Private label manufacturers must be aware of the profit objectives of the retailer. Retailers' profitability is measured not only in terms of margin, but also in actual dollar amounts. In addition, there are varying inventory turn requirements.

The private label must provide benefits to the consumer as its branded competitor or it will not achieve repeat purchases. Quality and efficiency can typically be obtained with a similar ingredient mix, formula, and process.

The packaging, both primary (exterior carton) and secondary (bottle or other form), should convey to the consumer a quality perception.  Private brand packaging must also meet regulatory, labeling and safety requirements.

The private label vendor must be customer-service oriented, which means aligning its efforts with the various operating strategies of the retailers. It must be able to tailor the product and marketing promotions to the needs of the individual chain. It must provide product in proper quantity in a timely manner.

With inherently lower gross margins than branded companies, it is critical for private label manufacturers to be low-cost producers.  The private label vendor must be state-of-the-art in terms of manufacturing, packaging, and shipping. Flexibility is imperative because product, package, graphic design, and size of orders are much more variable in private label than for nationally advertised brands. Private label production lines must be changed over much more frequently than at branded companies because of the greater number of different labels.

Only by keeping inventories, production schedules, manufacturing efficiencies, and shipping highly flexible, and by continually trying to maintain or lower costs can the private label company maintains its profitability. Price-related margin improvements are not an option. As a result of retailers' rising use of just-in-time delivery and the elimination of slow-moving items, the amount of inventory in the field is shrinking.

Since most retailers today give the vendor less then a few days lead on orders, the private label manufacturer must have the financial capacity to carry full inventories of such materials as packaging and labeling and finished product.