Private Labeling & Criteria for Selecting the Right Manufacturer

“Private label products or services are typically those manufactured or provided by one company for offer under another company’s brand.” –Wikipedia. This is the name of the game for China and for the most part, the products you buy here in the United States are not really manufactured by the name on the label. In some instances most of the big box or clothing stores you frequent have an inventory almost entirely made up of their own products under their own brand or multiple unaffiliated brands. This is not just a game for the big boys, this can be accomplished with the same everyday products under your own company’s label. Welcome to the club, we are about to pull back the curtain to reveal what you need to know in developing your own private labeled line of products.

Take notice that every manufacturer has its own guidelines, requirements and procedures for producing a private label product. Not all manufacturers offer this service or have the capability to laser-etch/carve logos etc. The first step is to source the product you like and then follow-up with the manufacturer opening a dialog about private label opportunities.

Lets get off on the right foot by stating that selecting the right manufacturer to work with may be the quintessential most important decision to make. Over the next few paragraphs we will detail some choice areas for consideration so that you can ask the key questions that will determine your success. You may find that this article is just as much of a primer for selecting the right manufacturer to work with as it is about developing a private labeled product.

Quality Assurance Testing
When you evaluate a brand you think most importantly about quality. It is important to court your prospective manufacturer inquiring about any quality assurance or rigorous testing that may be performed prior to shipping the products to you. You don’t want to damage the brand’s integrity with poor workmanship. Find out if your manufacturer implements or maintains any manufacturing certifications, process controls, quality management or assurance systems. Depending on the manufacturer this might be a free service that might put one manufacturer above all the rest. In my experience with private labeling kitchen and bath faucets, Globe Union offered unparalleled testing measures while keeping the price competitive. What else do you expect from the largest faucet manufacturer in the world. Are you familiar with the “Premier” faucets at Home Depot? They are made by Globe Union and if you only knew that Home Depot was making over 80% profit margins on them…

Designs, Legal Issues, Copyright & US Umbrellas
Most of the smart private labelers have already submitted for legal protection for their products under US copyright or other umbrellas. The manufacturer may have other customers, which may have invested large amounts of time and development monies into a particular design. Though some manufacturers will allow it, it is not a good idea to use someone else’s design. Fear not, in some cases this leaves an opportunity to design your own product. If there isn’t much of an artisan in you, then many times there will be some kind of stock/standard item that you can just slightly modify. This is all industry specific information, but it is something you should inquire about. Just because there aren’t any laws to prevent the manufacture of a protected product in China, there are in the US when you try to sell it.

Retail Packaging
One of the main selling points to a private labeled product is the opportunity for premium packaging. Obviously it is nice to have the logo on the product, but the packaging is where the consumer will first identify with the brand. Typical packaging for products that come out of China will come in a standard white/brown box or packaging with a marketing scheme that makes it obvious that it came from another country. This is one of the first places to incur an additional landed cost for your item. This amount can vary depending on the packaging material and the number of colors printed on the retail box. Remember that in the eye of the consumer, the better the packaging the more solid the brand.

Support/Defective Products/Warranty
Be prepared for defective products, this is inevitable, but less likely depending on the amount of quality assurance measures your factory implements. It is too costly to ship your product back to China for a refund, but you need to be able to accept returns, as this would hurt your brand’s reputation if you did not. You should combat this problem by building in an additional 3% of extra product into your order. You should handle warranty issues in the same way. Confirm this is the case, but the manufacturer will likely give you a credit on the backend transaction of your next order. Unless you have invested more money into a AAAA+ rated product, it is best to offer a short or limited warranty. Do not expect a lot of support from the manufacturer. It is a good idea to do your due diligence in the beginning, learning as much as you possibly can about the product before launching your line.

The Cost Comparison for Private Label
This is an area you will have to explore for yourself as it can vary entirely on the product category, quantity of order and manufacturer. In the case of Globe Union’s private label plan for kitchen and bath faucets, all the costs for the private label were built into their pricing schedule, which was very competitive with non-private labeled products. In terms of having logos laser-etched onto stainless steel kitchen sinks I have seen this raise the price $5-$10 per sink depending on the order size and use of premium packaging.

Branding Development Ramp-Up Time
There are two main elements that can determine ramp up time for having your private labeled product produced: manufacturer preparation and your own preparation. From your end, you may outsource the design of your retail packaging, which may take several weeks. In addition, if you have any design changes to the product other than imprinting logos, this is also on you. The manufacturer will have to prepare to source the required materials, create moulds, implement changes to their production line, QA, etc. It is important to inquire about the ramp-up time as it will vary depending on the factory, its staff and the specifics of your order. After everything has been decided, pricing agreed upon and detailed to the manufacturer, you will want to receive a sample of the final product before authorizing production. Remember, you will of course need to make changes to your own schedules for completing work to meet deadline/timelines. Get started early, I have seen manufacturing ramp-up timelines requiring up to 6 months!

Minimum Orders
Minimum orders should not be an issue if you are already importing. It is standard to purchase at-least a container of goods while importing from China, but many times you must commit to purchasing a certain quantity of containers annually to obtain a private label item.

Certifications, Licenses and Incorporating
Many times licenses and certifications must be registered, applied and obtained by the branding company and not the manufacturer. It is best to do your due diligence to find out what if any requirements that your brand should have. Do not take the manufacturer’s word on it, check into it yourself as it will not be them who will have to deal with the ramifications. This will also affect some decisions you may have to make during the pre-manufacturing and deal-making phase of your import venture. Try locating similar already imported products in the US and reviewing the packaging for identifying marks of their certifications. Depending on your product and scale for distribution, you should also consider incorporating.

Expanding the Product Line
Leave room for expansion; make sure that the manufacturer you select has accessory items or a variety of other styles to incorporate into your line. If you purchase the various products for your line from different vendors you will have to start from scratch with each one. This way all your packaging and logos retain their continuity throughout the line.

Dylan Blankenship signature
dylan@sourcejuice.com

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Comments

5 Responses to “Private Labeling & Criteria for Selecting the Right Manufacturer”

Jan Green on December 18th, 2007 3:15 am

I still have units of the AA Turbo Charger. This is the cell phone adapter that allows AA batteries to become the power source for cell phones. This product is manufactured in China; an excellent convenience; and at less than $20 per unity to the Associate was a bargain; however, investors were duped — I was not - I received my units (via USA Association) and can no longer replenish stock from the same source. I can not afford to order directly from China - importing would bankrupt me.
Dianne C on January 18th, 2008 9:39 am

Hi,
This is a very informative article and I do have some more questions about the actual contact person overseas and what I expect versus reality. What kind of title should that person have? Will I always talk/email with the samer person? Is it rude to always ask for the same contact. I want to build a relationship, not just have 1 product made and shipped.
thank you for your help.
dianne
The SourceJuice Team on January 20th, 2008 5:40 pm

Dianne,

It is common to be assigned an account manager (or similar title) and to speak with this person regularly. However, people do change jobs or companies and as you get more in depth with your product specifications, you may find you need to talk with several people. You could do yourself a disservice by only building a relationship with a single person.
One Man’s Challenge Is Another Man’s Treasure, part 1 of 3 | SourceJuice on April 20th, 2008 5:10 am

[…] Plumbing Fixtures – There is a lot of margin here, do your due diligence in comparing similar products. All products that look the same have varied degrees of finishing and contain different kinds of internal parts, see SourceJuice’s Quality Rating Systems article for more information. It is still possible to resell mid-range kitchen and bath faucets for 20% profit, but companies like e-Barnett supply are highly marketed to contractors and builders. A shoe-in is the high end luxury market for plumbing fixtures. Some high end roman tub valves, like the waterfall styles, can have hundreds of percentage points in margin. Private labeling faucets is another great way to get a niche that can propel your brand above the no name brands. SourceJuice has you covered there too: Private Labeling and Criteria for Selecting the Right Manufacturer. […]
One Man’s Challenge Is Another Man’s Treasure - Home Building Materials, part 3 of 3 and continuing. | SourceJuice on May 4th, 2008 8:33 pm

[…] expensive items to the builder and one of the better opportunities if done right. This is where private labeling may make sense to reap even larger benefits. Most builders check prices and look for cheap and easy […]