In this article
Talk to our experts- Private label
- A private label product is made by a third-party manufacturer and sold under the seller's own brand name. In Shopify's description, the seller defines the specifications, materials, design and packaging, the manufacturer handles production, and the product is sold by one company, while white label goods can be sold by multiple companies.
Also called: private-label product
How it works
Shopify defines a private label product as a product made by a third-party manufacturer and sold under your brand name. Shopify describes it as a business model in which the store owner defines the product specifications, materials, formulation, design, and packaging, and the manufacturer handles production.
- Exclusivity: Shopify says private-label contracts often have exclusivity agreements that restrict the manufacturer from selling your product to other brands.
- Minimum orders: Shopify says most manufacturers require a minimum order quantity per production run, so for new products or untested SKUs you commit capital before you have validated demand.
- Pricing: Shopify says that because the product is made to your specifications and sold only under your brand, you set your own pricing without competing against identical products sold by other retailers.
- Product identifiers: Google Merchant Center's product rules say a store-brand product may not have a GTIN. In that case Google asks for your store brand as the brand and a unique number of your choice, such as your SKU, as the manufacturer part number.
Private label vs white label
- Who sells it: Shopify says private-label products are produced by a third-party manufacturer and sold by one company, while white-label products can be sold by multiple companies.
- Customization: Shopify says private-label products are customized to the brand's specifications, while white-label products are pre-made and limit customization to packaging, labels, or tags.
- Speed and cost: Shopify says white-label products can reach your market faster and at a lower cost, while private label needs more upfront investment to fund research and development.
Labeling rules
Two federal texts show how the label works in the United States:
- FTC packaging rule: under the FTC's Fair Packaging and Labeling Act regulations, the label of a consumer commodity, as those regulations define it, must conspicuously name the manufacturer, packer, or distributor and its place of business. Where the consumer commodity is not made by the company named on the label, the name must be qualified by a phrase that reveals that company's connection to it, such as "Manufactured for" or "Distributed by".
- Consumer Product Safety Act: in the Act's definitions, a consumer product bears a private label if it or its container is labeled with the brand or trademark of someone other than a manufacturer of the product, that brand owner authorized or caused the labeling, and no manufacturer's brand or trademark appears on the label. The owner of that brand or trademark is the private labeler.
This is general information, not legal advice.
Example
A distributor launches a private label line of nitrile gloves made to its own specification by a contract manufacturer.
- Commitment: the manufacturer's minimum order is 5,000 boxes at $4.00 a box, so the first run costs 5,000 x $4.00 = $20,000.
- Price: the distributor sells the gloves to contractors at $6.50 a box, a gross margin of $6.50 - $4.00 = $2.50 a box.
- Break-even on the run: $20,000 / $6.50 = about 3,077 boxes sold to recover the run's cost.
The figures are illustrative.
On Shopify
A manufacturer that makes private label lines for several business buyers can control who sees what with Shopify B2B catalogs, which determine the products and pricing your B2B customers can access.
- Per-customer assortments: you can include or exclude specific products and set prices for each customer.
- Plans: on the Basic, Grow, and Advanced plans you can assign up to 3 active catalogs across all your B2B markets. The Shopify Plus plan offers an unlimited number of catalogs and direct assignment to companies and locations.
- Vendor field: each product's Vendor field records the manufacturer, wholesaler, or other vendor, and you can filter your product list by vendor.
How Uncap helps
Uncap's resilient vinyl flooring page covers private label directly: a cross-reference from your label and style name to the mill's style number and the carton run is built during implementation and kept in the ERP, so search finds the plank under either name and a claim traces to the right run.
Sources
Frequently asked questions
What is a private label business?
A private label business sells products made by a third-party manufacturer under its own brand name. In Shopify's description, the business defines the specifications, materials, design and packaging, and the manufacturer handles production.
What is the difference between private label and white label?
Shopify says a private label product is customized to one brand's specifications and sold by one company, while a white label product is pre-made by a third-party manufacturer, can be sold by multiple companies, and limits customization to packaging, labels, or tags.
Is private labeling legal?
US federal law addresses private labels directly: the Consumer Product Safety Act defines a private labeler as the owner of a brand or trademark on the label of a consumer product that bears a private label. Under the FTC's Fair Packaging and Labeling Act regulations, a consumer commodity's label must name the manufacturer, packer, or distributor, qualified with a phrase such as "Manufactured for" when the named company did not make it. This is general information, not legal advice.
Can you make money selling private label products?
Shopify says private labeling can be profitable, because products made to your specifications and sold only under your brand let you set your own pricing. Shopify adds that margins vary by product category, manufacturer costs, and pricing strategy, and that for new products, meeting minimum order quantities means committing capital before demand is validated.
