By Fredrik Grönkvist
Importing Private Label Products from China is a shortcut to success. How hard can it be to just pick a product, send over a logo file and start selling something on Amazon? Well, as I explain in this article, reality is a lot more complex than what many importers may think.
Keep reading, and learn why private labelling is not really what it seems to be in China, and why it can be more complex to get an ODM product right – compared to a custom designed product.
We also explain what Startups and SME’s must know about Intellectual property issues, printing specifications – and how much you should expect to pay a logo print! Yes, this is by far the most comprehensive guide on private label imports written.
What is Private labelling?
A private label product is manufactured by Company A, but with the brand name (i.e., logo and packaging) of Company B. In theory, Company A (the producer) provides a ready-made ‘product template’, to which other buyers can apply their own brands.
The benefit of private labelling is that you can create a branded product, without investing into all too much time and money in product development – and tooling. Hence, you can launch a product much faster.
Again, this is all theory, and I will explain later why this is not really how it works out in reality. But, the point is still valid.
With all that said, branding is still a key for startups and small businesses, as these cannot compete on pricing. This is especially obvious on marketplaces, such as Amazon.com, or the incredibly profitable watch brand, Daniel Wellington*
*Daniel Wellington is not a private label brand. However, their branding has been integral to their success.
Is China the right place for sourcing Private label products?
Private labelling was certainly not invented in China. It has existed for decades in the food, and other, industries. But, Chinese manufacturers have certainly widened the range of items available, for private labelling.
Our customers often ask us whether Chinese manufacturers ‘allow’ their products to be private labelled. The answer is almost always, yes.
Chinese suppliers are, in general, very flexible. They make products according to buyer specifications. The positive aspect of this is that you can essentially get any product out there private labelled.
The bad side is that, well.. Private label products don’t really exist in China. Keep reading and I’ll explain what this means.
Chinese suppliers are primarily OEM suppliers. Not ODM suppliers.
Chinese suppliers are not proper private labelling manufacturers. They are still operating according to OEM ‘make to order principles’. In short, the OEM process can be broken down as follows:
- The buyer provides a spec sheet, reference samples, applicable safety standards and labelling files
- The supplier manufactures a product sample for two reasons: First, to learn how to produce the product, and to show the buyer that they have the expertise to do it.
- Production begins. The supplier procures materials and components from its subcontractors. After this is done, assembly begins.
In theory, private labelling is supposed to work as follows:
- The buyer browses through glossy catalogs and websites, picking out what they want. The buyer sends a logo file to the supplier, and they work out the rest.
- The supplier starts production and manufactures the product according to an established set of quality standards and product specifications. The buyer can just sit back and wait for the next batch.
You’ve already figured out by now that this is not how it works in the real world. And, this is why:
- The suppliers most often do not have a fixed set of product specification: They still want you to provide explicit requirements for labelling, materials, design and product compliance. Yes, even if you intend to buy a (so called) ‘private label product’.
- They don’t really develop their own products: What you find in the supplier’s catalog are partly products they’ve done for other customers, partly products they want to show that they can manufacture (but never actually did produce, so far). That said, there are certain exceptions, for example, the Drone industry in Shenzhen.
- Product catalogs are for reference only: As mentioned, a product catalog is not much more than a case study of what the supplier has produced before, and what they suggest they can make. I have dealt with companies that have tooling for less than 50% of the products in their catalog. In these cases, there’s nothing but a 3D rendering. No molds, spec sheets or design drawings.
Importing Private label products is not necessarily easier than designing your own
So, how do you go about to buy private label products? First, you need to find out what sort of products the supplier has existing tooling for. Second, you need to get a list of product specifications.
However, as many suppliers lack both tooling, and product specifications – you may need to both buy tooling (which partly defeats the reason to buy a private label product) and provide the supplier with a complete spec sheet (which completely makes it irrelevant).
Buyers often find themselves in situations where they must reverse engineer the ‘supplier’s product’. This can be far more time consuming than just hiring a product designer from the very start.
The problem is that the supplier still expects you to provide them with a specification. Even when buying a private label product.
If not, they’ll fill in the gap for you – and that’ll be in a way that benefits them (which means they’ll use the cheapest possible materials and components, to improve their own, meager, profit margin).
Consider ODM products (private label products) as general design templates – nothing more. In the end, the process is still essentially the same as if you’d go for a custom designed OEM product.
The only difference is that you may be able to say that you want the design to be based on an existing sample. But that’s about it.
… and, certainly, not a good reason to step down your Quality assurance procedures
As there’s normally no fixed spec sheet, or internal quality guidelines, applied by the manufacturers (remember, they expect that to come from you) – the risk of defective units and damages is always present. Yes, even when importing private label products from China.
As such, your quality assurance procedure is as important now, as if it would be if you’d buy a custom designed product.
You must still order pre-production samples, communicate your quality requirements in the form of a sales contract – and you must follow up with quality inspections after production.
Intellectual property (IP) issues
Intellectual property is another issue that especially Private labellers must deal with. What if you buy a ‘private label product’ that turns out to be patented?
This question was recently answered by Rachel Greer, of Cascadia Seller Solutions. This is what she says:
Typically, we recommend checking if the product you’re trying to sell is the only version of that product on the website, and if so, it’s probably patented.
As an example, there’s a car seat that uses heavy duty suction cups to hang in a window. The suction cups are patented, and so no one else can copy that exact design – only Amazon and the original seller are listing that product for sale.
Sometimes you can also see when something is truly innovative that it is likely patented. There are many traditionally used products, or variations on the theme, that new Amazon sellers can use to build their brands, it’s not necessary to copy someone else’s brand or designs.
That being said, patent infringement is quite hard to prove on Amazon, and typically Amazon will require some sort of proof of successful legal proceeding. Where we see sellers get into trouble far more often is trademark and copyright infringement.
Sometimes, they’re using someone else’s name brand in their product description (never use the name Dr. Oz to promote your supplements!), or using someone else’s photo. Always try to have unique offerings and photos.
Having a product branded is not expensive. The price difference between a private label product, and a no-name product, is usually very small.
Printing a logo on a product is most often not costing more than $0.2 to $0.4, per piece. In comparison to the added value (assuming you do it right), that is a very good return on investment.
However, the costs depend on many factors, including placement, the number of colors and logo size. In some cases, suppliers also charge an additional tooling fee (print card cost), ranging between $50 to $200.
Getting your products labeled is not rocket science, but things can still go horribly wrong. As said, Chinese suppliers are accustomed to a “make to order” approach. Thus, they expect you to provide every relevant specification, in this case relating to the private label itself.
The stakes are high, as the supplier will fill in the gaps if you would fail to provide one or more labeling specifications.
What makes things worse is that many Chinese suppliers will not alert you of mistakes or other issues (for example, incorrect font), even if something is obviously wrong.
Yet, many startups and small businesses fail to realize the importance of providing comprehensive labeling specifications to their suppliers, and instead think that the supplier “should know how to get it right”.
Yes, perhaps they should, but you are the one losing a ton of money when something goes wrong. First, make no assumptions, and second, nothing is too small or unimportant to be included in your labeling specification.
This is what you must include in your label or logo specification:
- Print type: Your label can be printed, or affixed, to the product in various ways. There’s no right or wrong here, apart from the obvious fact that certain print types are not suitable for some products. Below follows an overview of various print types:
- Silkscreen print
- Heat-Transfer Printing
- Hot stamping
- Sublimation printing
- Inkjet printing
- IMD print
- Water transfer printing
- Colors: Always refer to a Pantone or RAL color code, depending on which color matching system your supplier is using. Never refer RGB colors or other digital color systems.
- Print Position: The supplier must know the exact position, on the product, where the logo shall be printed. Thus, you must provide reference measurements, based on the actual product dimensions.
- Artwork: The artwork must be based on the actual product design. Thus, you must either draft an Artwork template yourself, based on a product sample, or obtain one directly from the supplier. However, it’s quite common that Chinese suppliers either lack or refuse to provide, artwork templates.
- Files: Most suppliers prefer to work with the scalable vector file format, EPS (Encapsulated PostScript) or an Adobe Illustrator file (.ai). It’s critical that the files are set with the correct dimensions and resolution.
If you use a non-standard font, you must also provide the font file. Time and time again I see buyers making assumptions about these small things.
Fredrik Grönkvist is the co-founder of ScandinAsian Enterprise in Shanghai. Since 2010, he and his team have helped hundreds of companies worldwide, primarily in the EU and US, to develop and manufacture products in China. He is also the main contributor on www.chinaimportal.com, a leading knowledge base for small- to medium-sized enterprises importing from Asia. For further questions, you can contact him on www.chinaimportal.com/contact-us/.