At Ease, Private!

Private labeling wasn't part of Michael Levin's initial game plan. The idea for his innovation, a clear plastic overlay for broken fingernails that adheres with a nail-friendly adhesive, first struck Levin back in 1989, when his then-girlfriend cracked a nail. At the time, she couldn't find a product to repair the nail-and she complained to Levin that cracked nails were a common problem among all women. Levin, sensing an opportunity, decided to hire a market research firm to evaluate the market. The results were staggering. Levin, now 42, reports that "60 percent of the women [surveyed] broke a nail once a month, and 35 percent broke a nail once a week."

Levin perfected his clear plastic overlay design in 1992, after searching for and experimenting with dozens of plastics and adhesives. But when Levin tried selling the product directly to retailers, he was in for quite a reality check. With the product retailing for just $3 to $4, Levin found that "drug store chains weren't willing to add a low-priced, low-volume item from a one-product vendor."

That's when Levin considered all his options and decided to private label. "Lots of nickels are better than a few dimes," Levin reasons. The most consistent of the three private label customers he's worked with, Professional Solutions, signed on in 1994 and has since sold Levin's product under the name Instant Nail Repair. The decision proved to be a smart one for Levin: Since 1995, his Danville, California, company, Custom Solutions, has been selling about 1.5 million units of the instant nail-repair product per year.

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Making the Choice

Is private labeling right for you? Before making any final decisions, consider the following pros and cons:

Pro: You have very low sales and administrative expenses.

Pro: The risks are lower because you don't have to invest heavily in a product with uncertain sales potential.

Pro: You get an established sales force and distribution system.

Pro: You get better upfront input about how your product can be improved to increase sales.

Con: If you lose a private label customer, it will have a dramatic impact on your business.

Con: You have no control over how the private label partner sells your product. Says Levin, "One private label agreement we had was with a company that put too much of the product in each set and sold it in mass merchandisers for $5. We told the company the price was too high, but they went ahead with their plan. Sales didn't materialize, and the company then cancelled the agreement."

Con: You can't make the company promote your product. According to Levin, "We could have dramatically higher sales if our customers would spend more money letting people know the product is available."

Despite the disadvantages, Levin feels that private labeling still turned out to be the best choice for his product: "I just don't see any other way that we would have been able to get by the resistance of stores to carry a cheap, relatively low-volume product from a one-product supplier."

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