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.
Welcome back to Epic Sourcing 101.
In this series, we’re breaking down the nitty-gritty details into bite-sized chunks. We’ll be arming you with actionable info so you can source from Asia like a pro.
In our last post, we took an in-depth look at the difference between private label products and white label products. If you haven’t read it yet and you’re keen to get up to speed, check it out here.
Today, we’re going to examine the pros and cons of white-label sourcing to help you determine whether it’s right for your business.
It’s worth wrapping your head around the term because white-label sourcing offers a lucrative business opportunity for Aussie startups and eCommerce entrepreneurs, especially now in 2021. White-label products provide an easy, low-investment entry point for budding entrepreneurs seeking to build a business from scratch.
That said, these products do have their downsides, too. It’s worth weighing up the pros and cons so you can evaluate whether white-label products are a suitable strategy for your business.
First things first, what exactly is a white-label product?
The term refers to a product manufactured by one company and then sold onto another company (or numerous companies). The recipient company then slaps their brand logo on the top and sells it to its customers under its own brand name.
If you’ve ever seen two products sold by competing companies that appear to be exactly the same aside from the logo, it’s a safe bet they’re both white-label products—it’s a nifty import hack from way back.
What’s so good about the strategy, then?
Low investment costs and straightforward sourcing make white-label products a hit in the eCommerce realm. And as we know, worldwide lockdowns and the proliferation of online shopping saw eCommerce explode with the pandemic. Just ask Jeff Bozos, who made like $70 billion out of the whole thing.
People are shopping online more than ever before, and this eCommerce boom has seen scores of start-ups enter the scene. White-label sourcing helps the budding entrepreneur get started fast, and with minimal risk.
White-label products let a business skip the daunting (and costly) product development phase, enabling them to put a ready-made product on the market at record speed. It provides a promising opportunity for small-timers to snag a slice of the lucrative eCommerce pie without high production costs and risks.
What’s the beautiful thing about sourcing white-label products for a small business? The cost, or lack thereof.
Developing and producing a new product from scratch is an expensive and time-consuming affair.
But with white-label sourcing, there’s no need to reinvent the wheel. Forget about dreaming up a hot consumer product, developing a working prototype, and undertaking a costly manufacturing process. A white-label manufacturer already has the equipment and know-how to produce the product you want in bulk—in fact, they typically have a whole bunch in stock to fulfil your order instantly.
You could hop onto Alibaba, place an order for…let’s say, handmade bamboo sunglasses, and then start your own trendy brand before breakfast (we recommend at least finishing this post first, though).
Of course, you might dream of releasing your own custom-developed shades one day. But until then, white-label sourcing lets you dip your toes into the industry and see how it goes.
Please Note: Developing a product from scratch and getting it to market is loads of fun and can be super lucrative, too—we’re not trying to discourage you here. In fact, we’ve helped stacks of small Aussie businesses do just that.
Looking for help turning your dream idea into reality? Book a FREE CONSULTATION with Epic Sourcing today.
When developing a product, you’ll need to test the market first—and that’s not as easy as you may think.
Focus groups, consumer surveys, and other data-gathering processes can help determine whether anybody actually wants to buy bamboo sunglasses. And even if your research indicates they would, you’re still taking a punt—developing a product is always a risk.
On the other hand, white-label products already exist, and there’s a proven market for them. That Alibaba manufacturer wouldn’t bother making bamboo sunglasses if people weren’t buying them.
The process works something like this:
1. Somebody dreams up a nifty unique product they think consumers will like.
2. The product turns out to be popular.
3. Other companies begin competing with their own similar versions.
4. Asian manufacturers get wind of the trend and start producing white-label versions to sell in bulk to retailers
5. eCommerce entrepreneurs or traditional retailers brand these white-label products in their own name and sell them to consumers
To better understand the white-label merry-go-round, check out our post on the difference between private and white-label sourcing.
White-label products are a great way to test the waters in a new market.
Let’s say you’re developing your own sustainable cactus leather work boots, and you sense an opportunity to add an apron to the line. Instead of creating the apron from scratch, it’s quicker and cheaper to source an existing white-label product so you can test the waters. Of course, the strategy only works if you can find a cactus leather apron on Alibaba, but you get the idea.
If your customers love the apron and start buying it in droves, you know you’re onto a winner. With market research under your belt, you can confidently develop a superior version: the cactus leather apron 2.0.
White-label sourcing lets you identity promising trends in your niche and jump on the bandwagon at record speed.
Let’s say you sell fitness products, and you’ve noticed your competitors are doing well with their vibrating foam rollers. Naturally, you want a piece of the pie, but you don’t have the time or resources to develop one from scratch.
White-label sourcing lets you take immediate advantage of the trend—simply order a batch, pop your brand name on top, and start selling it to consumers.
White-label sourcing works exceptionally well for generic consumer goods. A generic product(A.K.A a “like” product) will closely resemble a product already sold by a well-established brand.
Therefore, white-label sourcing lets you take advantage of consumer familiarity with these big-name brands.
Let’s look at Olympic weight plates to explain what I mean.
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 foolish to compete with these big players, plenty of small businesses are selling similar Olympic bumper plates with great success. And that’s made possible by the power of white-label sourcing.
While China was once considered the place to look for cheap, low-quality products, that’s no longer the case. Numerous Chinese manufacturers are building high-quality bumper plates for competitive prices these days.
Although brands like Eleiko have earned a reputation for supplying top-quality gear at a premium price, there’s still plenty of scope for smaller players to offer amore affordable alternative while still retaining an acceptable level of quality.
Reverse Sourcing is a revolutionary way to find white-label products or alternatives.
Put simply, it’s the quickest and cheapest way to connect with suppliers and manufacturers you KNOW will deliver a quality product. Just find a product you want to sell yourself, and we’ll tell you who makes it (or who makes something very similar).
Reverse Sourcing is a data-driven way of working out who makes what. It’s a fast and cost-effective sourcing system that will save your business time and money.
While white-label sourcing is fast, safe, and cost-effective, it’s not all sunshine and lollypops. Let’s take a look at some of the cons the strategy entails.
This is a somewhat controversial ‘con.’
White-label products are typically used as part of a mass-market strategy, and some folks reckon you need a large, well-established following to reap the rewards. When white-label sourcing, your brand reputation is critical because you’ll be selling a generic product that doesn’t differ from the competition in any meaningful way. White-label products are most commonly used to add additional revenue streams and enhance market share.
As such, some people believe white-label sourcing isn’t a viable solution for launching an up-and-coming brand.
However, we reckon that’s hogwash.
There’s a grain of truth behind the idea as it can be challenging to kick start a brand through white-label sourcing alone. Nonetheless, we’ve helped stacks of budding entrepreneurs break into a market and make a name for themselves using nothing more than existing white-label products.
You’ll need to get a little creative with your marketing efforts—but hey, that’s what entrepreneurs do best, right?
Probably the most prevalent con associated with white-label sourcing is there’s going to be stacks of competition.
By their very nature, white-label products are generic, which means consumers already have loads of identical options to choose from. You need to be savvy with your marketing or ruthless with your margins to earn a respectable amount of market share.
Let’s say you’ve found the perfect protein shake from a white-label manufacturer. Chances are your competitors are already onto it. And if you do start being successful, they will catch on pretty quickly and white-label source the same thing.
To differentiate your product from the competition, it’s possible to request the manufacturer make minor alterations on future orders. However, these changes will increase production costs, thus cut into your margins. And once you start demanding lots of changes, you’d be better off opting for private sourcing instead.
Although competition is high, that doesn’t mean there’s no money to be made. If you’re an entrepreneur dipping your toes into the white-label realm, you can stand out from the pack with superior marketing and customer service.
“It takes 20 years to build a reputation and five minutes to ruin it.”
- Warren Buffett
If you hop onto Alibaba and type in the product you plan to sell, chances are you’ll be swamped with potential suppliers. Take a look at how many manufacturers are offering wooden watches—you’d think such an obscure product would be rather niche, wouldn’t you?
While choice is generally a good thing, the quality will vary SUBSTANTIALLY from one manufacturer to another. Not all wooden watches are created equal, so to speak.
Some excitable entrepreneurs will speed through the sourcing process and order products without taking the time to assess their quality. Sadly, more often than not, they end up with inferior products that don’t sell well and damage their brand.
The good news is there’s a multitude of reputable, high-quality suppliers out there offering top-notch merchandise at rock bottom prices. If you make an effort to verify your supplier and evaluate your samples, there’s good money to be made from white-label sourcing.
Need help sorting the wheat from the chaff? Our Supplier Verification Report helps you assess whether your manufacturer of choice will deliver the goods.
And that’s a wrap. We’ve covered the key pros and cons of white-label sourcing to help you determine whether it’s a suitable strategy for your business.
White-label sourcing is a mysterious and widely misunderstood approach. But if done correctly in conjunction with in-depth market research and top-notch advertising, it’s possible to earn fat stacks of cash.
If you’re hoping to source quality and reliable white-label products from Asia, Epic Sourcing offers a FREE initial consultation for new clients. Fill in this form, and I’ll be in touch ASAP to organise a time to chat.
Good luck with your sourcing, everyone!
