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Contract manufacturing is popular mainly because it simplifies and reduces the cost of introducing new products to the market and expands its reach.
Companies save a significant amount of cost by partnering with manufacturers since they do not have to invest in the production plant or staff.
In addition, the cost of labour is also considerably lower while delivering optimal output.
The location of the plant may also offer other benefits such as lower energy, overhead, and raw material costs, along with tax savings.
By outsourcing manufacturing, companies can focus on their competencies such as marketing and sales
If the owner comes from a similar background, it could potentially reduce the number of employees needed to support these tasks.
Contract manufacturing can also allow the company to introduce their products in the host country.
This could allow them to expand their market base in other neighbouring countries too.
A private label product ideally refers to merchandise produced by a 3rd party manufacturer and marketed under the name of retailer or the distributor.
The retailer has complete control over the merchandise, including its ingredients, package design, labelling, etc. The retailer has to bear the cost of all production and delivery costs until it's delivered to the store.
Some of the biggest advantages of private label products include:
Control over production - Retailers have full control over every aspect of the production. The manufacturers follow the guidelines set by the retailers to ensure the product meets the required specifications.
Control over pricing - Since the retailer has complete control over the product's quality and specifications, they can also determine the cost and set a reasonable profit margin.
Adaptability - Smaller retailers have the upper hand when it comes to responding to market demand for a new feature by producing a private label product. Larger companies may not be interested in niche products due to their size and structure..
Control over branding - Retailers can create their own brand name and also decide the packaging design based on the market condition.
Control over profitability - 3rd party manufacturing offers high levels of control over production. This allows them to decide the profitabilityof the products according to the market.
Customised Packaging is “Tailor Made to Fit Your Product”.
When a product fits into the packaging perfectly, it minimises the need for other packaging materials such as padding or void fills.
Besides the functional applications of proper packaging, the ability to provide custom packaging can also boost the brand image of the product.
Unlike advertisements, a package is a tangible item that helps customers in building their perception around a brand.
Receiving the product in customised packaging along with a personalised note is a surefire way to boost the customer experience as opposed to receiving it in a plain brown bag.
This little bit of extra comes at a very low cost while giving the retailer greater visibility and brand image because of the nature of its outreach.