Business-to-business (B2B) trade is thriving, especially in the digital realm where software can get distributed for little cost. Part of this is white labelling, where businesses provide resources that entrepreneurs can build with. It can take the pain out of starting up a business, saving time and money in the short term. Here are three ways that white labelling can help entrepreneurs kickstart their business.
Reduce Time-To-Market
No matter what the white labeller does, there’s an inherent benefit to outsourcing part of a process out to another company. That is, it reduces time-to-market. Whether setting up a business or just adding a new product/service, white labelling is much faster and simpler than getting it done yourself.
This is popular with business models that provide interactive experiences, often where branding is important, but they’re small and can’t afford to fret over the nuts and bolts that experience is built on.
For example, the iGaming sector is a massive space full of giant casino sites and many challenger sites looking to carve out their own audiences. They may have the branding and the capital to start, but they don’t want to muddle through web dev or run a support service. So, some B2B businesses offer casino platform software that entrepreneurs can build upon, often with customisable aspects that allow clients to make their sites stand out. It allows new entrepreneurs to clear the barrier to entry and focus on the main USPs of their business.
Naturally, the benefits of a faster time-to-market are weighed against the cost of outsourcing it in the first place. For those with the capital, cutting time-to-market and getting started ASAP can be more beneficial and justify the cost. This makes it ideal for seasoned entrepreneurs looking to expand operations.
Built-In Compliance
Compliance, and more broadly research and development, are two major barriers to entry for some business models. Most industries come with regulations that need to be followed; otherwise, entrepreneurs risk everything from costly fines to criminal charges. Assuming you’re buying from a legitimate source, white labellers are proven businesses that have spent longer in the market than your company and so have already cleared those barriers.
They already operate within any compliance guidelines and make products that adhere to quality standards and other industry demands. So, if you’re adding a new product to a clothing line, for example, then sourcing from them provides built-in security. It lessens the time and often the cost of learning the regulations yourself.
The same principle applies to research and development tenfold. While there’s no shortage of tinkerers who happened upon the million-pound idea, the reality is that R&D is typically very expensive and time-consuming, which is why only the biggest businesses have R&D departments. White-labelling a product that already has its R&D done by others is cheaper, though you won’t find many new and innovative ideas that way and sacrifice first-mover advantage.
For entrepreneurs intent on proving their ideas and bringing something new to market, there is actually a model for this that allows you to outsource research. Contract Research Organisations (CROs) get paid by companies to conduct research on a project-by-project basis. It’s more expensive than going with the flow, but the rewards for delivering a new hit product or finding a new way of doing something could be astronomical.
Immediate Product/Service Credibility
It can be hard to win consumer trust when you’re a new business and, even more, a new entrepreneur who doesn’t have priors. Outsourced products/services can help with that by offering recognisable, proven stock to build up a consumer base with.
Entrepreneurs with more ambitious ideas for their business still need to start somewhere, and outsourced products can help them get their foot in the door. Then, once a cash flow has been established and you have your audience’s trust, it becomes possible to invest in R&D and bring your own ideas to market. Some even develop their own supply chain to keep costs down and have full control, gradually replacing white-labelled products with their own offerings. This way, white labelling is just a stepping stone to where you’d want the business to be.
Potential Downsides of White Labelling
Before making any business decision, entrepreneurs should remember the potential downsides. Most of them are inherent to the model, so they don’t make success impossible; they just change what your business is and what it offers customers.
There are two big downsides to white labelling: product exclusivity and supply chain control. We touched on the first already, where it’s typically more lucrative to offer a unique product, assuming it finds its audience. Theoretically, a competitor could also enlist a similar service and get all the products, services and perks you have. While that’s true, if two businesses source from the same place, the one with the best branding and service quality gets the customers, so entrepreneurs can just shift their focus to those.
Supply chain control is more about your business reputation and only shows itself when something goes wrong. Circumstances beyond your control can cause delays in delivering a product or issues offering a service. However, the customers don’t blame the white labeller; they blame your business. Selecting trusted labellers is important. The reality is that most mid- to large businesses rely on outsourcing somewhere in their operations.
The perks and pitfalls of white labelling vary depending on your specific business model. In most cases, there are workarounds or compensatory factors that a skilled entrepreneur can navigate.