You’ve probably seen the terms “ODM” and “OEM” before. And chances are, wherever you’re sitting right now, you’re within arm’s reach of several ODM and OEM products. Understanding these terms and the difference between them is an important step in setting yourself up to be an importing entrepreneur.
ODM, or original design manufacturing, is also also referred to as “private labeling.” This is where an importer selects an already-existing product design from a factory catalog, makes a few small changes and sells it under their own brand name. Changes can include things like packaging or product bundles, colors and branding, and some limited adjustments to components or functionality.
OEM stands for Original Equipment Manufacturing, and refers to products that are fully designed by one company and then licensed out to a manufacturer to produce. The Apple iPhone, for example, was invented and designed by Apple, and then licensed out to Foxconn to produce. As a result, the iPhone enjoys a higher level of product differentiation because its design is only available to Apple and its licensed manufacturer.
Many other brand name electronics and appliances are OEM. Custom designed clothing, as opposed to a generic garment with a custom logo, is another example of OEM.
The main advantage of OEM is that the designer retains total creative control over the design. Whereas ODM products are restricted to a predetermined design, OEM products can be made according to any specifications. The only limitation is the designer’s imagination (as well as budget).
The disadvantage of OEM manufacturing is that it is much more resource intensive. OEM designers often invest millions of dollars into research and development over several years in order to create unique products. Because of this, OEM designers have to guard their designs as intellectual property, lest it be copied and sold by another company for a lower price.
For readers who have or are looking to start their own FBA (Fulfillment By Amazon) business, ODM is by far the more common path. Most of us don’t have R&D departments working around the clock for us. And, if you do have a winning OEM idea, private label selling is a great way to generate the start-up capital and experience you’ll need to get it off the ground. If you’re interested in getting started, or in improving the business you’re already doing, give Guided Imports a try. Nobody makes private label sourcing and manufacturing easier!