Being a retailer is the reality of more than 5 million European companies, representing 11,5% of the total supply chain companies. A retailer is a company that will buy smaller quantities from bigger manufacturers or distributors to brand and sell directly to consumers. These companies can be online or offline, meaning they can sell their products to their customers in a physical brick-and-mortar store or through a website on the internet.
While retailers will buy the products from an intermediate party and sell them directly to their consumers, being responsible for branding, delivery, and quality control, businesses that opt for private label manufacturers have control over the steps of production and can negotiate the price, choose the quantity, and make customizations in the process.
For some businesses, staying only as a retailer has many advantages, such as a simpler business model overall, more time to focus on branding, and no strings attached to the manufacturer. But for many others who have more experience in having a business and would like to have more control over customizations and be able to negotiate the price, the private label may come to be more of an advantage.
Some of the advantages of private labels that retailers should consider are:
1. Profit margin
Retailers will buy the goods from an intermediate party, such as a wholesaler, and bring the products to their store, where they will sell directly to consumers under the name of their brand. This system is here to facilitate the distribution of goods and make it easier for them to get to the consumer’s hands. At every added intermediate of the process, the final sale price that the consumer will pay increases because it has to cover the profit of all the involved parties.
By eliminating the intermediate and buying straight from a private label manufacturer, the retailer now not only has the option of negotiating prices and buying bigger quantities but of expanding their profit margin, as they can now pocket the profit that would go to the middle party. They also can lower the product’s sale price, making it more competitive in the consumer’s eyes.
2. Customization
Private label manufacturers differentiate the most from retailers when it comes to customizations. In retail, you can’t make any sort of customization, and It can be hard to differentiate from the competition. On the other side, private labels can be the best of both worlds, as it’s still cheap and can be produced faster than contract manufacturing, but allows you to customize some aspects of the production line and make your product look more like your brand.
Take advantage of every customization your manufacturer will allow, and consider the best ones for your product. Size, material, and packaging are all aspects of the product that can be adapted and customized. The more you customize your product, the more it will be unique and get attention from customers.
3. Negotiation
Private labeling involves a lot more responsibilities on the owner’s side. It’s their job to research the country where the product will be produced, contact and ask for quotes from the hundreds of manufacturers available, negotiate prices with all of them, and consider which ones have customizations. All of that might seem like too much of a hassle for those who are just starting their business, but for many others, control over the production cycle comes with many advantages.
By negotiating prices and comparing the different manufacturers, you can get the best outcome that a simple retailer might not get. A retailer will have the easy end of it and, consequently, pay a higher price for the same product without being able to differentiate from the competition through customizations.
Negotiation is a powerful tool for those who know how to use it.
4. Product range
While retailers are limited by the availabilities of the wholesaler and are not able to differentiate between competition – as everyone is buying from the same place – and cannot customize the products they sell, a business that chooses to go through the private label route will be able to offer a much wider product range that varies in color, size, formula, packaging, etc.
For example, you are in the shampoo business. The wholesaler only has the lavender shampoo available, so you and all the other retailers will buy lavender shampoo, put in their packages, and sell it to customers. The business owner across the street has a private label manufacturer and will sell not only lavender shampoo but rose, mango, and citrus shampoo. Soon, all the consumers realize that the shop across the street has so many more shampoos, and they all go there to buy, while all the retailers will stand there with the same lavender shampoo.
5. Competitive advantage
When we add up all these reasons – the profit margin, customization, negotiation, and product range – the result is a great competitive advantage on your side. The customization and product range will give you a competitive advantage, allowing you to make more revenue and expand production.
By expanding the production without the intermediate wholesaler and by being able to negotiate prices directly with the manufacturer, you will expand your profit margin and make your business grow.
Create your private label product line with Wonnda – the European platform for white label, private label, and contract manufacturing
Are you interested in producing your private label products in Europe but don’t know how to get your production up and running? Whether you’re an aspiring startup entrepreneur with an innovative product idea or an existing retailer looking to diversify your assortment with your products, launching your brand through a private 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 labeling and contract manufacturing. The first step in getting your product to market is probably the most crucial – finding the right production partner for your project. The great advantage of wonnda.com is that you can let us do the heavy lifting. Just tell us quickly about your project or product idea. We will then approach the most suitable producers for your project and connect you with them. Sounds interesting? Then fill out the form!
