In this article we are going to cover several reasons for launching a private label with your small or medium-sized business.
What is an SMB (Small Business)?
A small and medium-sized business is a privately owned corporation or a partnership with fewer employees and less annual revenue than a corporation or regular-sized company. Usually, they have less than 250 employees working for them and an annual turnover that is less than 50 million euros. However, the exact number of employees and the amount of turnover varies from company to company.
So what is private label manufacturing?
Private label manufacturing means that you do not manufacture the products yourself, rather that you partner up with an existing manufacturer, who has experience in building products in your desired domain. Moreover, you outsource the production and numerous times even the overhead tasks like bottling, filling and packaging.
Many are specialized in this kind of manufacturing. Either they have ready-made products, according to their experience (and some adjustments you can specify), or they produce a new product according to your fixed specifications, just like your recipe, design, or formula.
The Trend of Direct-to-Consumer (D2C) & Private Label
The times are passing by when customers only buy from the big brands. The Internet has become a catalyst for launching small independent brands, which are built around the idea of private labels. This includes the opportunity for customers to purchase goods specifically made and branded by a specific business rather than a huge corporation.
This business type usually outsources the production of its products to a specialized manufacturer. In connection with the “direct-to-consumer” distribution strategy, this is a powerful setup to produce and sell goods independently.
One of the benefits of D2C business model is that it often bypasses other retailers and resellers. This simplifies the process for brands who are looking to get their products onto the market, but do not want to deal with all the negotiations required in conventional strategies.
In 2020, the share of private labels within all consumer goods sales in Europe was 30%. In Germany, even 40% of consumers stated that they are open to private label products. Given that number, there is ample opportunity for new and existing businesses to launch their products via private label manufacturing and with a direct-to-consumer distribution strategy.
How private label can help you start and grow your business
According to a variety of both online and offline retailers, aspiring businesses, but also creators like influencers, private labelling is an essential part of their current commercial success and many believe that this will define their success in the future.
This particular trend has been steadily on the rise, with more entrepreneurs and business owners recognising how much it helps them in building their own brand identity and keeping up with every individual customer demand instead of relying on big suppliers. This business model is extremely consumer-centric, and it truly focuses on the fulfilment of needs and wants of consumers.
Since more and more big brands like Adidas are trying to cut out middlemen like small shoe retailers, a private label can also be a chance for small and medium-sized businesses to become more independent from their corporate suppliers, while also connecting with their customers in a more unique way.
Who should launch their own private label product line?
Many manufacturers are available who offer production with low minimum order quantities (MOQs). This is why private label manufacturing can become an attractive tool for any business. But we see a unique opportunity if you identify yourself as a member of one of the following groups:
Local retailers
Your brand can give you more independence from your suppliers and can also lead to higher margins. Your big advantage is, that you know your customers who visit you every day because you talk to them.
It is easy for you to understand what current customer needs are. Launching or extending your business through a private label brand with an own product line can accelerate your customer relationships and by definition also provide products to your clients only you have.
Our tip: Identity what products work well in your shop and choose products, that you feel comfortable selling under your own name. Start small, focus on 1 or 2 products first and test out if a private label is a strategy that can work for you.
Aspiring, newly founded (e-commerce) businesses
If you are excited about e-commerce and the future of retail and if you want to be part of the revolution of commerce, starting off with selling your own products through a private label strategy just might be the right thing for you. Firstly, because it allows you to build your brand with your products from day 0; secondly, private label manufacturing will enable you to outsource manufacturing, focusing on marketing your products, building your brand, and serving your customers. Also, when you are starting up, it is way cheaper to outsource production than to purchase the production machines yourself. So the production process accounts for 100% of variable costs for you.
Influencers and creators
As a creator yourself, you have a huge advantage over a lot of businesses and brands – your authentic followers that are willing to pay for the things that you recommend.
So why promoting someone else’s products and only get a fraction of the sales price if you can just build your own brand and sell your own products? The creator economy is expected to be the next big thing in commerce. And if you are a creator, this is something you should Definitely not miss out.
What are my next steps?
There are numerous product ideas and a good amount of manufacturers that can make your idea work. Depending on your industry, interest, and expertise it is completely up to you what to build and put out on the market. But we know it is not so easy to get started, therefore, you should visit us at wonnda.com and get inspired by the numerous products that are listed on our website.
Whether you are an aspiring startup entrepreneur with an innovative product idea, or an existing retailer looking to diversify your assortment with your own products, launching your own brand through a private label, white label or contract manufacturing could be just the step you need to take your business to the next level.
Here at Wonnda, we work with top European producers for private labelling and contract manufacturing. The first step in getting your product to the market is probably the most crucial – finding the right production partner for your project. The great advantage of wonnda.com is that you can simply let us do the heavy lifting. Just tell us quickly about your project or product idea, and we will then approach the most suitable producers for your project and connect you with them.
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