and Private label manufacturing has, once again, been making headlines. This time, it’s due to how private label products are being increasingly associated with higher profit margins. Lower costs combined with clever pricing strategies mean that private label brands are now really raking it in, leading to more and more businesses choosing to take the private label route.
How, exactly, do private label products help to maximize profit margins? Join FLPL as we explain just a few of the ways in which private label manufacturing could help take your business to the next level.
What are Private Label Products?
Private label products are products that have been produced by a private label manufacturer, rather than by a factory that is liaising directly with you. You’ll still retain full ownership of those products – you’re simply enlisting the help of another company to take control of the manufacturing process so that you don’t need to!
Why would you want to do this? For a number of reasons! Firstly, it means that if you don’t have any manufacturing experience, you’ll still be able to get your foot in the door. You’ll be able to rely on someone else to get the manufacturing part of your business done correctly. This will then leave you free to concentrate on the aspects of your business that you naturally excel at.
As mentioned earlier, another benefit that comes from selling private label products is that this manufacturing model often gives you higher profit margins. Let’s explore how…
Lower Costs
Profit margins are directly related to costs. The higher your costs are, the lower your profit margins will be. This is why businesses tend to spend a large amount of time figuring out ways in which they can lower their costs while still running in an efficient manner.
One way to cut back on costs is by creating private label products. While you may think that working with another company would be pricier than doing things without that company, this isn’t actually the case. With a credible and experienced private label manufacturer by your side, you’ll be able to bring down your costs in a few different ways:
Faster R&D
The research and development stage of creating new products can be extremely costly. It’s often the first hurdle faced by new businesses. After all, the longer this process takes, the more it will eat away at your profit margins.
When working with a private label manufacturer, the R&D stage is usually streamlined. You won’t have to start from scratch when it comes to creating your products as your private label manufacturer will already know the best avenues to take. Ingredient selection and testing are usually expedited too as, once again, your private label manufacturer will be able to make this easy. At FLPL, for example, we have an ingredient catalog featuring effective, science-backed, and safe ingredients that can be incorporated into the cosmetic products created by our clients. Pick and choose your favorites, and then decide on the types of products that you want to create. Before you know it, you’ll be holding your very first samples in your hands.
No Manufacturing Mistakes
Mistakes cost money. Worse still, some mistakes can be so expensive that they prove fatal for a small business. It goes without saying that if you want to boost your profit margins, mistakes need to be kept to a minimum.
How does private label manufacturing help with this? Because your private label manufacturer will have done it all before. Pick one that has plenty of experience in your chosen industry/niche, such as how FLPL specializes in beauty/wellness products, and they’ll already know what works and what doesn’t.
Private label manufacturers will also already have a network of reliable factories that they can use for your products. If you haven’t yet tried sourcing a factory to work with, you may not appreciate just how advantageous it can be to not have to do this! Many would agree that it’s a huge headache, not to mention expensive. Once again, make the wrong decision and it could be disastrous for your business. On the other hand, team up with FLPL, and not only will you have access to some of the best and most trustworthy factories in the industry, but you’ll also be able to choose between working with factories in the USA or in Asia. This is something else that can have a huge impact on profit margins.
Lower Branding and Marketing Costs
Many assume that private label manufacturing is solely about manufacturing. Once your products are manufactured and in your hands, this is where the relationship with your private label manufacturer comes to an end.
In some cases, this may be true. However, other private label manufacturers, like FLPL, go above and beyond in terms of the services that are on offer. We want your business to do well – your success is our success! This is why our services encompass many of the other aspects of running a business too, including branding and marketing. The costs of this can often be astronomical, especially when you need your branding/marketing to be of comparable quality to the bigger brands out there. With FLPL’s dedicated branding and marketing team, however, you’ll be able to produce high-quality material for a fraction of the cost.
Full Control Over Pricing
While costs have a big impact on profit margins, pricing is just as important. Selling your products at the right price can actually expand your profit margins more than increasing volume would. Likewise, setting the wrong price for your products will have the opposite effect, quickly shrinking those margins.
While many may think that private label manufacturing means that you aren’t able to control the pricing of your products, this isn’t true in the slightest. The products that you and your private label manufacturer create are yours and only yours. This means that you’re the one who has the ultimate say over how they’re sold, and for what price.
This also means that you need to be clever when it comes to the pricing strategies that you implement. While a higher price may seem appealing due to the increased profit margins that this commands, you also need to consider future growth. Short-term profit margins shouldn’t be your only goal – you should also be aiming to increase market share so that your business can grow, and this is something that the right pricing strategy will help you achieve.
To fully capitalize on pricing, don’t leave these decisions until the last minute. Ideally, your pricing strategy is something that you should be considering from the beginning. After all, this will also have an effect on other aspects of your business, from your packaging to your marketing. At FLPL, we’ve worked with budget brands, luxury companies, and everything in between. This makes us well-equipped to help you to determine where on the pricing scale your products should sit.
Shorter Lead Times
A reputable private label manufacturer will have a good relationship with the factories they work with. Not only will they be providing a steady stream of clients to those factories but they’ll also be placing regular orders. This means that when it comes to prioritizing various clients, private label companies often get preference.
This is why private label products are often linked to shorter lead times than products manufactured in a traditional way. And this, in turn, can help to further boost profit margins.
How? Because a shorter lead time means that you’ll be better able to cater to changing customer demands, market fluctuations, and new trends. You’ll be able to adapt your products when needed, faster and more efficiently than other businesses will. This will then give you a huge competitive advantage. It’s a great way to quickly expand your market share, grow your business, and, as a result, experience bigger profit margins too!
Private Labeling With FLPL
Ready to take the plunge into the world of private label manufacturing? The next step is to find a private label manufacturer to work with.
One option is FLPL. Based in Florida, we offer so much more than just manufacturing services. The assistance that we provide starts at the very beginning of the product development stage. From fleshing out your ideas to helping you to experiment with different concepts, we’ll ensure that your very first steps are ones that will lead you to future success.
Once you’ve approved your samples, we’ll then organize for them to be mass-manufactured. You can have as much or as little say in this process as you wish. We’ll also help you to select and create the perfect packaging for your products.
We’ll then liaise with the factory to handle logistics. If they’re being imported from overseas, we’ll also take care of the paperwork that comes with this. If you aren’t quite ready for your products yet, we can even have them shipped to our Los Angeles warehouse. We’ll safely store them there for you until you’re able to move them on.
As discussed earlier, we can help with branding, marketing, and sales too. Selling your products directly to customers, as opposed to selling them through another retailer, is another way to keep your profit margins high. We can help you to create and manage an e-commerce store. This way, you’ll be in full control over the sales that you make.
Summary
While the increased profit margins associated with private label products may initially seem hard to believe, those claims are, as you can now see, very substantial. Private labeling can help to cut costs in so many different ways. These advantages combined with an effective pricing strategy can often be all that you need to see those profit margins start to soar. After this, it will be onward and upward for your business, all thanks to your decision to start private labeling your products!
Click here to contact FLPL today to find out more about the private labeling services that we offer.
