May 1, 2019
White Label or Sell Direct: Which Is Better for Your Ecommerce Business?
This blog post was originally published by Deliverr, which is now Flexport. The content has been adjusted to fit the Flexport brand voice and tone, but all other information remains unchanged. With the merging of Deliverr’s services (DTC fulfillment, B2B distribution, and Last Mile delivery) into Flexport’s existing international freight and technology services, we’re now able to provide merchants with true end-to-end logistics solutions spanning from the factory floor to the customer’s door.
You only want the best for your eCommerce business, which is why deciding between white labeling your products, going through a middleman, or selling them directly to consumers is such a difficult decision.
Both white label and direct sales can generate serious profits, but with pros and cons surrounding each option, how do you decide which is right for your eCommerce business?
Different Ways To Sell Online
Let’s start with the basics of what white label is and isn’t. Imagine that you’ve developed a line of beautifully scented perfumes, which are ready to sell - you just need to decide between:
White labeling is B2B - you make a product, selling it to another business for them to brand and sell to their own customers. In this example, you make and package the perfume in an unbranded bottle, and another eCommerce business buys it, adds their own name label, and then sells it online through their store and online marketplaces.
Selling direct is B2C - you make a product, name it, brand it, and sell it directly to consumers. In the example, you bottle and box the perfume using your own branding, and sell it through your online store and marketplaces.
However, the differences between white labeling and selling direct aren’t constrained to their definitions alone. They have their own pros and cons, making them best-suited to different types of eCommerce businesses. Let’s take a look.
The Benefits of White Labeling
White labeling comes with many benefits, especially for those who don’t want to interface directly with consumers.
1. Use Your Talent
If you’re an expert perfumer, you likely don’t have much experience in selling a product to the mass market. White labeling allows you to concentrate on what you’re good at (product development), while someone else takes on the hard work of selling online to the public and overcoming issues such as preventing cart abandonment, increasing customer lifetime value, and beating the online marketplace competition.
However, for those that like a little recognition, this does mean that your customers will receive all of the public praise for your product - beyond your customers, your talent goes unnoticed.
2. Don’t Worry About Branding and Marketing
With no requirement to sell online to the public, you also get to skip the branding and marketing required for a consumer audience. Your customer is responsible for creating a brand, developing visuals, and thinking of a name - you just need to manufacture your product. Although, don’t get too excited at the prospect of avoiding this time-consuming and costly task. You still need to get your product in front of a business audience, which can be a talent in itself.
3. Increased Distribution
While the wholesale nature of white-labeled products means less margin per unit, you may offset the difference with bulk sales, minimum order amounts, and the opportunity to reach a wider audience through multiple sellers.
Of course, this means you’ll need the ability to store and ship large quantities, so take a look at your storage and fulfillment options and see if you have enough warehousing space and staff.
4. No Inventory Risk
When you sell white label or 1P, you sell wholesale and don't have to shoulder any of the inventory risk. Once your items have been purchased, the sellers or marketplaces who purchased from you are responsible for storing, managing, and selling inventory.
The Benefits of Selling Direct
White label may sound easier for your eCommerce business, but what if you had your heart set on creating a brand? Is selling direct all that bad? Not at all. Selling direct comes with many of its own benefits, including...
1. More Control
If you’ve developed a great product, you’ll want to keep it that way by controlling where it’s sold, who it’s sold to, and for how much it’s sold. Selling direct allows you to retain this control to create the premium, budget, or individual product that you worked so hard developing. This does come with the added pressure of branding your product accordingly, but for some, that too is part of the benefit of selling direct.
2. Building a Brand
While hard work, building a brand and marketing a product is an incredibly rewarding task. Not only do you get to define your product as you have always seen it, drive sales, and increase customer lifetime value, you also get to receive full credit for your work of art. And, although this may mean you have to deal with negative reviews, it also means that you’re closer to the feedback that will enable you to develop your product into something extraordinary.
3. Building an Empire
Finally, one of the biggest benefits of selling direct is playing a part in one of the fastest growing industries in the world. Retail eCommerce is expected to grow to $4.8 trillion by 2021, and by selling your products directly to consumers you’re benefiting from that.
Although this comes with the added pressure of keeping up with customer expectations surrounding service, shipping, and multi-channel product availability, with the right multi-channel listing tools and logistics partner, it can be easier and cheaper than you think.
An Alternative Option to White Labeling
If you’re still not sure between white label or selling direct, a third option may be just for you: selling 1P or 3P.
Selling through a first party relationship (1P) involves selling your products wholesale to an online marketplace, such as Walmart or Amazon, who then sell your products through their own brand. The benefits of selling 1P on Walmart or Amazon include having a big brand name behind your product, easy access to large volumes of buyers, and only having to worry about supply.
However, this does come with restrictions including very limited control over your pricing, and lower margins. That’s where 3P comes in.
Being a 3rd party seller (3P) on a marketplace means you have control over your branding and pricing, while reaching consumers on a platform they know and trust such as Amazon or Walmart. You can still sell to consumers via a marketplace that gives you a platform to reach buyers.
Which Is Better for Your Ecommerce Business?
While each options have individual benefits, selling directly gives you greater control over your audience, marketplace, branding, and pricing - all of which can lead to greater profits. And, with support out there for multi-channel selling, fast shipping programs, and advertising, the drawbacks are just opportunities in disguise.
The contents of this blog are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. We do not guarantee, represent, or warrant the accuracy or reliability of any of the contents of this blog because they are based on Flexport’s current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This blog has been prepared to the best of Flexport’s knowledge and research; however, the information presented in this blog herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this blog.