Want to understand exactly how this business model works? Continue reading and find out what white label is , what the advantages are for the company and how to apply it in HR. Check it out!
What are white label companies ?
White Label is a market concept that refers to the creation of products, services and platforms that can be used and marketed by other companies under their own brand.
It works like this: the owning company produces for several other companies, which can:
- apply your identity;
- customize products for use or sale;
This means that the reseller company outsources the development of products and services and, therefore, does not bear the production costs.
The expression “ white label ” means “white brand”, a reference to brands that buy ready-made pieces and simply apply their name and identity to the tags and labels.
Although the expression refers to physical products, such as clothing, food, electronics and even credit cards, the concept of white label can also be applied to services or digital products , such as e-commerce platforms and mobile applications .
Therefore, this model is widely used by companies that want to expand their operations, but do not have the expertise to develop solutions , nor do they want to invest in this. So, they only invest in branding , while entrusting the development of the product to those who already understand the subject and produce in large quantities.
Emergence of the term “ white label ”
The term has its origins in American music , more precisely with the hip-hop genre . With the explosion of the style in the late 1980s, the profession of DJ ( Disc Jockey) became popular in the United States.
These artists produced great hits using excerpts from previously released songs, the so-called samples . The big record companies, upon realizing the market opportunity , began sending records to renowned DJs who had the autonomy to produce their own versions and test public acceptance .
On the internet, the first record of white labeling dates back to 2001, when an e-commerce retailer provided telephone numbers for companies to sell their products and earn commission with their own brand.
How do white label companies work ?
Once an agency buys the platform, they can customize it to match their corporate identity. With the help of white labeling , they can add their agency name, logo, icons, URLs, corporate emails, text components, and other elements to comfortably align the platform with their brand .
After customization , the agency can offer the platform to its clients on their own terms . Email marketing and general marketing platforms are just a few examples of software products that can be purchased on a white label basis.
Another notable example is in the financial market, where digital platforms can also be acquired and sold by financial institutions as if they were their own.
Which companies need white label solutions ?
Using ready-made software allows partners to launch their own brand based on existing technology , taking into account all the high standards and innovations in the industry.
All technical issues associated with the development of the white label platform , as well as additional support and maintenance, are fully outsourced to the company that owns the digital product .
As a result, the brand receives the product that is made according to the technical requirements defined before implementation .
In practice, the white label business model works well for companies across a variety of industries. Saving money, time, and technical platform management aren’t the only reasons you might want to launch your own platform .
What leads to white label business development ?
White label solutions are often developed for a number of reasons:
- production requires a special registration or license ;
- the brand wants to have specific technical features that cannot be found on any other platform;
- the company intends to implement a unique solution that is best suited to the brand’s purposes, objectives, customer service process, etc.;
- the brand wants to enter a new market and beat the competition in the new segment and has a vision of how to capture its objective by applying a unique technology;
- the company doesn’t want to compromise quality when developing the new platform and simply purchases technology that its team has tried and liked before.
How is payment received?
White label , in general, falls under the category of SaaS , an acronym for Software as a Service . This means that the customer does not purchase the product license, but rather the right to use the service offered .
You may be wondering, “Who pays for the service, my company or my client?” The answer to that is quite simple. There are two ways to resell white label services : direct sales and indirect sales. See the differences below.
Direct sales
Your company resells the service adding a profit margin and invoices the end customer directly. Your company will be in charge of sending the customer the invoice (service value + service margin), while the company that developed the solution will be in charge of sending the invoice for the product’s worth.
Indirect sales
This modality is called this when the value for the end customer is exactly the same as that charged by the company that created the solution. In this case, your company will deal directly with the customer , but will resell the product without adding any margin and will not issue an invoice, which will be the responsibility of the service provider.
What are the advantages of white label companies ?
If you’re still not sure whether a white label solution is ideal for your company, check out the main advantages of this business model!
It’s quick and easy
White label solutions are usually fully integrated and ready to use , which makes branding very easy. It is a great opportunity for companies that want to add new features that bring more value to the end customer.
Keep your customers happy
Every consumer, when looking for a company, is looking for a solution to a problem. By opting for white label , you can quickly offer them a solution that solves their problems , before they look for that solution elsewhere.
Save time and money
At first glance, a fully built solution for your business may seem like the best option. However, more often than not, the effort to build a custom solution is unfeasible , resulting in more hassle than benefits. When time is of the essence and you need to move quickly, investing in an existing solution may be more cost-effective in the end.
Focus on core business
Building a modern digital product may not be your company’s specialty. Investing in such a project would therefore require expensive human resources that may not be available in the current business framework.
White label solutions allow you to entrust the development of the solution to subject matter experts , while you focus on what matters — your company’s core business .
What are the disadvantages of white label ?
However, there are certain drawbacks to white labeling as well, which should be considered:
- lack of interference in development : the contracting company has no power of influence or decision in the development of the product, which makes quality control difficult.
- lack of know-how : without contact with product development, the contractor does not acquire in-depth knowledge about this process. This can hinder the relationship with the client, as it can hinder support for queries.
- similarity with competitors : the brand loses differentiation, since the same product or service is marketed by different companies, which may be competitors.
What is the difference between white label and franchising?
White label and franchises are very similar models, but there are still differences between them.
White labeling requires fewer financial resources and gives more freedom to those who hire it . Unlike franchises, there are no sales targets to be met, much less a percentage of sales made.
It is possible to say that the main difference between white label and the franchise model is the flexibility for the use of the brand , since when joining a franchise your company needs to follow the guidelines of the parent company. With white label , you are free to customize the product and make it reflect your company’s image.
And what are the differences between white label and private label ?
White label and private label are business models in which a company outsources the development and production of its products or services.
But there is a difference between them: while white label delivers standardized and customizable products to several companies, private label produces exclusively for one brand , which orders products and services from the owner company. This way, there is no risk of finding identical products from competitors.
One of the most common examples of private label can be found on supermarket shelves. In addition to products from various suppliers, they also often sell goods produced by third parties on which they insert their own brand .
