Private Labeling Travails

[SpinnerRedPenny]

Hi Entrepreneurs!

I'm turning to you all in the hopes of receiving feedback on a quandary I find myself in.

I've been trying to broker a sales agreement between an original service provider (the SaaS equivalent of an OEM) and another seller.

The OSP wants the seller to be a reseller. The seller will only agree to sell the OSP's service as a private-label (sometimes called "White-label") service under the seller's own brand. The OSP is extremely reluctant to agree to this as they wish to build their own brand.

There is a compromise position and I hope I can get the parties to agree to it. I'm beginning to sense this effort might not bear the fruit I hope it will.

If I cannot convince them to agree to the compromise position, the next most likely way to get this sales agreement to work is to convince the OSP to accede to the private-labeling agreement. The OSP is a startup, they regard their service as "Their baby," and as I mentioned this makes them reluctant to allow the seller to offer it as a private label.

Below the signature line I've copied-and-pasted a white paper that I developed that is somewhat tailored; the expected audience for the white paper is the OSP. I did my best to write it in a way that it dials into their "WII-FM" and convinces them to acquiesce to the private label agreement. I queried two different AI models to assist me in developing the white paper and demanded the AI models list their sources, these are annotated on the White Paper (in very small font in the footer). In the interest of time I did not review the sources and presumed the AI interpreted the sources correctly.

What AI does not have, obviously, is experience. One of my hopes is that several of you with experience brokering private label arrangements may be able to review the White Paper (attached/below). If anything is glaringly incorrect, I'd be happy to know that. Often the toughest thing to see is that which is not there; if something is missing, by all means please advise me. Finally, is there a way I can better tailor any part of the message such that it will convince the OSP to allow the seller to offer their service via a private labeling scheme?

Please note that neither paragraph headers nor bullets and number formats translated from *.docx format to HTML below, I did the best I could to reformat the ordered lists below. I hope everyone can view the attachment for ease of viewing.

Thank you all in advance! I look forward to your feedback.

Sincerely,
Chris (d/b/a or aka "SpinnerRedPenny")

Glossary of acronyms: OSP = Original service provider; SaaS = Software as a Service; OEM = Original Equipment Manufacturer; WII-FM = "What's in it for me?"; AI = Artificial intelligence
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Using Private Labeling to Succeed with Your Business​

You’re the proud producer of a new and unique product or a service. You’re pushing the product out to the market. A sales company’s marketing team approaches you, and they are as excited as you are about your product. You’re more than a bit surprised when the distributor or seller advances the negotiation with a private labeling (or “White labeling”) request. The seller is eager to sell your product, but under the their own brand name. This is something you’ve never contemplated for your business or sales before. You’re taken aback and need to consider the matter further.

Are there good reasons to accede to the seller and let them offer your product under their label? The answer may surprise you. Here are some advantages to a private labeling agreement you will wish to consider:

1. Potential to increase your sales volume.
   1. Especially true if the seller has access to markets that you do not.
   2. The seller may be already more established in a market unfamiliar to you.
   3. The seller’s brand name may be stronger than yours.
2. Steady and diversified revenue stream.
   1. The additional sales made via the private label to their customer base represent one or more revenue streams otherwise unavailable.
   2. A private label seller offering your product or service is more likely to survive negative economic cycles due to dependence on exclusive resale agreements, helping ensure your own viability.
3. Increased profitability
   1. This will likely be through the seller’s ability to sell the product or service in a way or in a market your company will have difficulty entering.
   2. This may also be due to an increase in market share as the product or service is sold under several different company brands.
4. Cost savings to your company.
   1. Your company may be able to save on marketing expenses in areas in which the seller’s own brand name is dominant and has a significant goodwill factor.
   2. Your company will save on advertising expenses as the private label seller handles advertising for direct sales.
5. Customization and adaptability.
   1. The seller may be able to customize the product or service in such a way that it is more likely to sell under a private label than under the creator’s label.
      1. If sufficient additions or improvements are integrated into your product, it may make more sense to the customer to market it as a separate product to avoid confusion.
      2. Properly written private labeling agreements better define your company’s role in the success of derivative products or services and help ensure proper compensation for the value-added to the private label product or service.
   2. Private label products offer a separate feedback mechanism that may enable the original supplier to react to changing market conditions and tailor the product accordingly that they might not receive via their own marketing.

Here are some considerations that will mitigate the risks of using private labeling:

1. Profit margins per sale may need to be made up in volume.
   1. Choose private label resellers carefully for their ability to provide the volume offset, if needed.
   2. Choose private label sellers with access to markets you find it difficult to penetrate.
2. Intellectual property risks.
   1. Ensure your contracts and agreements are very specific. . .
   2. Consult with an attorney specializing not only in contracts but in intellectual property rights to ensure your contracts are framed in a way that maximizes your rights.
   3. Use caution if the reseller plans to enter markets that are known to harbor public or private entities that widely disregard intellectual property rights.
   4. As mentioned in customization above, properly written agreements help ensure your company is compensated for the value it adds to the private label product or service.
3. Brand dilution.
   1. Offer private labeling opportunities in markets in which your company suffers a disadvantage due to existing markets, economic policies, etc.
4. Competitive pressure.
   1. If a competitor enters the market, an exclusive agreement with a private label seller may provide your company an advantage by raising the cost to the competitor to enter the market.
   2. Exclusivity agreements may buy your company time to adjust to the presence of the competitor by delaying their entry into sales agreements with your private label distributor.

As you can see, there are advantages and pitfalls to offering your product or service to a seller via a private- or white-label. Only you can determine whether such an arrangement is likely to result in better or more business for your company.

This document was created with the assistance of OpenAI’s ChatGPT-4 and Gab’s Arya, which listed as sources Forbes, Harvard Business Review, Investopedia, Supply Chain Dive, The Balance Small Business, Nielsen, Berman’s & Evans’ Retail Management: A Strategic Approach, Retail Dive, Statista, Euromonitor International, various case studies by retailers and consultants, IBISWorld, MarketResearch.com, Private Label Manufacturers’ Association, and supplier financial reports.

 

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[MJ DeMarco]

Puv tasi xjev zua'si etloph; e temit tvsevihz vu dupwopdi upi qesvz vu edraoitdi? Upi, us vji uvjis, piift vu dunqsunoti epf tii onnipti wemai op edraoitdoph.

 

[StrikingViper69]

Vjuti “tuasdit” motvif esi ecuav et atigam et tezoph “opvispiv”. E tuasdi tjuamf jewi e tqidogod effsitt epf vji fevi ov xet eddittif.

Vji ipvosi vjoph ot cmepf, hipisod epf ucwouat. Vsz neloph ov tqidogod vu vji qesvoit opwumwif xovj simiwepv iyenqmit gsun vji goimf, ih qiuqmi vjev jewi hupi fuxp vjot qevj, vji taddittit epf gedomovoit epf xjz.

 

[SpinnerRedPenny]

Puv tasi xjev zua'si etloph; e temit tvsevihz vu dupwopdi upi qesvz vu edraoitdi? Upi, us vji uvjis, piift vu dunqsunoti epf tii onnipti wemai op edraoitdoph.

Vjeplt gus veloph vjot upi, @NK FiNesdu. O xet etloph gus giifcedl up vji ofiet O xet fiwimuqoph vu dupwopdi vji usohopevus/taqqmois vu edraoitdi vu vji qsowevi mecim ehsiinipv. O vjopl vji taqqmois ot nusi molimz vu dunqsunoti vjep vji timmis. Cav piovjis en O tasi vji taqqmois xomm dunqsunoti. O en vszoph vu qav vuhivjis e tiv ug sietupt ov xuamf ci op vji taqqmois't opvisitv vu ehsii vu vji qsowevi mecim tdjini.

 

[SpinnerRedPenny]

Vji ipvosi vjoph ot cmepf, hipisod epf ucwouat. Vsz neloph ov tqidogod vu vji qesvoit opwumwif xovj simiwepv iyenqmit gsun vji goimf, ih qiuqmi vjev jewi hupi fuxp vjot qevj, vji taddittit epf gedomovoit epf xjz.

@TvsolophWoqis69 uav ug dasoutovz, fof zua emtu atif vu gmz Woqist?

Vjeplt gus vji giifcedl. O'mm tii xjev O dep tdsuaphi aq vjev nohjv ci simiwepv. Cuvj qesvoit esi tvesvaqt epf piovjis jewi e jotvusz ug qisgusnepdi vu simevi vu, tu vjisi esi movisemmz pu tqidogodt simiwepv vu vjin. O'mm dupdipvsevi up gopfoph tonomes wipvasit.

 

[SpinnerRedPenny]

Og O deppuv dupwopdi vjin vu ehsii vu vji dunqsunoti qutovoup, vji piyv nutv molimz xez vu hiv vjot temit ehsiinipv vu xusl ot vu dupwopdi vji UTQ vu eddifi vu vji qsowevi-mecimoph ehsiinipv. Vji UTQ ot e tvesvaq, vjiz sihesf vjios tiswodi et "Vjios cecz," epf et O nipvoupif vjot nelit vjin simadvepv vu emmux vji timmis vu uggis ov et e qsowevi mecim.

O xepvif vu dmuti vjot vjsief uav xovj e puvi vjev xi emm siedjif vji fitosif dunqsunoti [the supplier is now willing to offer a private label deal for the seller] epf iwiszupi tiint vu ci jeqqz xovj ov.

 

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