walmart has Great Value, and Costco has Kirkland.
Just to let you know, you might have many competitors in your category. But there are many ways to make your products stand out in the eyes of your buyers. For instance, you can use water-based screen printing ink that only a few screen printers use. Consider buying high-quality screen printing ink from reliable stores like Screen Print Direct. Also, you can customize the clothes based on request or design the patterns yourself; the choice is yours!
Advantages of private labeling
Private labeling has several advantages beyond simplifying the product development process. Some of those advantages include the following:
- Control over production. You direct third-party manufacturers regarding materials, ingredients, quality, and production rate.
- Control over pricing. As the seller, you determine your pricing strategy and control how you optimize production costs, which helps create a healthy profit margin.
- Adaptability. Smaller retailers can move quickly to get a private label product in response to rising market demand for a new feature, while larger companies might not pursue a niche product.
- Control over marketing and branding. You choose how to promote and package private-label products before making them available for sale.
Disadvantages of private labeling
While there are many benefits to private labeling, it doesn’t come without its challenges:
- Manufacturer dependency. Because a third-party manufacturer handles production, you’re essentially at their mercy. That’s why finding a reputable and reliable manufacturer to work with is so important.
- Difficulty building loyalty. It can take time to get traction when starting a brand from scratch. This is one reason private label products are great for people and brand names with an established audience that trusts them.
- Poor consumer perception. Private-label products commonly have a reputation for being cheap or low quality. However, that perception is changing. Many consumers worldwide believe the quality of private-label products is improving.
Private label manufacturers for creating a custom-branded product line
While many private label manufacturers may seem similar, it’s important to vet them carefully to find the one that suits your business now and in the future. You have to consider what types of products you want to make and sell, where you want to sell and ship them, and how high you can price them.
Below is a quick overview of some of the best private-label manufacturing services and product-sourcing apps for all kinds of goods. Most here have a Shopify app you can use to connect directly to your online store.
SupplyMeDirect
SupplyMeDirect is a supplier that ships from the US, EU, and China. Features include automated order processing, local shipping when available, and a responsive and helpful customer support team.
Merchants who use the private label manufacturer’s app like that it syncs with your Shopify store is easy to use, and even helps save time and money.
Note that all payments are in USD, regardless of where you or your customers are.
AOP+ Easy Print on Demand
Focusing on the EU, UK, and US, AOP+ Easy Print on Demand is a platform for selling on Shopify and Etsy, specializing in organic print-on-demand products and services. Like SupplyMeDirect, the AOP+ Shopify app syncs with your Shopify store and automates order processing and fulfillment. It’s easy to use, and you can create a product in as little as 30 seconds.
AOP+ executes all the printing itself instead of using a third-party supplier, and it will even work with you to create your custom privately labeled products. It specializes in apparel and accessories like t-shirts, flip-flops, totes, and wall plaques.
Merchants also find their live customer support team extremely helpful and informative.
Apliiq – Print On Demand
Los Angeles–based Apliiq is another private label supplier and print-on-demand company specializing in apparel items. It focuses on trendy products like woven labels, pocket tees, liner hoodies, and patch beanies.
Like SupplyMeDirect and AOP+, Apliiq automates order processing and fulfillment and ships every order within a week. The Shopify app also sends tracking information to your customers, so they can see when their order will arrive.
Modalyst – Dropshipping
Modalyst is a dropshipping supplier that works with US-based providers and is also an AliExpress Partner. This means it has one of the more extensive product catalogs on this list—you can choose from more than a million products to dropship.
As far as private labeling goes, it specializes in athleticwear. Subscribing to Modalyst’s Pro plan, which costs $90/month and has a 5% transaction fee, gets you unlimited products, custom packaging and branding, and fast shipping—typically three to eight days for US orders and under 15 business days for international shipping.
Like other manufacturer apps for private labels, Modalyst automates order processing and fulfillment. You can contact live chat support seven days a week if you run into any issues or have questions.
Alibaba
Alibaba Group is one of the largest ecommerce companies in the world (if not the largest)—its revenue hit more than $72 billion in 2020. Alibaba offers one of the most comprehensive directories, connecting suppliers with merchants everywhere.
Though Alibaba doesn’t have a Shopify app and you can’t integrate the two, there are so many private label products available that it’s worth a mention. You can find almost any product you can think of on Alibaba’s massive directory.
While Shopify apps automate a lot of the process, you purchase many private-label products directly from the manufacturer when you work with Alibaba. This lowers your inventory costs and boosts profits but requires a more significant upfront investment. Manufacturers will work with you to create custom designs and logos.
We put together two guides to help you navigate Alibaba and its sister site, AliExpress:
- Alibaba Dropshipping: How to Safely Source and Manage Products From Alibaba
- The Dropshipper’s Guide to Sourcing From AliExpress
Drop shipper
If you’re looking specifically to private label and sell coffee online, look no further than the Dripshipper Shopify app. You can create and customize your branded packaging, logo, pricing, and tags.
The drop shipper is based in the US, but it ships worldwide. All shipments go out within five days of orders, and the coffee is always fresh. Whole beans go out the same day they’re roasted, while ground beans go out the next day.
Pricing starts at $30/month, and higher-priced tiers come with added support, coaching, and training. The Elite plan, at $197/month, also gets you access to Dripshipper’s in-house design team.
Harrods Own Label
Harrods, the luxury UK department store, strategically utilizes its private-label brand to provide a wide range of premium goods to its discerning customers. While brands like Amazon Basics and Kirkland Signature leverage private labeling to offer lower-priced products, Harrods takes a different approach.
Harrods’ own brand encompasses a diverse array of merchandise, including gourmet food and beverages, high-end fashion, accessories, and home goods. The store’s private-label products are carefully curated, ensuring they meet the highest standards of quality and exclusivity.
One way Harrods distinguishes its private-label brand from others is through its selection of teas. Rather than sourcing generic teas, Harrods scours the globe for the finest tea leaves, importing them to create a remarkable assortment. These exquisite teas are then meticulously packaged in Harrods-branded tins, setting them apart from similar products found in other retailers.
By leveraging its private-label brand, Harrods can offer these exceptional goods at premium prices, reflecting their superior quality and the exclusivity associated with the Harrods name. This strategic use of private labeling helps elevate Harrods’ reputation as a premier destination for luxury shopping, attracting customers who appreciate and are willing to invest in unparalleled products.
Amazon Basics
Amazon Basics is a private-label brand introduced by Amazon back in 2009. It enables Amazon to directly compete with other retailers on its own marketplace. Operating under its own brand name, Amazon Basics offers a wide range of products including electronics, home goods, pet supplies, and more. One of its key selling points is affordability, as it often offers products at the lowest price points within their respective categories. Notably, Amazon Basics charging cables have gained significant popularity. These cables are commended for their affordability compared to cables from official manufacturers like Apple, who tend to set higher profit margins on their accessories. Overall, Amazon Basics competes by providing budget-friendly options that cater to customers seeking value and affordability on a broad range of products.
Tips for starting a private label business
When you sell private label products, you don’t have to worry about product development—or inventory investments in many cases. But before you begin, it’s essential to consider a few things:
1. Find a niche market to sell products
There are many private-label products you can sell, spanning almost every industry. Some of the most popular personal label products are:
- Hair products
- Body products
- Pet products
- Baby products
- Beard grooming products
- Health products
Explore different niche markets within those categories to determine precisely what to sell. When you sell to a niche market, you can use highly targeted marketing and advertising strategies to get your brand and products out there.
2. Contact the manufacturer
Once you know what you want to sell, look for manufacturers and suppliers who have those items. Some manufacturers may specialize in a specific product category, like Dripshippers.
Get your shortlist of manufacturers and contact them to see if they offer private labeling. If so, inquire about setting up an account. Since most manufacturers carry various products, this strategy will allow you to quickly source a selection of products within the niche you’re exploring. Also, be sure to ask if the manufacturer has a minimum order value, as you’ll need to navigate if you want to hold the stock or set up a prepaid account with the manufacturer.
3. Order samples
It’s essential to test the product yourself before making it available something may look great online and even sound great once you’ve gotten in touch with the manufacturer, but the reality may be completely different. So you’ll want to do your due diligence to ensure the quality of products is up to your standards and expectations.
4. Set up an online store
You have your manufacturer and products; now it’s time to set up your online store. With Shopify, you can choose from and customize free and paid ecommerce templates. Once you’ve set up your online store, you can browse the Shopify App Store to find the apps you need to manage your private label business, including any of the options listed above.
5. Add your products to your store
When adding products to your store, you’ll want to do the following:
- Write compelling product descriptions. Product descriptions should be information- and benefits-oriented, as opposed to focusing on listing features and specs.
- Get high-quality product images. Product photos give shoppers an idea of what the item looks like—it’s the best they can get without seeing the product in person. Sometimes the manufacturer can provide images to you.
- Determine your pricing strategy. It’s essential to price high enough to make a decent profit but not so high you outprice your customers.
6. Launch and market your store
When you’re ready to reveal your store and private label products to the public, it’s not as simple as turning on a switch. You must build awareness and drive traffic to your site if you expect to make any sales.
For new stores, paid advertising on channels like Google, Facebook, and Instagram is a great way to get your name out there. Then you can supplement those efforts with email marketing, social media, content marketing, SEO, and customer loyalty programs.
Launch your private-label brand
Starting a private label brand takes the hassle out of product development. You can withdraw your private label and work directly with manufacturers to create products your customers will want to buy—all with your unique branding and logo. Private labeling is a great way to start selling your products online.
Illustration by Till Lauer
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Private labeling FAQ
How much does private labeling cost?
At a minimum, starting a private labeling business costs at least $1,000–$1,500. Your most significant expenses will be associated with ordering samples and setting up the logistics of your business, including your website, payment processing, and order fulfillment. Learn more about working with manufacturers above.
How do I price private-label products?
To price your private label products, consider manufacturer costs, shipping fees, and the expenses associated with selling your products (including website, marketing, and payment processing fees). Once you have a number, compare it to your competitors to see how you stack up. You can test to determine which price your customers are willing to pay while you still net a profit.
How do I create a private label?
Follow the steps outlined in the post above: Find a niche market to sell products. Contact the manufacturer. Order samples. Set up an online store. Input your products into your store. Launch and market your store.
Can you make money from private labeling?
Yes, you can make money from private labeling. Follow the steps in this article to find out how to make money selling personal-label products.
