With the rise in Instagram influencers, the e-commerce industry has seen a huge push in white label manufacturing. These white-label products, IMO, are pretty unethical. What they do is take an (often crappy) generic product, slap some fancy packaging on it, and sell it for 10x (or more) the price. You, the consumer, ends up getting ripped off for garbage. It’s hard to navigate the world of e-commerce.
The sad thing is, there are actually a lot of really awesome cool new brands on Instagram, that are totally worth buying from. The problem is, how can you tell who is actually legit? Don’t worry, today I am going to teach you how to avoid the "As Seen On Instagram Scam". Also, soon-to-be brands - I know this might sound like a dream business model (10x profits, what!?). And, if you are thinking where can I get my hands on some of this white label product, keep reading because at the end, I am going to break down all the pros and cons of this ecommerce business model.
But, before we get started - make sure to sign up for the FREE Sourcing Secrets Workshop. Plus, I will be doing a live Q+A at the end to get all your startup questions answered!
The first 2 workshops filled up with over 400 registrants! So, I am doing one last session on September 29th @ 8:00pm et (that's NY time), for everyone that missed out!
If you can give me 1 hour of your time I can teach you the three biggest mistakes startup founders make while sourcing their products, and what you should be doing instead.
A Little Background Story
A friend of a friend who just so happened to be an aspiring influencer brought some samples from their matcha green tea from the holistic woo woo company they were starting. When they broke out the goods I'm sure I must have had a full Liz Lemon eye-roll moment as I thought, omg, no, please spare me the pitch.
They proceeded to tell me about how their matcha was like no other matcha out there, and it was of the finest quality, and their face oil would cure any skin ailment from sunburn to acne.
If only life were that simple? If only we could solve all our life's problems from the magic inside a well-packaged tonic.
I call these people modern-day grifters or snake oil salesmen. They are selling a dream. A dream that isn't real. And, this can often be dangerous.
Now listen, I am all about supporting a friend's small business. But, I'm not about being taken for a fool.
I know the white label industry pretty well. And I am willing to bet you might buy more white label products than you actually realize (it's a model that most Amazon sellers use). And, if you don't know how the industry works the way I do, it might be hard to figure out who's legit and who's not.
So, Let’s Start Here With A List Of The Most Notoriously Scammy White Label Products
- COSMETICS - (hello Kylie and her never-ending customer complains about products that don’t perform)
- TRENDY HEALTH ITEMS - think, matcha, mushrooms, turmeric, and more
- DIET SUPPLIMENTS - how many times have we seen an influencer in a bikini offering up their discount code for diet tea? ...Avoid this!
- WORKOUT GEAR - Bala Weights is an example of this - I’m a pro, and even I fell for their clever marketing and celebrity-backed endorsements. It was peak pandemic, and I had put on a few pounds, I really believed these weights were the solution my quarantine self needs. They were not. And, the product was beyond disappointing for the price point
- SUNGLASSES - basically all of the worlds sunglasses are made in a single factory. And when you buy designer sunglasses you are always getting ripped off. This year I bought myself a pair of $500 Tom Ford sunglasses. I never spent that much money on anything - but I really, really loved them, and plan to wear them for basically the rest of my life, so I said "treat yo' self" and did. When I showed them to my friend from college, the first thing she said was Melanie, you look like a chump, how are people going to take you seriously? Everyone in fashion (even the interns) know that sunglasses are the ultimate con. And, she's was right. I know that if I ever walked into a room full of sourcing agents they would all secretly think, what kind of idiot is she, spending $500 on something that costs little more than $5 to make. But, you know what? I kept them anyway. Because they make me happy.
- ATHELISURE + SWIMSUITS - this is the easiest type of clothing brand to start becasue you can start with a blank garment and simply customize it with a print or logo
A Quick Tip
Basically, you need to be on high alert for the stuff that influencers love to push. But, before I teach you more about how to spot the ripoff, first you need to understand how private label manufacturers work.
What Is Private Label Manufacturing?
Now that you kind of have an idea of what type of stuff I'm talking about, let's get into how this industry works.
Manufacturing really is an economy of scale. The more suppliers can make of something, the bigger their margins - which means higher profits. That is why in some factories the machines run 24/7. Now, let me be clear. Just because a machine runs 24/7 that does not mean a worker works 24 hours a day - there are shifts. Usually, in most factories 2-3 shifts per day.
So, we know that factories want to make as much as possible. And the easiest way to do this is to make 1 product and sell it to multiple people. Maybe tweaking the recipe just a little so it can technically be different from everyone else. But, that small little change that offers just a little bit of originality, won’t affect the factory's mass-production model.
Cosmetics Case Study
The world of cosmetics is probably the most transparent industry about white labeling. But, they don’t use the term white label, they call it something else - dupes. With makeup dupes, you can literally buy the same product, made at the same factory, just under different brand names. Go ahead and try googling the best makeup dupes, and you will find page after page of blog posts that will teach you how to skip the expensive Sephora product and get literally the same results at the drugstore.
Personally, I love makeup dupes. They make me really happy. Here is why. For decades the beauty industry has prayed on women's insecurities to get them to buy expensive products that promise to solve all of their self-esteem woes. And, they promise, the higher the price tag, the better the results. But, you know what? When it comes to beauty, confidence is 1/2 the battle. What we are buying isn't just magic in a bottle, it's confidence. And, I love that if you know how to shop the dupes you can get that same confidence for a fraction of the price.
If you are interested in getting started learning about makeup dupes start with NYX, ELF, and Pixie from Target. IMO, they make some killer products, that will leave you looking and feeling amazing, and your wallet much happier too.
White Label Products Are Literally Everywhere
And, this happens a lot in fashion too. The best example is streetwear, now dubbed athleisure. Both of these styles take blanks and customize them. Blanks are generic garments like t-shirts, hoodies, sweatpants, and leggings. They come in an assortment of styles and colors. And, they make starting a brand really easy.
Instead of having to design an entire garment, you can buy a blank and add some custom artwork or embroidery to it. Boom. Instant brand.
IMO there is nothing wrong with white label clothing or using blanks - as long as brands are honest with their marketing.
The Truth Is, When it Comes To Private Label Products, Some Are Good And Some Are Bad
And that's what makes shopping on the internet so confusing and difficult.
Let's look at two quick examples - Trader Joe's vs Vitamins.
Trader Joe's is all about private label brands. Except, unlike influencers who are looking to make a quick buck, they are using the power of white labeling it to help you save you money.
Here is how a retailer like Trader Joe's white-label brands work. By essentially repackaging well-known brands they save a ton of money on R&D (research and development) of new products. Plus, they save even more money tapping into established brands' already existing supply chains, instead of trying to build their own. They then pass those savings onto their customers.
Here are a few examples of Trader Joe's white label products at work. Their pita chips are actually made by the famous brand Stacey's. Their smoothies are Naked Juice, and their hummus is by Tribe. And, their gluten-free chocolate chips cookies? Those are actually the same as bougie brand Tate's!
Now, Let's Consider Vitamins
Vitamins and supplements are the perfect "As Seen On Instagram" products. Think about it. These influencers are famous because (unless you are hate following) some part of you wants to be like them. And, they promise that if you take this supplement or drink their tea, you can be. Their pitch is that they are literally handing over their secret to you in a magic pill.
The problem is, according to this article, 90% of the health advice influencers are giving, is actually pretty terrible.
And, here is the real danger. Influencers generally have no idea what it is they are selling. What they do is find a cheap manufacturer, and attach their name to something that is already being made. The guy with swimsuit beach photos of him all over the world and 100k followers is almost always never a real health expert. Want to travel the world and live the dream like him? It’s as easy as taking these pills, that he swears by, and changed his life... (yeah, right).
It's the modern-day infomercial. And, the real danger is many of these supplements can actually be bad for your health because they are poorly formulated.
Legislation Is Changing To Protect Consumers Because Of Influencer Health Scams
This has become a huge problem in the United States, with tons of ongoing lawsuits. Laws around supplements and wellness items are changing, specifically to protect consumers from influencer marketing!
Why Is Private Label Manufacturing So Appealing, Especially To Amateurs?
So, now you are probably wondering - how do I spot white labeling and not get scammed. I get that there a ton of poorly researched products out there, so how do I find the good ones?
We will get to that in a second. Because, to really understand the full picture, first you need to understand why this type of gimmick manufacturing is so seductive to a startup founder.
You Literally Don't Need To Break The Mold
I am sure this is a term you have probably heard before, and, interestingly enough, it actually has roots in manufacturing. Breaking the mold means just what it sounds like. In a factory there is something called a mold, you can think of this as the template for a product. When companies invent something new, they literally break the mold and start over.
With white label products, you keep that same mold, or template, and just add something extra. Like maybe a new color, or your brand logo.
And what this means is minimal startup fees.
The product already exists. In some cases (depending on what you are making) developing a new product from scratch can cost tens of thousands of dollars. That's a lot. When brands white label, they can save tons of money and use that for other parts of their business like marketing and sales.
White Label Is Considered A Low-Risk Product
The market research is done already.
When you are taking someone else's product that is already doing well, (usually the factory will tell you how much they are producing for other clients) and just slap your logo on it, you are buying into someone elses product research and product development that you know works.
The logic goes, if they can sell 1000 pieces, then why can't I? There is clearly an industry need and customers want it.
Well, kind of.
The downside to this is when the market becomes overly saturated because everyone else is trying to do the exact same thing you are. This is especially the case for influencer-backed diet teas - you can’t give that stuff away at this point.
Another Benefit For Startups Is Low Or No MOQ's
When you are using a product that already exists and rebranding it, usually you can get low to no MOQs. That is because the factory is already making it for someone else. So you can basically just tack onto their order, or even buy up their leftovers.
3 Things To Check Before Buying From A Trendy New Instagram Brand
Now, it’s finally time to learn how to spot the cheap white label product!
Look At The Literal Label
Specifically, is the label a sticker? This is the cheapest and easiest way to white label a product, just stick a brand logo sticker on it.
If you are buying something and the box has a sticker. I would say avoid it. Trusted brands have custom packaging made, with their logos not only printed onto the box, but also onto labels, jars, bags, etc.
Really Read The Copy
Look for brands that show, and don't tell.
For my green tea example, I mentioned at the beginning. The packaging said something like sourced from the highest quality tea farms. Ok, that's cool. But, where are these tea farms? What makes this tea such “high quality”? Does it have more caffeine? Is it grown in special nutrient rich soil? Like, what info do you have to back up this ambiguous claim of “quality”?
Show me the facts!
The thing with white label manufacturing is that often the brand has no idea where the product is actually coming from, and they are definitely not an expert in the category.
So, when brands have big claims, call their bluff. Ask them for the details. If they respond to your questions with more vague language - well then, you just found a phony!
Who Is The Founder?
Think about it. Just because you spend your days at the gym and have a good body, that does not mean you understand the intricacies of sourcing and creating supplements. That is a whole other specialty. One, that might actually be better for a doctor or nutritionist to handle.
Here is another example. Just because your a girl that happens to have access to nice yachts and loves to take photos on them, that does not mean you spent decades learning how to make good clothes.
When you look at the founder look at the skills they have, and think if they match their product.
Now, some founders will actually do a really good job at this. They will recognize that they don’t have certain skills and hire a team of real professionals instead of slapping their logo on cheap crap they find on Alibaba.
So, if the influencer is not qualified, give them the benefit of the doubt, and look at the team they hired too.
Are You A Brand?
I bet if you are a brand, that 10x margin is stuck in your head. So, if you are still thinking about going down the white label path, here are a few pros and cons.
Easy To Develop
You get to choose from a catalog of highly researched well-performing products, all with low MOQs. A newbie founder's startup dream!
There are even companies that offer label services, where you can buy generic products and they will put your logo on them for you.
It's Easy To Rapidly Grow Your Product Range
You can start with one product and if that does well, easily pick up other products from the supplier catalog. Again, without having to invest in R&D or trial and error.
Plus, when you work with a private label manufacturer the lead times are generally quicker than custom stuff. Because again, it's usually already made, or being made for someone else.
Easy To Copy
You're not the only one that is getting this product when you are private labeling. It is literally available for everyone and anyone to buy. Remember, your exact same product might be being sold by hundreds of other companies with private labels just like yours.
So, your entire brand strategy needs to change.
Your brand becomes a lot more about branding and marketing, than about the actual product.
Little To No Control
As they say to kindergarteners, you get what you get, and you don't get upset.
When sourcing private white label products, you don't get a lot of say in customizations. The product is what it is, you can take or leave it.
My Two Cents
If you are looking to just start a company. White label manufacturing might be for you. But if you are interested in starting a real movement or creating a product that really solves a problem, custom manufacturing might be more your speed.
Let Me Know What You Think In The Comments!
Are you more of a white label done for you brand owner, or someone who wants to put in the hard work and create something custom?