You’ve likely come across store-branded products in a supermarket that appear as if they were produced by the retailer, when, in fact, they were made by another company. This practice is called white labeling, which occurs when one company (i.e. the marketer) rebrands and sells the products or services made by another company (i.e. the manufacturer or reseller). The term “white labeling” traces its origins to the white label that appears on product packaging.

Companies in all industries, as well as individuals, use white labeling to leverage another company’s existing production, marketing infrastructure and customer base. If you’re a startup entrepreneur or small business, white labeling may be a viable option for gaining additional funding, creating a value-add for customers or for meeting long-term business objectives. Here are some things to consider if you’re currently seeking white label licensing.

Benefits (and Disadvantages) of White Labeling

The most obvious benefit of white labeling your product or service is that you’re able to leverage the brand equity and distribution prowess of a well-known company. For instance, if you’re an app developer, you can license your application to a national retailer who will rebrand and offer it to their customers at a competitive price with their custom color scheme and brand design.

White labeling skips the need to build a product and customer base from scratch; instead, you get to leverage the company’s existing customer base to gain momentum in the marketplace. In an ideal white label agreement, the funding you receive from the reseller can be used to fund your next business venture, while your white-label product or service is promoted without the need of ongoing investment. Your product sales increase, and the reseller gains revenue by adding a product or service to its portfolio without investing resources into further research and development.

However, there are potential disadvantages of white labeling, including the possibility that you partner with a reseller who fails to align with your marketing strategy. Once a product is white labeled, it attains the brand connotations associated with its new owner. Because of this association, it’s a good idea to avoid partnering with marketers who have a habit of selling white-label products that are low quality or cheap counterfeits of higher-quality goods.

White-Labeling Options

There are several examples of companies that sell white-label products. For instance, many computer retailers use a separate manufacturer to produce their computer displays, which they then brand with their own logos and model numbers. Electronic goods, including television sets and DVD players, are often distributed by well-known brands but are sometimes produced and distributed by companies that focus solely on manufacturing.

On the other hand, many marketers white label software products to deliver capabilities and services not offered through existing platforms. Microsoft SharePoint, WordPress and Joomla are some of the more popular technology platforms that allow companies without in-house capabilities to leverage their technology to build everything from complete websites to internal collaboration platforms for online publishing and sharing.

While using white-label software may not generate direct sales of a particular product, you can rebrand and integrate the software into your existing domain. Whether you license your product as a white label or choose to take and rebrand a product for your own company, white labeling offers a more affordable alternative to creating and branding your products.

Conclusion

Before settling on a licensing proposal, research potential white-label partners to decide whether they’re a good fit for your product and in sync with your business goals. Determine if the retailer’s pricing structure for your product matches your vision for how the product should be positioned in the market. If you’re producing a high-quality item, then selling a white-label version in a boutique or luxury retail space is likely more appropriate than a lower-end chain.