Flaws in Private Labeling

Is it more luck than skill?

If your company is successfully selling Private Labels – well done! It’s not always an easy task, and many companies fail to even get this branch of merchandise off the ground.

Sometimes, being successful with private labels is about being lucky in finding the perfect product, or product line. Since you’re not going to take a gamble on a new product, you are faced with entering an area where there is vast competition, with an existing customer base. Overcoming these hurdles will take a lot of patience, strategy and potential money to ensure your products rein superior to your competition, while charging a lower, more competitive fee.

PRICE: Since the private label products are similar to a name-brand or established resellers, everything will come down to the price of the product. Just because your products may be 10% lower in price than the leading competition, doesn’t mean it’ll be enough to sway a customer. 10% is a great percentage, but what does that equal in actual dollars? If it’s a matter of $2, would that really be enough to sway a customer away from a highly rated seller to buy from someone with little to no ratings?

To complete, you’d have to lower your costs even further, thus dipping into your profit margins. This is a leading reason why private labeling is flawed, and why it may not be a sustainable option for the growth of your company unless you can afford a gamble.

OVERSEA SUPPLIERS: With costs top-of-mind, finding suppliers with the lowest rates will be a fundamental aspect in having luck with private labels. Often times, getting the lowest rates will be from oversea suppliers, and this will take a lot of planning as the lead times can be quite lengthy and the volumes required could be rather steep – especially for new resellers.

QUALITY: With lower rate suppliers, quality becomes another factor to consider in private labeling. Things can go bad to really bad to horrendous over time, leaving you with a large volume of low quality merchandise you’re unable to sell. So while a supplier may have the best rate, to make you incredibly competitive within the market, know it may come at a cost unforeseen in the beginning.

Keep this in mind – getting new customers can be rather easy, but it can be costly. Keeping customers is not so easy but comes at a lower cost. The benefits of a buyer base prove to be very valuable over time as not only will they come back for more, but they will also buy more each time. Whereas a new buyer may make smaller purchases.