Entrepreneur magazine, May 1997
Looking for ways to reach new markets? Consider private labeling--manufacturing a product that is sold under another company's label.
As a market opportunity, private labeling is significant. For example, the vast majority of store-brand products sold today are manufactured under private-label agreements. And most private-label orders are large, making them attractive to manufacturers.
If you're going to pursue private labeling, it's a good idea to start small. Get comfortable with the process before moving on to larger customers, advises Kenneth L. Newman, president of Kleen Products Inc. The Oklahoma City company manufactures hand cleaner under its own and several other labels.
"Stay as close to your own niche as you can initially," Newman adds. "Private labeling is a good way to get into markets you're not serving, but start with what you're familiar with. You can broaden later on."
Be sure you have enough space to accommodate the process. You'll probably need to store a certain amount of product, as well as the required labeling and packaging.
Work closely with your customers on the actual label. Newman suggests making a checklist of everything that must be on the product--contents, warnings, UPC codes, weights and the like--and giving it to your customer so they can design the label. If there's a potential for the product to be exported, work with your customer to be sure the labeling meets the destination country's requirements.
Keep in mind that private labeling may put you in competition with yourself. But, Newman points out, most companies that purchase products to sell under their own label are going to do so anyway--whether from you or from someone else--and private labeling gives you access to a market share you would probably not otherwise have.
Private-labeling marketing is done discreetly, mostly through word-of-mouth and direct contact with companies that use private- labeling sources. Expect your private-label customers to demand a high degree of confidentiality--and a comparable degree of quality. "Don't cut corners on your private- label products," Newman advises. "They need to have the same quality as the products you market under your own label."
Kleen Products Inc., (800) 392-1792, (405) 495-1168, fax: