If you’ve ever heard of white label products, you might be wondering if you could turn a profit by selling them. In this article, we’ll explain how to start a business by white labeling products so that you can jump into the fray and make your brand.
What Does It Mean By White Labeling Products?
White labeling products is finding generic products which you can sell under any brand. Because the manufacturer customized these products with the brand’s artwork and name, they’re called “white labels.”
White label products include store brand products, but could also include white label services which businesses offer to consumers.
The point white labeling products is so your company can siphon some of the revenues from a market that you aren’t targeting. Think about the store brand dish soap that you see at the grocery store.
The grocery store isn’t in the soap making business, but if they think they can generate some revenues by offering their brand of soap next to the major brands of soap, there’s an incentive to provide consumers with a choice.
The trick to white labeling products being profitable is cost savings. White label products don’t claim to be better products than their competition. In fact, many barely claim anything at all -- they’re not competing on product performance.
White label products are very inexpensive to buy, which means that a business can turn it around and offer it to consumers at a lower price than the competition.
Even if the competition has a higher quality product, the low price of white label products makes them compelling options, especially in categories of product where quality is not a large factor such as dish soap.
Procuring Your Products
Now that you know what white label products are and how they have a chance to generate revenues even in a crowded market, it’s time to get started with your white label product business.
First, you’ll need to decide which white label products you’re going to try to sell. Some examples include:
- Business software
- Pens or pencils
- Dry cleaning (as a service)
The sky's the limit when it comes to the product that you pick -- but there are a couple of considerations which are relevant when it comes time to buy your inventory. Because your white label product must compete on price, you’ll be doing yourself a disservice if you don’t purchase in bulk.
Purchasing in bulk isn’t nearly as hard as it might sound at first glance. For products rather than services, websites like alibaba.com and dhgate.com serve as interfaces with factories in China.
These factories provide goods that can be white-labeled via an agreement with the manufacturer, or modified to be white-labeled after the fact. You can purchase products for pennies on the dollar, and then leave yourself with a lot of room for price competition at the sales point.
Once you have your products in hand, it’s time to figure out how you’re going to get those products to consumers.
E-commerce is the best way for a quick and dirty white labeling business, but unless you have another draw, it’ll be hard to move your white labeling business.
Nonetheless, many set up their businesses using concepts which seem like they won’t work, and the endless abundance of white label storefronts on e-commerce sites is proof that there’s enough demand to go around.
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Pick the e-commerce platform of your choice, and build an online storefront there. Set up your products, and make sure that the price of your white label products is lower than the competition.
Pick up a bunch of shipping materials like boxes, tape, and labels preventatively. You don’t want to get caught without the necessary infrastructure if that your customers start demanding your products as soon as you launch.
Once you get an order, ship it out and follow up with your customer to make sure they’re happy. Handling returns at a small scale will be a pain in the neck, so be sure to be clear about when you’ll refund your customers and when you won’t.
If you have a physical storefront or a place to sell goods, making a white label business is even easier.
Be wary that if you decide to sell your white label products from a physical location, you’ll need a payment processor or another way of taking your customers’ money. You’ll also need a business banking account where the proceeds from the payment processor will arrive.
The business banking account is also where you’ll be paying your business taxes from, so be sure to keep it with a reputable bank which offers robust online banking.
Interestingly enough, if you’re desperate for a payment processor that is of your brand, there are white label processors which you can purchase to give your customer the idea that you have a processor customized for your company.
White Labeling Products: Marketing
The biggest factor in being successful in the white labeling products business is your marketing. Your brand name is not going to be the biggest factor which moves your white label products, however.
Especially if you make a business specifically to sell white label products, once again, you’re going to move products based off of their cost savings to the customer. In your marketing materials -- likely ads on the internet -- you’ll need to heavily emphasize your low price point.
That won’t be enough, however. Customers can find low prices anywhere. You may consider offering bulk discounts, repeat customer discounts, or other promotions to get customers to see your product and decide to purchase it over the alternatives.
Once your customers are at your e-commerce store, you’ve nearly won the battle. All that remains is to show the customer the product that they’ll be purchasing and emphasize its low price.
A good trick is to present white label products at a lower price immediately adjacent to the bigger brand name products which sell for a higher price. You won’t need to retain that much of the brand name product in your inventory, and you might see some revenues from it anyway.
You should expect that the brand name products offer a lower profit margin for you than the white label products, if customers decide to buy them from you at all.
You’re ready to start your white labeling products business. The only things which remain are logistical.
Depending on the scale of your business to start, you may want to register an LLC with your state government. Registering an LLC will cost you a few hundred dollars at most, and it’ll protect you from vindictive lawsuits brought by customers.
Likewise, you’ll need to start keeping track of your accounts. Start up a spreadsheet; track your expenditures, revenues, inventory, and margins. Once you have the basics set up, remember to arrange for a marketing campaign to guide customers to your storefront.
With luck, you’ll be moving your white label products to consumers seeking a cheap fix in no time flat.