How Does Private Labeling Work and Is It Right for My Business?

Private labeling is an efficient way to start or grow your brand without the headache and hassle of creating the products yourself. Products like aloe vera, which are natural extensions of other product lines, are the ideal investment for private label products. 

As a business owner, you want to look for private label products that will sell themselves. Products that will sell for 5 to 6 times their manufacturing costs are ideal as this will leave some wiggle room for sales and discounts. 

Private label products are appealing to businesses because they can generate profit without the burden of extra R&D, sourcing and manufacturing. It may sound too good to be true, but it isn’t. A study conducted by the Private Label Manufacturers Association found that private label items have a 25% market share of sales in the U.S. That’s ¼ of the market share. Certainly, something to take note of.

In this article, we’ll show you how private labeling can work for your business, and we’ll help you figure out whether it’s a good fit for your needs. 

 

How Does Private Labeling Work?

Private labeling works by creating a sense of exclusivity for the product. After all, it’s your brand on the label. When you find a product that can be private labeled and works well for your company, customers are driven to come back and purchase that product again. 

Private label manufacturers secure deals with individual sellers or brands to sell their product through the business or seller using their company name without credit back to the manufacturer. The individual seller or brand has the right to sell the product independently or with other products they’re already selling. 

Private label products work best for products that improve the value of other products. For example, if you are a company that sells health supplements and protein powders, aloe vera juice would make an excellent addition to your product selection, as it fits with the health and fitness focus of the brand. Likewise, if you are looking to incorporate natural ingredients into your cosmetic products, aloe is a natural fit for your line.

It is an ideal partnership for you and the private labeling company. Your customers become repeat customers turning you into a repeat customer for the private label manufacturer. It’s a win-win partnership.

 

Types of Private Label Products

Nearly every company has a private label product they sell. But, there are different types of private label products. 

Generic Private Labels

Generic private labels are the more traditional private label type offered by manufacturers. The objective of generic private labels is to provide a low price point option allowing brands to have a more budget-friendly option.

Generic private label products are generally the cheapest, low-quality, with minimal packaging design and zero room for promotion. 

Copycat Brands

Copycat brand private labeling are products that are reverse engineered from nationally known products. These products will give a brand's customers that sense of similarity. 

Value Innovators

Value innovators are private label products that are one step above the copycat brands. These private label products have the value-added features but remove the non-value adding features to reduce the per-item cost. As a result, these are often the best deals for the brands’ customers. 

Premium Store Brands

Premium store brands are private label products priced higher than some national brands because they are superior in quality. Brands use these products because the best brand their money can buy and pass that on to their customers. The manufacturer will focus on the quality of the product - and the price tag that comes with it.

 

How to Market Private Labels

Once you’ve selected the type of private label product you want to sell, you need to know how to market your product to your customers. Adding a new product to your existing catalog is excellent for bundling or an offer-added, but outside of that, you’ll need a bit more to get your new private label product in front of new or existing customers.

Branding

Having a brand creates a sense of legitimacy and trust by customers. Create a brand that is not only eye-catching but expresses who you are as a company. The right logo, website, and company story can draw customers in and encourage them to purchase your private label products.

Advertising

Advertising is the best way to get the word out about your product. Create a marketing plan by researching your target audience, where they shop, how they like to shop, and their spending habits.

Hire a Photographer 

Invest in a professional product photographer to create enticing and captivating photos of your product. Show video of someone using or consuming the product. You don’t have to make a full-on commercial for TV - video is used on social media every day to market goods and services.

List Product Details 

Consumers want to know what is in your product, the benefits, and sizing. In an ad you create, give as many details as possible to address any concerns a potential customer may have and let them know exactly what they get when purchasing from you.

Trade Shows  

Get a foot in the door using salespeople, marketing personnel, and executives. You want your product on as many shelves as possible, don’t be afraid to reach out and pitch your product to retailers. 

 

Is Private Labeling Right for My Business?

Now that we’ve shown you how private labeling works, the different types of private labels, and how you’ll need to market those private label products, you’re probably wondering if private labeling is right for your business. 

As with any business venture, there are advantages and disadvantages to selling a private label product. Knowing how private label products will benefit you and the potential pitfalls is essential to your success.

Advantages

Loyalty 

Building long-term success in the market needs loyal customers who purchase the product. When you use private labeling, customers become familiar with your product and your brand. This loyalty translates into a customer buying your product more because they trust it. 

Increased Sales Margins 

Private label brands generally have larger profit margins than resale products because making your own products costs less than purchasing pre-made products. 

You’re Exclusive 

When you use private labeling, you stand out from the crowd. You alone have the exclusive right to sell the products. 

Disadvantages

Minimum Ordering  

There is generally a minimum required inventory a manufacturer sets for bulk purchases. You may find that the minimum order required is more than you would typically want to purchase.

Brand Recognition 

Do your research on a private label product you wish to purchase. Customers like to buy products from brands they trust. If the product you’re purchasing isn’t common on the market, you may have to spend a little more money to market the product.

 

Let Aloe Labs Help You with Your Natural Private-Labeling Needs

The best way to ensure that you're getting the highest quality aloe gel possible is to choose a company with complete control over the manufacturing process, from growing to harvesting and processing. 

At Aloe Laboratories, we maintain our own aloe vera farm and production site, allowing us to craft the most satisfactory products possible while keeping bulk and wholesale prices low. We pride ourselves on producing aloe vera gel, juice, and powder specific to each customer's needs.

If you'd like to learn more about how aloe vera gel can enhance your products, or if you have some ideas of your own, reach out to us to learn more about how we can help you make your product a reality.

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