Private label and contract manufacturing allow businesses to sell products under their brand. But the 2 terms are different. Today’s blog will compare the 2 modes with examples, so you can choose the one that suits your project better.
Contract manufacturing vs private label, what’s the difference?
Although contract manufacturing and private labeling may overlap in some cases, they are different concepts and are applied in different fields.
Contract manufacturing (CM) is to entrust third-party manufacturers to produce the components and finished goods as required. This model mainly focuses on the outsourcing of the production process and is typically used for products that are complex to produce and have high technical requirements.
Examples include the medical, energy, aerospace, precision instruments, and high-end electronics industries. For instance, well-known brands such as Apple and Hewlett-Packard provide product specifications, and Foxconn and other entrusted contract manufacturers handle the rest.
Private labeling, a widespread retailing practice, typically involves retailers sourcing existing products from manufacturers and rebranding them with retailers’ logos and specified product specifications. Private labeling focuses on branding and market strategy and is more involved with consumer goods.
Private label manufacturing vs contract manufacturing
The production process of private label products is called private label manufacturing, which uses the contract manufacturing method. In other words, private label manufacturing is a form of contract manufacturing, involving manufacturers producing goods according to retailers’ requirements in terms of design, materials, packaging, and other aspects.
In summary, contract manufacturing is not the same as private labeling, but private label manufacturing is a form of contract manufacturing.
Private label vs CM, what are the advantages & disadvantages?
Contract manufacturing has many advantages. Typically, the hiring company can benefit from the manufacturer’s expertise and cost efficiencies, so as to focus on product design, marketing, and customer service.
For example, for complex products like engines and chips in electronics, contract manufacturers can provide the necessary specialized equipment and technology to ensure the product meets quality and safety standards. In the field of healthcare products, specialized manufacturers help meet stringent regulatory standards and reduce costs.
However, due to the technical complexity of products and strict certifications and industry standards, contract manufacturing usually requires a higher Minimum Order Quantity (MOQ) to amortize these costs. This model is suitable for large brands and established enterprises.
In contrast, the MOQ of private label manufacturing is more flexible and friendly to startups and small businesses with limited budgets. For instance, if you slightly adjust the appearance of wooden toys, you can order 300-400 pieces per style. Additionally, private-label manufacturers are typically more flexible with lower MOQs if your product value is high.
Note that if the product customization is complex, the private label manufacturing MOQ will be high and will also require more funds and time from prototyping to mass production and product launch on the market. This is common among medium-to-large retailers with the capital and experience to make significant product improvements or develop new products from scratch to attract more customers and build the brand.
JingSourcing simplifies your private label manufacturing in China.
Over the past 10 years, JingSourcing has successfully assisted over 4,000 clients with private label manufacturing in China, many of whom are startups and small businesses. Their private label products cover a wide range of everyday consumer goods.
Leveraging a wealth of manufacturer resources and strong industry relationships, our private label services are MOQ-friendly, reasonably priced, and quality-assured.
For logo printing, custom packaging, sizes, colors, etc., using JingSourcing is much more straightforward than spending much time and energy comparing manufacturers by yourself. We can quickly find reliable factories for you, follow up on the private label manufacturing process, and conduct quality inspections before the products leave China to ensure they meet quality standards.
If you want to develop brand-new products, we can bring your ideas into reality and guide you through the whole process. This includes finding factories, making a cost breakdown of your product development, creating prototypes based on your 3D designs, customizing packaging, mass production after sample confirmation, quality inspection, and shipping to your place. We support you at each step, ensuring private-label manufacturing quality and cost savings.
Three further asked questions.
What is the difference between a manufacturer and a private label?
A manufacturer makes products like a kitchen cooking various dishes. Private labeling is like ordering dishes from this kitchen and serving them on your plates with your labels, making it look like you made them yourself. In simple terms, manufacturers make products, and private labeling means selling these products under your brand.
What is the difference between co-manufacturing and private label?
Co-manufacturing is like two people cooking together: one provides the kitchen and tools, while the other provides the recipe and ideas, and then they make a dish together. Private labeling is like buying ready-made dishes from a supermarket, repackaging them, and putting your own label on them to sell as if you made them yourself. In simple terms, co-manufacturing is collaborative development, while private labeling is brand rebranding.
What is the difference between private labeling and third-party manufacturing?
Private labeling is like going to a wholesale market, buying unbranded products, and then putting your own label on them to sell. It’s like giving the products a “new outfit” to make them look like they belong to your brand. Third-party manufacturing is when you have a product idea but no factory to produce it, so you find someone else to manufacture it for you. They only handle production, not sales.
In simple terms, private labeling is repackaging and selling products, while third-party manufacturing is finding someone to make your products.
