White labelling is the term given when one business cloned the products or services of another and sell them as their own.
A popular white label business is eBay; a company that sells nothing of its own, but rather earns commissions from bring buyers together with sellers.
eBay is not a typical example as with most resellers, the buyers are not aware that they are effectively dealing with an agent and not the actual supplier of the services.
The company from which the goods are purchased from is essentially a reseller, bringing buyers and sellers together, acting much like an estate agent does.
Advantages of White Labelling and Reselling
Low risk
White labelling has several advantages, the first of which is the low levels of risk attached.
In many situations, the business only has to purchase goods or services once an order has been placed for it. It therefore carries little or no stock, which in turn, requires very little investment or outlay .
If is often the case in internet transactions that the money is received by the reseller company before they then have to order the products from the actual supplier.
Easy to set-up
White labelling is generally easy to set-up. In many cases, the hard work of starting the business has been done by the actual suppliers. Therefore the person wanting to resell their products can often use their expertise in setting up their operations.
Help from suppliers
Suppliers are often keen to have other businesses act as their agents and resellers as it provides them with greater reach and access to consumers. They may also be motivated by knowing that if they do not provide the white labelling services, then one of their competitors will and hence gain extra sales.
Disadvantages of Becoming a Reseller
Lack of control
One of the primary disadvantages of reselling the services of another business is that of lack of control.
The quality and delivery of the services or products is largely out of your hands and you are wholly reliant on others to maintain your standing and reputation in the marketplace.
Price
Most businesses with a white labelling facility will provide discounts to the reseller which may bring the price down below the normal retail amount.
It is unlikely however that these items would be provided at cost (otherwise the supplier would gain nothing).
Paying the premium on cost price might make it difficult for the reseller to make a sufficient profit as their expense structure would not be equal to that of the supplier.
In addition, it might prove to be an annoyance knowing that for every sale made, the supplier receives income for essentially doing nothing. The advertising, marketing and other elements which led to the revenue would have come from the reseller, yet some of the profit is shared with the supplier.
White labelling can serve a purpose in that it can allow a new business to have access to a tried and tested system whilst at the same time; limit their exposure to the risks normally associated with starting a business.
As the operation grows and become more successful, the reseller could perhaps look at acquiring their own systems, products and so on and move away from the supplier.
