The term “white label” has its origins in the music industry, where record companies would send radio DJs records with blank, generic labels before they were released to the public. Today, the phrase is typically used to refer to instances where goods are produced by a company only to have another business rebrand them as their own.

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For example, in the UK the same model of DVD player was sold by Dixons as a Saisho and by Currys as a Matsui. These were brands that the two companies had created themselves and sold exclusively in their own stories, using these particular names to take advantage of the popularity of Japanese electronics that was prevalent in the 1980s.

Pro: It Lowers Development Costs

One of the reasons white-labelling is so popular, particularly amongst businesses that are just starting out, is that it vastly reduces development costs when compared to creating your own products in-house. This allows you to build up a catalogue of goods much more quickly, which could be the difference between staying competitive in the market or falling out of favour with consumers.

Con: Marketing an Unknown Brand Is Expensive

While you may save money initially by using a white-label product, you’ll also have to consider how you’re going to market the product. Established brands spend millions on advertising every year, which you also benefit from when you decide to stock their goods. With a white-label product, you’ll have to develop and promote a brand to compete with these companies and this is where the costs could start to add up.

Pro: You Can Easily Move Into New Markets

If you deal in fast-paced markets like the technology industry, working with white-label product manufacturers gives you the benefit of easily moving into new product categories like this as they soon as they become popular. Designing, testing, and, creating these goods yourself can be extremely time-consuming, and in the months, or even years, that it takes to do this one of your rivals could have already built up a large customer-base.

Con: It Makes It More Difficult to Plan for the Future

Since you have so little control in what your partner produces, you can’t guarantee that this particular manufacturer will be around in the long-term. This makes it difficult to plan for the future, as you never known when the product could become unavailable and leaving you to have to quickly find an alternative. Conversely, if a product receives negative feedback from your customers, you don’t have the power to fix any of the bugs or implement any of the necessary updates yourself.

Operating under a white label strategy has its advantages, but if you want to have full control over the future of your business it’s highly recommended that you do not become dependent upon it. Many businesses prefer to use the practice as a stop-gap solution instead, perhaps until they’ve developed their own products or established a partnership with a more reliable, long-term supplier.

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