The disadvantages of adding a private label line are few, as long as you have the financial resources to invest in developing such a product. The main disadvantages include:
- Manufacturer dependency – Since production of your product line is in the hands of a third-party manufacturer, it’s important to partner with well-established companies. Otherwise, you could miss out on opportunities if your manufacturer runs into problems.
- Difficulty building loyalty – Established household brands have the upper hand and can often be found in a variety of retail outlets. Your product will only be sold in your stores, limiting customer access to it. Of course, limited availability could also be an advantage, giving customers a reason to come back and buy from you.
Although private label products are typically sold at a lower price point than their name brand brethren, some private label brands are now being positioned as premium products, with the higher price tag to prove it.