Everything You Should Know About Private Label Business in 2024

The popularity of private labels has been on the rise as consumer behavior changes and the overall price increases due to inflation. Consumers are becoming more price-conscious and looking for ways to save money on daily purchases. And private labeling can help businesses provide consumers with good quality products at lower prices. 

For e-commerce retailers, private labeling offers you more flexibility in product manufacturing, pricing, marketing, and most importantly branding. It allows you to sell products under your brand name while outsourcing manufacturing and fulfillment to third parties. Moreover, a private label usually symbolizes a premium or preferred product line, making it the most effective way to differentiate your products and stand out in the market. 

So, a greater focus on product quality and uniqueness is expected to be the trending strategy to increase sales in 2024. Before you get started, we will take you through the important things about the private label business and useful tips to identify the best private label manufacturer and product ideas.

 

The Trends of Private Label in 2024

 

The private label market is expected to keep growing in 2024. According to DataHorizzon’s Research, the Private Label Market size was valued at $742.1B in 2022 and is expected to grow at a CAGR of 10.8% and reach $2,049.7B by 2032. And Europe holds a significant share of the private label market. 

Besides, customer behavior changes are driving the increase in private labels. As inflationary pressures persist and prices are soaring, consumers have to rearrange their daily spending. The most common response is to opt for cheaper items, with private labels becoming a more important consideration than usual. 

U.S. private label sales increased 6% year-over-year to reach $217 billion in 2023 as consumer's growing interest in store-brand products, according to a new report from Circana. Private labels gained a share even over name brands last year, with the unit share increasing in general food, shelf-stable beverages, refrigerated foods, beauty, and home.

The private-label business model continues to grow in popularity among national brands and small businesses. According to Jungle Scout’s 2023 State of the Amazon Seller report, 54% of Amazon sellers use the private label business model for their own brand and product line. And for dropshipping or print-on-demand businesses, selling private-label products is one of the most effective ways to stay competitive.

 

Advantages of Private Label Business

 

Private labeling refers to the process where the retailer gets products manufactured by a third-party manufacturer and sells them under the retailer's brand name. It helps retailers be in direct contact with consumers, giving retailers the power to design products rather than being part of the supply chain for some more well-known brands. Starting a private label business can bring you a lot of advantages as follows. 

 

Complete Brand Control

As a private label business owner, you have complete control over your brand. You can design and market products under your own brand name, creating a unique identity and building customer loyalty. This control allows you to differentiate your products from competitors and develop a distinct brand image. 

 

Higher Profit Margins

Compared to general products, the pricing of private label products can be higher, including the added value from your brand. Also, private label products are typically manufactured at lower costs compared to branded products. Since you are not paying for the brand name or extensive marketing and advertising, you can achieve higher profit margins. This gives you the opportunity to price your products competitively while still maintaining attractive profit margins.

 

Flexibility in Customization

Private label businesses offer flexibility in product selection and customization. You can choose the products you want to sell and tailor them to meet the specific needs and preferences of your target market. This customization allows you to differentiate your offerings, cater to niche markets, and respond quickly to changing consumer trends.

 

More Control over Supply Chain

When you operate a private label business, you have control over the entire supply chain. This control enables you to ensure product quality, streamline operations, and maintain consistent inventory levels. By partnering with reputable manufacturers, you can reduce the risk of supply disruptions and ensure a reliable source of products.

 

Challenges of Private Label Business

Running a private label business can come with its own set of challenges. Here are some common challenges that entrepreneurs may face in the private label industry.

 

Product Differentiation

Private-label products often compete with mainstream brands and other private-label offerings. Creating a unique selling proposition and distinguishing your products from competitors can be a challenge. Compared to developing a new product idea, making slight changes to existing products can be easier to get started. By focusing on quality, unique features, or specialized product lines, you can position your private label brand as a premium or niche alternative to generic or branded products.

 

Brand Building

Establishing and promoting your own brand can be demanding. Developing a strong brand identity, building brand recognition, and earning customer trust requires consistent effort and effective marketing strategies.

Also, it's challenging to overcome any negative biases or skepticism towards your private-label products. What you can do is educate consumers about the quality and value of your private-label offerings to gain their trust and loyalty.

 

Quality Control

Maintaining consistent product quality is crucial for building a positive reputation. Ensuring that manufacturers or suppliers meet your quality standards and conducting regular quality checks can be a challenge. If you rely on a single manufacturer, any issues with that manufacturer may delay manufacturing and thus lead to late delivery.

 

Inventory Management

Balancing inventory levels to meet customer demand without overstocking or running out of stock is a delicate task. Efficient inventory management and forecasting are critical to avoid costly inventory-related issues.

 

How to Find a Reliable Private Label Manufacturer?

 

With private label manufacturing, you pay a manufacturer to produce the product under your brand. It’s ideal for companies wanting to sell an existing product without having the design and manufacturing capabilities to produce it themselves. It is critical to find a reliable private label manufacturer as the manufacturer controls the product specifications, materials, processes, and quality. Here are some steps you can follow to help you find a trustworthy and suitable private label manufacturer:

 

1. Research and Identify Potential Manufacturers

 

Conduct thorough research to identify potential manufacturers that specialize in producing the type of product you are looking for. Use online directories, trade expos, industry associations, and referrals from trusted sources to find reliable manufacturers. 

 •Google and Social Media. Google is a great tool to search for “manufacturers near me”. You can also find ads and reviews of private label manufacturers or companies who provide private label services via Google and social media.
 •e-Commerce Marketplaces. You can try to talk directly with suppliers on platforms like AliExpress and Alibaba. Those suppliers usually have a close relationship with Chinese manufacturers and they may be able to connect you with the manufacturers of the products you want. 
 •Dropshipping Agent. Many dropshipping agents also offer private label services and they can help you quickly connect with trusted manufacturers and provide products according to your needs.
 •Reddit and Communities. Asking on Reddit or in e-commerce communities for suggestions and recommendations is a good way to find reliable manufacturers.
 •Local Sources and Expos. You can visit your local e-commerce or trade expos to discover companies that offer private-label manufacturing and fulfillment services.

 

Here is a tip, it’s usually cheaper to source products overseas, especially from China. It is recommended to work with overseas manufacturers to minimize your costs while finding a domestic manufacturer as a backup in case there are some issues with international delivery. 

 

2. Contact Manufacturers and Collect Information

 

After you have collected a list of potential private label manufacturers, the next step is reaching out to get quotes and select the top choices. The following are some key information you should ask the manufacturers for.

 •Product categories they offer. Make sure that they can provide the product you want.
 •Make sure they are not resellers. Make sure that they will be the original manufacturer of your product and can make any adjustments to the product.
 •Customizations. Find out what kinds of customizations they can offer to realize your product ideas.
 •MOQs and pricing. Negotiate MOQs for customizations and make sure it is within your budget. Compare the unit prices of the products from different manufacturers under the same MOQ requirement. 
 •Communication and customer service quality. Judge their communication skills and the quality of their customer service to ensure they can accurately understand your requirements.
 •Manufacturing capabilities and lead times. The shorter the lead time, the better, while maintaining consistent product quality.
 •Additional service fees. Ask about all possible costs and fees from creation to manufacturing to delivery. Be wary of manufacturers who charge too much extra before delivering any product.

 

3. Communicate Your Product Designs

 

After identifying one or more manufacturers that basically meet your customization needs, the next step is to clearly outline your product specifications, including materials, design, packaging, and any specific requirements. You should also discuss the potential issues and risks like dimension deviations, finish limitations, material domestic equivalent alternatives, etc.

It's better to bring your product drawings or reference photos for communicating your designs. Some manufacturers may have the ability to bring your idea to a digital or 3D prototype but that will cost more. Alternatively, you can find a freelancer on Fiverr or Upwork to create prototypes for your product.

 

4. Request Samples and Evaluate Quality

 

The key step next is to ask for samples and evaluate if they meet your requirements. Although the manufacturer will help you with the quality inspection, a better way is to purchase the samples home and inspect them yourself. This does not cost much but is crucial to ensuring product quality. 

You should write down all the parts of the sample that need to be adjusted and fully communicate with the manufacturer. If it is only a minor adjustment, you can ask the manufacturer to provide clear videos and photos of the adjusted product for secondary inspection.

 

5. Negotiate MOQs, Pricing, and Payment

 

To make sure that everything will go as smoothly as you expected, you should negotiate and double-confirm with the manufacturer about the MOQs, pricing, terms of payment, production processes, and any other necessary terms. For payment, you can ask if you could pay a deposit first and the balance after deliverables to maintain your cash flow.

 

6. Sign a Clear Agreement and Place Your Order

 

Before you make any payment, it is important to sign an agreement or manufacturing contract with the manufacturer to ensure that production details and lead time are consistent with what you have agreed, and also safeguard your designs, specifications, and trade secrets throughout the manufacturing process.

 

5 Top Private Label Product Trends in 2024

 

Based on industry type, the private label market is segmented into food & beverages, apparel & accessories, beauty & personal care products, and home goods & furnishing. The following 5 niches are top choices for 2024 if you are tapping into the private label market for the first time.

 

1. Athleisure Clothing

 

With the increased passion for sports and outdoor recreational activities among the young population, the Athleisure trend, which is characterized by the combination of athletic wear and casual fashion, has become increasingly popular.

The Athleisure Market size was valued at USD 358.08 billion in 2023 and is expected to expand at a CAGR of 9.3% from 2024 to 2030. The growing consciousness of fitness and health among consumers is generating the demand for comfortable and fashionable clothes.

The Private Label business model allows apparel brands to grow by offering consumers the choice and uniqueness they see. By focusing on trending aesthetics and customer demands, you can easily tap into the Athleisure sector with popular products such as T-shirts, sweatshirts, hoodies, yoga pants, sneakers, etc. 

2. Sustainable Fashion

 

Sustainability has become a major focus for the three industries of apparel, beauty & personal care, and furniture & household equipment. And Millennials made up the biggest share of sustainable apparel consumers in the United States. 

With the increasing awareness about environmental and social issues within the fashion industry, sustainable fashion has gained popularity. When making purchase decisions, consumers are likely to seek out brands with sustainable fashion options that align with their values.

So, if you are tapping into the fashion industry, you can follow up on sustainable fashion trends and incorporate sustainability practices into your private label brand.

3. Beauty Devices

 

The beauty device is an emerging niche with a combination of beauty, wellness, and technology. These devices involve a range of solutions including facial cleansing tools, anti-aging devices, hair removal devices, etc. With the rising consumer awareness regarding skincare routines and the benefits of using these devices, beauty devices are emerging as a lucrative market.

According to Fact.MR, the global beauty device market size is estimated at USD 34.45 million in 2024 and is forecasted to reach a size of USD 107.95 billion by the end of 2034. Starting a beauty device brand offers a great way if you want to turn your expertise and passion for beauty into a profitable business.

4. Pet Supplies

 

The pet industry continues to experience significant growth, with pet ownership on the rise and pet owners increasingly investing in products and services for their furry companions. This presents a lucrative market opportunity for pet supplies.

Pet supplies encompass a wide range of products, including pet food, treats, toys, grooming products, bedding, collars and leashes, training aids, and more. Private labeling allows you to create your own pet supplies brand and establish a unique identity in the market. 

5. Household Items

 

Household items have a broad target audience and consistent demand as they are used by people in their everyday lives. The products include home decor, kitchen equipment, cleaning supplies, bathroom accessories, furniture, storage and organizational items, etc. It allows you to tap into a large potential customer base and create the opportunity for repeat purchases. 

Household items are often influenced by current lifestyle trends, such as eco-friendly products, minimalism, or smart home technology. By staying up-to-date with consumer preferences and market trends, you can develop private label products that align with popular lifestyle choices.

 

Create Your Private Label Product Line with SourcinBox

 

SourcinBox is a dropshipping agent and sourcing supplier that works directly with manufacturers and factories in China. Our private label service can help you handle everything you need for carrying out your business including product sourcing, customization, custom packaging, quality control, inventory management, kitting, and shipping products to your end customers, whether you want to sell existing products or develop new products.

Talk with our experts now and streamline the process from creating to sourcing to fulfillment all in one platform.