The Tech World’s Secret to Success: White Labeling
By Ofer Fryman • August 28, 2018
If you’ve ever wondered how some apps get off the ground so quickly or how some competitors add complex features at lightning speed, we have your answer — it’s white labeling.
White labeling is when your company takes the product of another company — whether physical or technical — and rebrands it as their own. This can give you a competitive advantage because it makes upstarting a core product or feature much faster and easier than doing it on your own.
For software companies, this means getting features or functionality that would be prohibitive to build, and for products, it means having the benefit of an already-scaled operation at the start of business operations.
While white labeling has benefits, it can also come at a cost. You don’t have the same control of your product as you do if you build everything completely in-house. Sometimes this is necessary because of the processes involved in building your product; but if it is a choice, it’s one you have to weigh carefully.
What is white labeling?
If you’ve ever drunk Costco’s store-brand coffee, you’ve had a product that’s been white labeled. Why? Because Costco’s store-brand coffee is actually Starbucks coffee, just in another package. White labeling is something that happens with both tech products and physical products. It is a process in which a company takes a product or feature that they don’t make and rebrands it so that it appears to be their own.
Costco’s business and competitive advantages come from their physical stores and their bulk prices, not their ability to grow and process coffee. For them, white labeling allows them to instantly sell their “own” cheap products without the cost of becoming experts in coffee growing.
Or take Dollar Shave Club, which was acquired for $1 billion in 2016. They may have created their own website, ran their own ads, and staffed their own support center, but they did not make their own razors. Half the product of their business was the physical razor, but the other half was branding and subscription services. To start manufacturing razors from scratch would have been cost and time prohibitive, so they white labeled.
For ecommerce businesses like Dollar Shave Club, white labeling for either products or software (like an app) can be a great option because it is unlikely that a company’s expertise will lie in both. DSC had the marketing, subscription plan, website, etc., but they didn’t have the physical product. Another company, say a furniture company, might have the physical product but doesn’t have the expertise to build an app where customers can use photos of their space to see how the furniture will look. White labeling that tech could push them into ecommerce without having to suddenly hire app developers.
What isn’t white labeling
Now that you know what white labeling is, it’s important to delineate what it is not. In order to be white labeling, you have to be:
Selling someone else’s product
Rebranding that product under your own label
A public partnership, like Oreo ice cream, where one company (Breyers ice cream) uses another company’s product (Oreo cookies) and states that right on the box:
Using someone else’s product to facilitate the normal course of your business. A book publisher isn’t white labeling another company’s paper because they aren’t selling paper — they’re contracted to use paper as a material in their product.
How white labeling fuels the tech industry
When it comes to tech, white labeling can take as big a role in a company as razor production did for Dollar Shave Club. Some companies may choose to white label the primary function of their product, building a user interface and other features and functionality on top of the tech. Others use white labeling to add a new core function to expand their existing product offering.
There are many reasons that a company might choose to take this option rather than building their core functionality from scratch:
You don’t have the time to build the tech. As a company that sells AI software, we know that certain tech takes a lot of time and manpower to create. White labeling can save you time and energy, allowing your company to move to market faster.
You may not have the knowledge. There are many great entrepreneurs who are not world-class software engineers, and many companies that can’t afford a huge team of data scientists. White labeling can circumvent those problems by giving you core functionality without forcing you to add a whole new department.
Your resources are better used elsewhere. If it is cost prohibitive to build core functionality, white labeling can help your money go where it is used best, whether that’s marketing or hiring a CEO, while the sophisticated tech you need to compete is taken care of.
This means that companies that white label technology can move faster than their counterparts that are working from the ground up.
It’s important to note that in the tech industry, white labeling appears through partnerships where one company works with another to use their technology as a core function of the product. It should be a mutual relationship where the company providing the technology is responsive to white labeling needs, and the company building off the tech is enhancing its features or usability for consumers in a way the core company can or will not.
And again, using a company for software that helps you run your business isn’t white labeling because it is an internal company function. Using a piece of software like Stripe to process payments on an online shop isn’t white labeling because that’s a small outward feature that isn’t part of a core ecommerce service. In the same way, a customer support team might use a live chat for support software to chat with customers. If they use a software as a service company to provide that chat platform, they haven’t white labeled it because they aren’t claiming to sell chat software.
White labeling in action
Let’s look at the two ways that white labeling is most frequently used in the tech world. First, we’ll show you how a company added a new core component to their software through a software partnership, and then we’ll show you a company that built the customer-facing side of their product but none of the core function.
Adding Features At The Speed Of Light
Ace Marketing Solutions is a company that provides software and web products for independent hotels. For example, one core of their products was software to help run and automate tasks related to the running of hotels and property management software. This is a robust core product, and it served Ace Marketing Solutions well.
But as their client base grew, and they started thinking about how to best expand their business to better serve independent hotels, they realized that they needed to add a hotel booking management software to their suite. This is a piece of software that would represent a new pillar of their suite of products but isn’t significantly similar to hotel management systems.
Instead of building the new tech they needed, they decided to white label hotel booking software from The Booking Factory. This meant that they were able to add a core service to round out their suite of products under their name — nobody going through Ace Marketing Solutions is aware that they are using The Booking Factory’s tech because it is all through the other company.
Within a few weeks, they had the system up and running and integrated into their product offerings — dramatically faster than what they would have been able to offer themselves. Ace Marketing Solutions’ white labeling of The Booking Factory is a great example of a company quickly adding a feature clients want, giving existing customers solutions to their problems and making their product more enticing without committing resources to pivot a core product.
Building A Product Without Touching Core Tech
An example of a company with a great idea they brought to life without creating the core technology themselves is ScreenShop. ScreenShop is an app that can turn any image on a user’s phone into a shoppable image. Photos, screenshots, anything that you have on mobile can now be used for outfit inspiration.
As a user uploads a product, they can see different retail options for similar products, save the images, download them onto their phone, and sort and browse at their leisure.
The only catch? They needed sophisticated image recognition AI to make it work — AI that would take years and millions of dollars to produce.
Rather than letting their great business idea become just another thing you almost did, ScreenShop turned to Syte, which already had the tech up and running. ScreenShop built all of the customer-facing components — something that Syte never planned to do with their company — to make an app that has great UX and great core software.
This is a great example of the way that a partnership works for tech white labeling: ScreenShop can’t do the AI, and Syte’s business has no interest in expanding to standalone, consumer mobile apps. They both benefit from working with each other because they both bring a vital part of the business together. Syte’s technology helps people find exactly what they like, but they can only access it in the user-friendly marketplace app because of ScreenShop.
When you can combine the strongest parts of your company with tech that makes it better without having to build it yourself, you are on the road to success. Idunn figured this out when they realized that one of the biggest strengths of their company was social media marketing and scheduling. Based in Europe, they were able to successfully cater to clients all over the world by helping them set up schedules that worked for their time zones, whether that was Australia or North America.
But the manpower it took and the odd hours they were forced to keep to help clients schedule and post properly meant that they were not fulfilling their potential.
So they turned to Sendible. By using Sendible’s dashboard and scheduling technology and branding it as their own, they were able to come up with a solution that allowed them to connect with clients around the world and collaboratively schedule posts, just what they were good at. Only this time, it didn’t come with the manual cost of forcing employees to keep overseas schedules.
It also allowed them to scale the best part of their service thanks to the tech. Rather than hiring more marketers, they were able to take away busywork from their marketing team and give their clients a more streamlined way to communicate about scheduling and posting on social. Thanks to white labeling, they were able to grow their business 300% in a year.
Give your idea wings
If you are thinking about starting a company or adding a core feature to your existing company’s offerings, look into white labeling before you jump into development on your own. It can be the difference between giving your idea wings and staying grounded forever. The tech world is competitive, and you can give yourself a huge advantage by forging a white labeling agreement rather than sitting on your hands and waiting for other companies to come to market while you try to wrangle up a core feature.
If you think that Syte’s technology is a good fit for your business, don’t hesitate to contact us today.