Beginner's Guide to Finding Private Label Manufacturers in 2020 [with examples]

Posted by Star on December 24th, 2020

Private labeling is one of the most effective ways to make your products stand out from the millions of others listed for sale online.

Creating a private label product can give you more control over production, pricing, branding, and profitability.

It has become a very popular business model for sellers on online marketplaces such as eBay, Amazon, and Etsy.

And the good news is that it’s not hard to get started.

However, there are common pitfalls that you need to be aware of before committing to your first private label product.

This guide will take you through the benefits and risks of private labeling, including tips for how to source the best private label products.

What are private label products?

A private label product is one that is manufactured and supplied by one company and offered for sale under another company’s (or individual seller’s) brand.

For example, say you have been selling wholesale Wayfarer-style sunglasses on eBay, sourced from a supplier in China.

They are generic sunglasses that don’t have any branding and dozens, if not hundreds, of sellers are selling the exact same product at similar prices with low profit margins.

In this example, private labeling would involve you creating your own brand and arranging with your supplier to print or emboss that brand onto the same, or similar, Wayfarer-style sunglasses.

You might also ask if they can manufacture customized casing that also features your brand name and logo.

That way you have your own, exclusive brand of Wayfarer-style sunglasses ready to sell online.

Private labeling has become a popular way for online sellers to add value to their product offerings and differentiate themselves from the masses of generic products being sold online.

Traditional retailers, such as Target and Whole Foods, are also investing heavily in private label products.

But you don’t have to compete with big-name brands to have success selling private label products online.

Benefits and risks of private labeling

There are many benefits and risks associated with private labeling that sellers should be aware of before getting started.

Benefits of private labeling

Profit margins

Private label products will generally have higher profit margins than their generic counterparts. While it will cost more to get a manufacturer to add your branding to a product, you will be able to sell the product at a higher price. There is inherent value in a branded product even if the brand is unknown. Private label products will generally have higher profit margins than established national brands as the items are usually cheaper to make.

Exclusivity

A major advantage of private label products is that they stand out from generic resale product on websites like eBay and Amazon. You are essentially setting yourself apart from your competitors and, hopefully, giving buyers more reasons to choose your product. It also removes the temptation of competitive pricing as your product is different to everything else out there.

Branding

Creating a private label means that you have your own brand. It’s something you own and an asset you can build upon. Having a brand gives your online business an identity. If your buyers like your product they will purposefully seek out your brand in future, rather than opting for whatever generic product is cheapest. A brand could lead to starting a personal eCommerce store where customers can discover your full range of products. Ultimately, branding is about recognition, trust, and customer loyalty, all things that are more difficult to foster when selling generic resale goods.

Marketing

Having a private label product can help take your marketing to new heights. You are limited with what you can do to market a generic product. With your own brand, you have many more options. You can create a story around your brand, take creative product photos, build a social media presence, and target your product at specific demographics. Having a more purposeful marketing strategy can increase brand equity, customer loyalty, and sales.

Risks of private labeling

Quality

Product quality is a risk that all online sellers take. However, there is possibly more at stake for private label sellers. You’re taking the risk of putting your brand on a product that may not be up to scratch. And if a poor quality product makes it into the hands of your customers, your business and brand are going to suffer. This is why it’s so important to find trusted private label manufacturers and test sample products before committing to your first big order.

Reliability

You’re also taking a risk on the reliability of your manufacturer and supplier. What happens if they take too long, muck you around, or suddenly go out of business, especially when you’ve worked with them to create your private label product? Finding a reliable manufacturer helps to mitigate this risk, but you can’t eliminate it entirely.

Liability

As a private label seller, you are likely to be liable for the product you’re selling. This can be a risk, especially with goods like baby products, or anything that is inherently fragile or dangerous (think electronics, safety equipment, sports and outdoor gear, food and dietary supplements etc). This can be particularly risky in the United States where civil lawsuits are common. Private label retailers can seek to shift liability to the manufacturer, but this is something that needs to be established before you start selling. There is also the option of liability insurance for your business.

Legality

Selling a private label product with your brand on it leaves you open to potential legal issues. You need to be aware of trading regulations, possible trademark/patent risks, as private label manufacturers hair care well as the safety risks mentioned above. You also need to be wary of any words you use or claims you make on your packaging to prevent potential legal challenges. And if you’re going into competition with a big-name brand and they see you as a genuine threat, you can expect them to take legal action to either slow you down, or shut you down.

What to look for in private label manufacturers

Finding trusted, reliable private label manufacturers is essential private label manufacturers cosmetics to the success of your online business. But what does a good private label manufacturer look like?

Product specialization

You want to find a manufacturer that specializes in producing your type of product. Just because you’ve worked with a manufacturer on a kitchenware product doesn’t mean you should stick with them for your private label Wayfarer sunglasses. Seek out manufacturers that have a track record in your niche.

Competitive pricing

Securing a great price from the manufacturer means your profit margins will be higher. You will want to shop around. We recommend requesting quotes from five different manufacturers so you know you’re getting a competitive price. The difference with private labeling compared to dropshipping is that you’re negotiating the price for adding your branding and any other features to the manufacturer’s product. Make sure to also enquire about pricing for sample products, minimum quantities, discounts for bulk buying, and shipping costs.

Product quality

Product quality is probably the most important thing to look for in private label manufacturers. The best way to do this is by doing your research on forums and ecommerce websites. You can also use SaleHoo’s supplier directory, or any other trusted list of suppliers and manufacturers. It’s also advisable to get samples of your private label product made so that you can test them before they go to market. Some sellers even visit the factory to oversee the production process before committing to a manufacturer.

Reliable delivery

Before committing to a manufacturer, ask them about delivery times. Any delays in getting your private label product to your store will result in lost sales and unhappy customers.

Low defects What’s the manufacturer’s track record with product defects? This can be hard to come by, but you should be able to find feedback online from other sellers who have used the manufacturer.

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