The craze of branded products is increasing among people at a faster rate. Some people use the branded product due to their good quality, whereas some people may use it to show that they belong to that part of the society which is economically better than others because the prices of the branded products are more than the local brands. An increase in the liking of people for the branded products has decreased the sale of the local brands due to which the local brand manufacturers have started labelling their products under the name of other parties. In simple words, say t-shirts, are manufactured by one company but are getting labelled under the name of other companies (branded companies) which is known as private labelling. Cosmetic private label manufacturers are one of the examples of private label manufacturers.
However, there are also advantages of private labelling:
- One of the benefits of private labelling is it allows the companies to sell products manufactured by others under their name (brand). This product is produced by one company (not having a brand name) and is sold under the brand name of another company. It helps in increasing product manufacturing without spending any money on the extension of manufacturing machines.
- It does not only contribute to increasing productivity but also helps in decreasing per-unit cost by increasing the scale of economies.
- Lower the per-unit costs help in increasing margins also.
- It also helps in limiting the competition in the market, a company having a brand name engages the other company (not having a brand name) in the production of its products, which may otherwise start producing under its name and become a competitor in the future.
- It also has benefits for the company which does not have a brand name. It saves the research and development cost of the company. For example, a company may have to do market surveys to know the customer’s tastes, preferences, and other information costs spent on these activities are known as research and development cost, which can easily be avoided by the company by labelling its products under the name of branded companies.
- It is an opportunity for a company to sell its products under the name of a brand. Which it might take years for a company to create its brand and gain customer’s loyalty.
- Having a different range of manufacturers allows a branded company to provide a variety of products to its potential customers.
- New start-up companies can take advantage of this scheme and increase their sales by selling under the name of another company.
- This scheme can also be used to gain customer’s loyalty by labelling the products under the brand name of a company. Nowadays achieving customer loyalty is one of the tough and important goals of the company which can be achieved by labelling products under this scheme and also increasing sales.
- Decreased cost, increased margins/profits help in increasing overall revenue.
There are various products available in the market that have been labelled under the name of other brand names of the companies. Private label herbal products are one of the examples of such products.