You've probably heard that your favorite foodie website or magazine recently launched an "exclusive" line of products under their corporate banner, with no competition from other brands. What exactly do these terms mean and how can you tell if something's really exclusive? We'll explain what this means for consumers, companies and even society as a whole — and why there's still room in the market for new players.
When people talk about marketing strategies like white labeling, they're usually referring to a business practice where a company hires someone else's production team to make its branded goods instead of having its own employees handle everything on site. This allows smaller businesses to save money without giving up quality control. In some cases, white-labeled products will bear only a slight resemblance to those made by their parent company, while others may take more liberties with design. White labels often rely on licensed designs (like Harry Potter merchandise) or use existing materials and techniques (such as a car wrapping service).
White labelling was first used when Coca Cola decided not to build bottling plants for its newly acquired syrup concentrate in order to keep overhead costs low. Nowadays, however, many big corporations have experimented with the strategy, including Nike, Starbucks and Target, who each produce items such as clothing, shoes and home decor under their own name but using outside contractors to manufacture them. The strategy gives them access to better distribution channels, faster turnaround times and lower manufacturing prices.
But the biggest reason for doing so is customer familiarity. When customers see familiar packaging and colors, they feel less stressed out by buying unfamiliar things, which leads us to our next point...
An exclusive brand is one whose identity is completely separate from any other similar products available at retail stores. It isn't just limited to naming rights or trademarking, either. Exclusive brands also include unique advertising campaigns and promotional events, such as parties and pop-up shops. For example, Apple uses its famous slogan "Think Different," while Samsung markets itself around its Galaxy tagline, "Unstoppable Innovation."
In addition, exclusive brands often incorporate elements beyond visual branding, such as different types of media, such as music. Some exclusive brands, such as HBO and Star Wars Episode VII, use their logos and names across multiple platforms. Others focus on specific areas, such as sports teams, films or video games.
It should come as little surprise then, that being an exclusive brand offers significant advantages over non-exclusive ones. Not only is it easier to establish a recognizable image, but it's much harder for competitors to copy. With fewer options open to rivals, exclusivity raises barriers to entry for would-be competitors. As a result, exclusive brands enjoy higher profits than their counterparts. A study published in Journal of Consumer Research found that consumers were willing to pay 10 percent more for a luxury item when they knew it came from a prestigious source.
Having an exclusive status provides a competitive advantage because it makes potential buyers believe that whatever they buy must truly be special. They become loyal fans of products, rather than mere enthusiasts. So, although most white-labelled products won’t ever reach the same heights as their parent brands, at least they don’t suffer from the stigma associated with cheap knockoffs. And since we all want to get ahead, wouldn't you agree that making yourself stand out from the crowd is good thing?
So now you know that exclusive brands offer certain advantages over white-labelled products. But what happens when a brand goes above and beyond, becoming synonymous with its namesake product? Is that called “being an exclusive brand?” If so, here's what it looks like…
Being an exclusive brand is when a product becomes synonymous with a particular brand name, logo or concept. An exclusive product doesn't necessarily need to be made exclusively by that brand, though. For instance, Disney owns Marvel Studios, and DC Comics publishes Batman comics. Even if both properties aren't created entirely by their respective owners, they remain exclusive nonetheless.
Exclusivity comes into play when a brand reaches near ubiquity through repetition, reputation, longevity or the sheer size of its audience. While an exclusive brand might seem rare today, history shows that once upon a time, everyone had Mickey Mouse toys, Coke bottles and Barbie dolls.
As long as a product remains relevant, it could retain its exclusivity indefinitely. However, changing trends can cause previously exclusive brands to lose their luster. Once popular characters or concepts fade away, their former monopolies fall to competing manufacturers. Take Calvin Klein Jeans, for example, which became widely known for its CK1 jeans before being replaced by cheaper imitators. That's why it's important to stay flexible and aware of changes in consumer tastes. You never know when your unique selling proposition might suddenly go extinct.
And finally, let's discuss a term that gets thrown around quite a bit lately: exclusive product. Like exclusive brand, exclusive product refers to a piece of merch that's sold directly from the manufacturer, rather than through retailers. Examples include designer handbags, high end electronics and cars. Although it sounds great in theory, the reality is far messier. First off, it's hard enough getting attention for regular products, and adding the word "exclusive" onto the front certainly doesn't help. Secondly, many of these products tend to cost thousands of dollars or hundreds of euros, making them inaccessible to most of humanity. Lastly, with the exception of very small niche groups, nobody actually cares. Most shoppers simply want affordable, accessible products.
However, despite the disadvantages, the idea behind exclusive products is sound. After all, nothing stops a savvy shopper from finding exclusive deals online or checking prices elsewhere. Just look at Amazon Prime users, who regularly find bargains on top tier gadgets and apparel. Similarly, if you shop smartly, you'll always be able to find decent alternatives to pricey designer bags and clothes. Plus, if you try hard enough, you'll eventually stumble across one.
A lot of times when you see something on the shelf at Target or elsewhere, there's no real indication as to what company actually made that particular thing. You might notice a white sticker with "Exclusive" written in big letters above it and assume that means this product came from only one source. But did it really? What exactly is an exclusive product anyway?
In many cases, yes, those products were probably manufactured by just one manufacturer — but not always. Sometimes they're branded under a different name for two reasons: either because the original maker couldn't make enough of them to keep up with demand (in which case they need to be sold under someone else's name), or because they didn't want their competitors knowing how many units they'd ordered until the time comes to ship out more. In other words, sometimes exclusivity doesn't necessarily equal brand ownership. Let's take a look at some examples.
When we talk about whether a given product is exclusive, we're talking about whether it was created specifically for that single retailer, or if the creator can sell it to multiple retailers. For example, let's say I've got my eye on buying a new pair of Nike sneakers online, so I do some research and discover that they cost $80 each. If I spot those shoes on sale at Walmart for half price, would they still count as being exclusive to me? Or could I also purchase them from Target where the same exact model costs $50 less? The answer here depends on who owned the actual trademark rights to produce these shoes.
If Nike owns the manufacturing rights, then yes, since those shoes wouldn't have any chance of seeing retail availability anywhere else without infringing upon Nike's intellectual property. However, if that shoe had originally been designed for Target exclusively, then all bets are off regarding whether it should be considered part of Walmart's inventory. After all, Target isn't even selling these items themselves — they're passing them along to third-party sellers like Amazon, eBay, etc., so they aren't technically responsible for shipping them to customers. Even though the end result may seem similar, the way these pieces originated differs significantly between stores.
Another point to consider is that while most brands will have a corporate identity separate from their distributors, the reverse isn't true. When it comes to making sure your favorite product stays exclusive, you'll need to ask yourself whose side the manufacturer is really taking — theirs or yours? That said, certain companies can become too large to maintain control over every aspect of production, leading to situations where branding decisions get left up to others. This happens often in fashion. For instance, H&M produces clothing for dozens of high-profile brands, including Calvin Klein, Gap, Forever 21, Versace, Armani, Diesel, DKNYC, Tommy Hilfiger, Ralph Lauren, Marni, Michael Kors, Marc Jacobs, Burberry, Giorgio Armani, Louis Vuitton, Donna Karan, Alexander McQueen, Stella McCartney, Hugo Boss, Carolina Herrera, Dolce & Gabbana, Prada, Domenico Ghirlandaio, Yves Saint Laurent, Oscar de la Renta, Chanel, Givenchy, Christian Louboutin, John Galliano, Gucci, Roberto Cavalli, Balmain, Jean Paul Gaultier, Chopard, Bvlgari, Cartier, Fendi, Dolce Vita, Coach, Missoni, Sergio Rossi, Zac Posen, Vera Wang, Anne Klein, Jessica McClintock, Kate Spade, Ann Taylor, Liz Claiborne, Betsey Johnson, Narciso Rodriguez, Jeffrey Banks, Coco Channel, Cynthia Rowley, Sisyphe, Rebecca Taylor, Rachel Roy, Stuart Weitzman, Jimmy Choo, Diane von Furstenberg, Nina Ricci, Mary Kattinger, Vinylux, Jason Wu, Tracy Reese, Tory Burch, Isabel Toledo, Thakoon, Jenny Packham, Alyx Clothing Company, Club Monaco, BCBG Max Azria, and Esprit among countless others. So, what kind of designer are you shopping for?
Since design houses don't typically manufacture their own goods, the question becomes who controls the right to reproduce their designs. It's usually whoever designed the piece first. As such, designers retain copyright protection over their creations, meaning that unless specific permission is granted, anyone who wants to replicate the work needs to obtain a license before creating anything using that concept. And once again, this varies greatly depending on the type of project. A designer working on a handbag, for example, likely won't hold the patent or copyright to the bag itself, but they definitely hold the copyrights to the patterns used to create it. On the flipside, if a fashion house creates a line of bags based around geometric shapes, it'd be much harder for another company to legally copy their styles after the fact.
So now that we know why exclusivity exists, let's turn our attention toward finding out what it actually looks like. Does the word exclusive imply that the product wasn't available anywhere else? Not necessarily.
We mentioned earlier that simply having an exclusive product doesn't automatically give a store sole rights to sell it. Here's an easy way to tell if a certain item falls into this category: Take a quick peek down the ingredient list. Do you recognize the name of the company listed alongside everything from dyes to adhesives to preservatives? More than likely, it's hard to find any sort of personal care product that hasn't come packaged from a major corporation. Since nearly every consumer uses cosmetics daily, and since these types of products tend to carry higher profit margins, manufacturers spend a great deal of money trying to secure patents and trademarks on various formulas and ingredients. In short, most people rarely encounter a product that wasn't mass-produced by a conglomerate.
But wait, maybe there are some exceptions! There certainly are. One notable exception is Tom Ford lipstick, which was initially released back in 1999 by his namesake makeup collection. Despite the fact that he stopped overseeing his own lines altogether, the formula remains unique within the industry thanks to Ford's meticulous attention to detail. Another interesting example includes Elizabeth Arden skin cream, which features botanical extracts derived from roses, violets, jasmine, lily-of-the-valley, heliotrope, aloe vera, ylang-ylang, geranium, hiba oil, chamomile, lavender, ginger root, pomegranate seed extract, vitamin E, panthenol, vitamin C, milled silk protein, soy lecithin, glycerin, stearic acid, propylene glycol, benzoates, triethanolamine olethargylamide, sorbitan monosteardiethique, sodium hydroxide, disodium EDTA, citric acid, methylparaben, ethylparaben, tricalcium phosphate, talcum powder, calcium silicate, magnesium aluminum silicate, titanium dioxide, iron oxide red 40, yellow 6, blue 1, green 3, red 2, ultramarines, zinc acetate dihydrate, borax, fumed silica, tetrasodium EDTA, sucrose sulfonate, sorbitan sesquioleate, polysorbate 60, hydrolyzed collagen, cellulose gum, cetyl alcohol, ceteareth 20, cetyl dimethyl ammonium chloride, disodium EDTA, sodium laurel sulfate, FD&C Yellow No. 5, FD&C Red No. 35, tartrazine, quinoline carboxamide. Now that's impressive.
Now that we understand what it means to call something exclusive, let's examine some common terms associated with the practice. For starters, what's the difference between private labels and white labels? White labels refer to merchandise that has been licensed from a larger supplier and retailed directly by a smaller business. Private labels, meanwhile, are brand names that appear on products that weren't developed internally by the seller but instead purchased wholesale from a reputable vendor. Both can help boost sales and profits, but are completely distinct from one another.
Next, what's the difference between co-branding and licensing? Co-brands share marketing support and resources with existing partners, but are otherwise independent entities. Licensing occurs when one party grants the use of its intellectual property to another group. Typically, licensing agreements last longer than contracts involving co-branded merchandise, although both approaches offer benefits depending on the situation.
Finally, is it possible for a small company to develop a signature style that eventually turns into a recognizable brand? Yes, absolutely. Just think of the late '90s/early 2000s era of indie rock bands releasing music on Sub Pop Records, Elektra Records and Warner Bros. Music. These artists built cult followings through distinctive sound and image, and ultimately became household names. The key takeaway here is patience. Sure, Tim Buckley went platinum four times over with his debut album Grace, but it took him 17 years to release it. Similarly, Nick Drake waited three whole albums before recording his masterpiece, Pink Moon.
When you think of brands, chances are the first thing that comes to mind is Coca-Cola or Nike shoes. But there's more to branding than just big corporations. In fact, many small businesses use their own labels on products for aesthetic purposes — as well as to communicate what sets them apart from competitors in the market.
Many people aren't aware that they can also sell their products under someone else's name without actually using their logo, so long as the end result looks like theirs. This concept is known as "white labeling" products, and it allows companies to put their own unique stamp on items without having to pay royalties or make deals with other producers. It can be an inexpensive way for smaller shops to compete against larger organizations.
Here's how this works: A company will decide whether it wants to produce certain goods itself or if it would rather outsource production elsewhere. If it decides to do it all themselves, then it'll need a manufacturer who makes those specific products. The business might already have one it uses or it may want to seek one out specifically to work with (though finding a reputable supplier takes time). Once it finds said manufacturer, the two parties come together to create a licensing agreement called a distribution contract (or DC) through which the producer will supply the company with its branded merchandise.
In some cases, the company won't even know the name of the actual maker of these products. Instead, it will simply purchase them directly from a third party, commonly referred to as a "distributor." As part of the DC, however, the distributor agrees to market those products exclusively under the company’s own name and keep any profits made from doing so. They're still technically selling the item, but since they don't control where the finished product goes after leaving their warehouse, they're not responsible for shipping or delivery. That responsibility falls onto the original manufacturer, while the distributor handles everything else.
But why would anyone choose to go down this route instead of producing items at home? For starters, working with manufacturers offers bigger discounts than buying directly from vendors. And because distributors often buy large quantities of materials, they pass along savings to customers. Also, sometimes production costs exceed the margins available to licensees, making it unprofitable to try to manufacture the product yourself. When prices are high enough, though, it becomes worth the effort to take over manufacturing. Companies looking to start up should consider this option before diving headfirst into creating their own line of merchandise.
Not every business owner interested in white labelling needs to run off and open a factory. There are plenty of ways for entrepreneurs to get started. Read on to find out the basics of white labeling.
As mentioned above, a licensee is essentially renting space in a licensed facility owned by a different entity. So, a person seeking to start white labeling must determine a couple things about the location they'd like to set up shop. First, they'll need to assess whether it provides adequate access to consumers. Does the building allow for ease of egress, especially during rush hour traffic? Are the parking spaces sufficient to accommodate truck deliveries? Is the location close enough to public transportation? Will signage clearly identify the licensor's presence within the premises? These questions help a new entrepreneur gauge whether the place is right for white labeling operations.
Once potential locations are vetted, the next step is to reach out to suppliers. While most people assume only major players in industries such as food and beverage deal with manufacturers, retailers can also rent space in facilities belonging to others. Distributors provide products to stores via pallets, meaning they never touch inventory until it reaches shelves. Many times, contracts stipulate that the store cannot remove anything from the packaging once it leaves the distributor’s warehouse. So, if a retailer wanted to add a personal flair to its stock, it could contact a white label provider to arrange for customized boxes and packing material. Similarly, clothing boutiques can rent warehouses in order to offer custom sizing options to patrons.
A final consideration for beginning white labelers involves choosing a legal structure. Most companies opt to incorporate to shield themselves from liability issues associated with being a sole proprietorship or partnership. However, incorporating doesn't always guarantee immunity. Licensing agreements require the licensee to give notice to the licensor whenever changes occur in ownership or management. If a licensee isn't careful, he or she could potentially expose itself to claims of copyright infringement or trademark violations if someone were to claim the company infringed upon intellectual property rights.
There are benefits and drawbacks to each type of entity, so consult your accountant and attorney before going forward with incorporation.
Next, we discuss the differences between white labeling and private labeling.
While both types involve leasing space in another organization’s building, white labeling differs slightly from private labeling in that it requires a formal relationship. Private labeling occurs when a business rents space in a retail outlet owned by a competitor. Since private labelers have no official ties to the licensor, they don't necessarily need to comply with terms specified in the original contract. White labeling, however, requires adherence to contractual obligations established by the license agreement. Additionally, unlike private labelers, white labelers must maintain separate bank accounts and file annual reports documenting performance metrics, including sales volume, profit margin and gross revenue.
So far, the main difference seems to be compliance. Because private labelers rely solely on their landlord to enforce rules laid out by the DC, they can easily cut corners in pursuit of higher profits. On the other hand, white labelers bear greater responsibilities toward their clients, who expect consistency in quality and service regardless of ownership fluctuations.
White labeling vs. private labeling aside, there are still a lot of similarities between the two concepts. Both involve a middleman trying to maximize efficiency and drive down expenses. One key similarity is that both entities benefit from economies of scale. With increased demand comes decreased per unit price, allowing buyers to save money on bulk purchases. Another economic factor is that white labelers generally face lower overhead costs than traditional manufacturers. This is due to the lack of fixed assets required to operate a white label operation. Rather than investing hundreds of thousands into costly machinery, white labelers can focus resources on marketing and customer acquisition efforts. Lastly, both types of providers enjoy enhanced brand awareness thanks to prominent placement of their logos throughout the establishment.
Now let's talk about exactly what happens when a product is white labelled.
Everyday products typically fall into three categories: tangible, informational and intangible. Tangible products include physical objects such as clothes, electronics and furniture. Informational products consist primarily of services, ranging from landscaping to medical care. Intangible products encompass ideas, knowledge and emotions. Although none of these things exist independently outside our minds, they become real when given form. Think of a catchy slogan, for instance.
For example, if I am considering opening my own coffee house, I can either lease space in a restaurant that serves caffeine drinks instead of offering food, or hire an interior design firm to handle decorating. Now imagine I've decided to go with the latter. Since the designer worked for Starbucks, I wouldn't have much input regarding menu choices. My choice of beverages would likely reflect the corporate culture of the franchise, and I probably wouldn't have much say in deciding how best to promote my venture.
However, if I hired the same designer to outfit my cafe, I could pick whatever flavors and coffees I liked. I could even expand beyond the standard offerings and serve specialty drinks that align with my mission statement. Likewise, if I opened a bakery specializing in vegan pastries, I could cater events with specialties that fit my niche and advertise online with social media influencers promoting healthier alternatives to mainstream fare. Whether or not I was able to strike out on my own, hiring a professional helped me achieve success faster and allowed me to avoid headaches stemming from miscommunication later on.
One reason white labeling became popular among startup founders is that it lets them bypass expensive equipment investments. By leveraging existing infrastructure and capital, owners can begin testing new products and gauging consumer response without taking too heavy of a financial hit. Like any enterprise, white labeling presents risks. If the company fails to live up to expectations, it may lose investors' trust and end up folding. But if done correctly, failure is less catastrophic. Smaller losses tend to lead to fewer job cuts, which keeps morale intact. Of course, it's impossible to eliminate risk entirely. Every decision carries inherent uncertainty, and it's inevitable that unforeseen circumstances arise occasionally. Fortunately, in today's global economy, it's easier than ever for startups to build prototypes and test market viability overseas before bringing them back home.
According to research conducted by Harvard Business School professor Benjamin Edelman, white labeling firms spend approximately 20 percent of total revenues on administrative tasks such as taxes, payroll and insurance. Overall, it appears that white labeling represents good value compared to starting a factory of one's own. According to one estimate, it costs $1 million dollars to start a manufacturing plant, whereas it costs around half that amount to establish a white label business.
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