Business Glossary

What is private label?

This article is for educational purposes and does not constitute financial, legal, or tax advice. For specific advice applicable to your business, please contact a professional.

When you go to the grocery store, you’ll see many own-brand products lining the shelves. They carry the supermarket’s branding and packaging, but have been manufactured by a third-party supplier for that brand. These are known as private label or white label products.

Most retailers, whether ecommerce or offline, will get their products from other suppliers rather than manufacturing them themselves. Private label products take it a step further enabling them to go to another manufacturer but have their brand and label put on the products too.

Who uses private label?

You’ll often see private label goods on supermarket shelves. Trader Joe’s for example, sells a lot of everyday basics under its own brand name and they’re not alone – other brick-and-mortar retailers such as Target and Walmart carry products under their own private label brands.

It’s not just supermarkets who sell white label products. In fact, small businesses can run successful private label businesses to appeal to the consumer and build their brand name without the hassle of also being the manufacturer.

Getting started with private label

Whether you’re running a brick-and-mortar store or work in ecommerce, private label is becoming increasingly popular. Private label works better for some product categories than others so profitability is dependent on what you’re selling. Cosmetics and clothing are sound private label products, as are the condiments and low-priced items you see in grocery stores.

Once you decide to operate as a private label business, you need to find a manufacturer. Reputable manufacturers will provide you with samples and you can decide whether you want to go ahead with your private brand.

Advantages of private label products

  • Pricing control – as the retailer controls what goes into the product they also retain control over pricing.

  • Greater profit margins – you control production and pricing so you set the level of profitability.

  • Manufacturer control – retailers who use private label engage third-party manufacturers to make their label products and therefore control quality and product ingredients.

  • Control your own branding – white label products carry the name of the brand ordering them.

Disadvantages of private label products

  • By outsourcing to third-party manufacturers you’re reliant on them producing private label items to your specification. Your suppliers can encounter problems which you have no control over.

  • National brands garner more loyalty and it can be difficult to build loyal customers with generic products sold under private label. You can only sell private label products in your own store, which limits the amount of customers you can reach. Some retailers are turning private label products to their advantage, producing exclusive high-end items and creating a buzz around them to encourage customers to specifically shop with them.

FAQs about private label products

How much does private label cost?

Private label products are usually cheaper than national brands, but it’s hard to put a figure on how much it costs to bring your private label brand to market. You could spend as little as $1,000 to launch a new branded product or as much as $15,000. As well as label manufacturer and shipping costs, there will be other expenses, including marketing and social media advertising.

Is private label profitable?

It can be and many retailers successfully build their own brand and customer base through their private label business. It enables them to create exclusive private label products straight from the supplier and cut out the manufacturing process, whilst simultaneously retaining control over quality, pricing and ingredients.

Should I private label my product?

It’s exciting when a larger retailer contacts you about selling your product under their brand. Private label products can increase your revenue and will reach the wider consumer. However, if your goal is to build your brand independently, white label branding can be counterproductive – revenue can increase but profit margins will decrease. Sales of your product under your brand may go down or disappear altogether.

There’s no right or wrong answer when it comes to private label branding, just be clear on your business goals and make sure any plans to white label align with them.

Retail Definitions, Terms & Abbreviations

Explore how Square can help you run your business.

Free POS software

Square Point of Sale makes it easy to sell in person, online, over the phone or out in the field. It’s simple to use, and there’s no training required.

Checkout links

Create payment links, buy buttons or QR codes with Square Online Checkout. Share them almost anywhere and start selling without a website.

Payment terminal

Square Terminal is the card machine for everything from managing items and taking payments to printing receipts and getting paid.