Private label is when you produce product for a retailer or another brand under their name rather than your own brand name. Usually the margins on this business are smaller. But many times the units are bigger than you might have sold the store if you used your own logo. It is very enticing business, especially if you are new and trying to build sales volume.
It is great for retailers as they expect to pay less for private label so their profits are much higher. “The stores don’t really make much money off of the brands they carry. For example, a dress from Aqua, Bloomingdales in-house contemporary label, generates much higher profit margins than a number by Marc by Marc Jacobs because they aren’t paying the high premium of getting the Marc by Marc Jacobs label. Usually the price is less for the customer as well. This is a win-win for Bloomingdales and their customers. For brands it extends their product assortment into categories they do not have experience with.
Is private label a good way to grow a fashion business? That depends on your business. Each fashion company has its own business model. It also has its own unique characteristics. So what might work for one brand might not work for another. The questions you need to ask yourself are, “What business am I really in? What are my ultimate goals?” Look at your business as it stands. Do you need the business because your sales are low or would the sale use up precious resources and reduce your profitability? Do you have a hot item that would loose its exclusivity if you make it for someone else at a reduced price? Or is everyone already starting to knock it off so you might as well get a part of that business. Do you have the infra structure in place to do private label? Because many companies that do private label have a whole list of requirements in order to do business with them.
As in all business there isn’t one stock answer fits all so studying the opportunity to do private label and making sure it adds positively to your company is truly the way to go. Always do your due diligence before making any decisions.