Typically, margins on white-label products are better than they would be for name brands, which is another reason retailers like to use them.
What's the difference between white-label and private-label products?
White-label and private-label are terms that are often used interchangeably, but while they're similar, they don't mean the same thing.
With a white-label product, a manufacturer sells the same product to multiple retailers, who are free to brand it as they choose. A private-label product, on the other hand, is made specifically for one retailer. The retailer contracts with the manufacturer to make a product exclusively for that retailer. A private-label product is preferred by retailers who don't want to worry about competitors selling the same product.
Trader Joe's, for example, is well known for selling private-label products; almost everything its stores sell carries the Trader Joe's brand even though the company gets its products from many of the same suppliers found in other supermarkets like Pepsico (PEP +1.40%), Snyder's-Lance, and Stonyfield Farms. Similarly, Costco's Kirkland brand is a well-known private label.
White-label products, on the other hand, are a better fit with discount retailers, which are more interested in selling products at bargain prices rather than taking control of the marketing behind them.
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