Welcome back to our sourcing 101 blog.
In this series we break down the basics and arm you with actionable intel to help you source products from China like a pro.
In the last post we looked at the difference between a white label product and a private label product. You can check out that post here.
White labeling is an important term to wrap your head around, and it presents an interesting opportunity for startups and eCommerce entrepreneurs, particularly in 2021. White label products can be a simple, low-investment starting point for budding entrepreneurs looking to build a business.
With that being said, it’s important to weigh up both the pros and the cons (yes, there are some cons) so you can determine whether or not it’s the right strategy for your business.
So, without further ado, let’s dive into White label products - the pros and cons.
What is a white label product?
A white-label product is a product that is manufactured by one company and sold to another company that rebrands it and sells it to their customers. It’s a sourcing hack from way back.
Pros of white label products
Thanks to the COVID-19 pandemic, and the worldwide lockdowns, the eCommerce revolution picked up even more steam in 2020 (just ask Jeff Bezos who made like... $70 billion).
Put simply, people are buying more stuff online than ever before. The boom has helped inspire many an eCommerce startup, and white labeling has played an important role.
White label products allow you to skip the lengthy and costly product development phase and get a product to market, fast. It’s a window of opportunity that allows the small players to carve out a piece of the pie, without the usual risks and costs.
- Minimal initial investment
What is the most enticing thing about a white label product for a small business? The low cost.
Developing a product from scratch is time-consuming and expensive. With White labeling there is no need to dream up the next hot consumer product, develop a prototype, and go through the lengthy and expensive manufacturing process. Your white label manufacturer knows exactly how to make the item you want, and will often have stock waiting to be ordered.
You could jump on Alibaba right now, place an order for handmade bamboo sunglasses, and launch your own sunglass brand before the end of the month. (Perhaps read the ‘cons’ section of this post before you place your order though). You might have ambitions to eventually launch a fully unique, custom-designed pair of sunglasses, but in the meantime, white label products can help you dip your toes.
Important side note: Developing a product from scratch is awesome! And, we certainly don’t want to discourage anyone from doing it. In fact, we have worked with many clients that have done just that. Need help bringing your big idea to life? Book a FREE CONSULTATION today.
- Market tested
Establishing whether or not there is a market for the product you want to sell is an important step in any entrepreneur’s journey (leaving aside those geniuses that develop products we didn’t even know we needed).
White label products usually exist because there is a market for them.
Someone creates a cool product that people want.
Other companies start selling ‘like’ versions of it.
Manufacturers in places like China pick up on trends like this and start offering white-label versions of those products.
Retailers or resellers buy these white label products and sell them to their customers.
For a clearer picture of this sourcing merry-go-round, check out our post on the difference between white label and private label products.
- Enter a new or emerging market
White label products can be a useful tool to test the waters in other areas of the market. You might be developing your own line of work boots made from sustainable cactus leather, and see an opportunity to add a work apron to your product offering.
Before you invest in developing one from scratch, you might use a white-label solution to test the waters with your customer base (assuming someone out there is producing a work apron from cactus leather - which there probably isn’t, but you get the point). If your customers like the product, this could provide you with very useful market research. You can then start developing your own, custom, 2.0 version of the apron.
- Ride the trend wave
White label sourcing allows you to identify a particular trend in your niche and jump on it, quick. Let’s say you’re in the fitness industry selling affordable gym equipment. Vibrating foam rollers start selling like ice-cream in the Sahara and you want a piece of that action. White labeling allows you to jump on that trend, order your own vibrating foam roller, slap your brand on it, and start selling.
- Leverage the familiarity of established brands
White labeling is the realm of generic consumer goods. A generic, or ‘like’ product usually closely resembles a product sold by a well-established brand (or brands) in the market. As such, white-label sourcing allows you to leverage the familiarity of these well-established brands. Let’s look at Olympic weight plates as an example.
The design for the Olympic style bumper plates you see in competition today appears to have emerged some time in the 1980s. Since then, big fitness equipment brands like Eleiko and Rogue have dominated the market with their versions of the bumper plate. Although it might seem impossible to compete with a mega brand like Eleiko, when it comes to Olympic style bumper weight plates, plenty of small brands are doing just that. And that’s largely thanks to white label products.
China is no longer simply the place to go for low-quality, cheap goods, and plenty of manufacturers are producing high-quality Olympic bumper plates. Big players like Eleiko have positioned themselves as suppliers of top of the line products (with a top of the line price tag), which has left ample opportunity for small players to position themselves as an affordable (but still high-quality) alternative.
What is Reverse Sourcing?
Reverse Sourcing is a revolution in China sourcing.
It’s the fastest way to connect with suppliers and manufacturers you KNOW can deliver, and it couldn’t be more simple. You find a product you want to source, and we’ll tell you who makes it.
Reverse Sourcing is the data-driven method of finding out who supplies who, and who makes what. It’s a revolution in sourcing that will save you time and money.
Cons of White label products
- Mass-market strategy
A controversial ‘con’. Typically, white label products have been used as a mass-market strategy and it is often said that you need a sizable, established following to benefit from their use. A brand’s reputation is key here because you’re dealing with generic products that don’t confer a lot of competitive advantage on their own. This is why white label products have traditionally been used to add new revenue streams and increase market share, rather than as a market entry strategy.
We say hogwash! While there is truth to this thinking, there are plenty of examples of eCommerce entrepreneurs breaking into existing markets with nothing more than a White label product. You might need to get creative with your marketing strategy, but that’s what entrepreneurs do best (and the big players often don’t). So don’t let this con slow you down!
Perhaps the most obvious con when dealing with White labeling is that competition is often very high. White-label products are by their nature generic, and consumers have plenty of options. If you’ve found the perfect protein shaker to white label, it’s likely that some of your competitors have too.
In some cases you may be able to make slight changes to a white label product to differentiate it from other products in the market, but this will almost always cost you. Once the costs for modifications start piling up you start creeping towards a private label situation, which by the way you can learn a little more about here.
So the competition might be high, that shouldn’t necessarily stop you. If you’re a small business dipping your toes into the world of white labeling, you just need to kill it with your branding and marketing, and the consumer facing side of your operation.
- Quality control
“It takes 20 years to build a reputation and five minutes to ruin it.”
- Warren Buffett
Jump on Alibaba, type in a product you want to sell (let’s revisit our wooden watches) and you’ll be flooded with options. Unfortunately, as we’ve discussed many times on the Epic blog, quality varies SIGNIFICANTLY from one supplier or manufacturer to the next. In other words, not all wooden watches are created equal!
Many excited entrepreneurs race through the sourcing process, and place an order with a supplier they haven’t properly verified. The result is often poor quality products that do nothing but damage your brand.
The lesson here is to make sure you work with top suppliers that have a reputation for producing quality products.
So there you have it, White label products - the pros and cons!
Understanding the world of White label sourcing is like popping the hood and taking a look at how an engine works. It’s a mysterious and misunderstood side of sourcing, but if used correctly the opportunities are endless.
If you’re looking to source white label products and would like some expert support, Epic Sourcing offers a FREE consultation for new clients. Simply fill in the form here, and we’ll be in touch.
Better sourcing everyone.