White label

What it means

White label is a business model in which one company makes a product or provides a service and another sells it under its own brand as if it were its own. Customers often do not know who the real maker is. Examples include retailers’ private labels, cosmetics, supplements, software and online portals.

For the seller, the benefit is offering its own product quickly without investing in development and production, and focusing on brand building and sales. For the maker, white label is a way to use capacity and reach customers through other brands without its own marketing.

The relationship is governed by a contract that may be a supply, licence or distribution agreement. Key issues are quality, pricing, exclusivity, delivery times, intellectual property rights and who is responsible for the product towards customers.

How it works in practice

We point out to clients launching a product under their own brand that, towards consumers and regulators, they often become the producer. That means responsibility for safety, labelling and instructions and, if something is defective, compensation for damage. We therefore recommend product liability insurance.

For white-label software and digital services, the main issues are licences, service availability and data protection. If the seller offers clients a portal built on someone else’s platform, the provider is usually a data processor and a processing agreement is needed.

In the accounts, a seller acting in its own name and for its own account reports sales under its brand in full and purchases from the maker as costs. For some digital models, it must be assessed whether the arrangement is really an agency, in which case only the commission is reported.

What to watch out for

Dependence on a single maker is a risk. If the maker raises prices, lowers quality or ends the relationship, the seller may lose the whole product. The contract should cover notice periods, a transition period and, where relevant, transfer of the formula or code.

Customers see the product as the seller’s. A quality problem caused by the maker damages the seller’s brand. Quality control, supplier audits and clear contractual penalties are therefore an essential part of any white-label arrangement.