Private Label Products: Trend For The Best?
By Charles Hopkins
Published 04/20/2006 | Business and Finance
Lately, private label products have made a tremendous impact on the U.S. market, affecting almost everyone, from producers to retailers to consumers. Private label products are products whose name or brand solely belongs to a specific retailer (e.g. Wal-Mart and Marks & Spencer). Let us say that you are in a grocery store. At first, you see all those gourmet sandwiches with brands that have long been familiar to you. Then you go to Marks & Spencer and lo and behold, now they are selling the same type of sandwiches too!
Private label products have grown significantly in Europe, especially in the Western half, and now it is making its mark in the United States. Private labels can be divided into sub groups: store brands are products where the retailer's name is a strong factor in its packaging and marketing aspects; store sub-brands are products whose connection to the retailer is minimal; umbrella branding is a strategy where a retailer uses only one private label for different product categories and finally there are individual brands in which one private label is accorded to one product type.
The advantages are of course numerous, to all key persons involved. For the retailer, one of the most obvious pros would be the increase in sales. In addition, since it is his or her own private label, the retailer then has the freedom to create its own marketing strategy, have more control over its stock inventory and possibly use it to gain a more positive image to the public. And with a positive image, this would of course lead to stronger customer loyalty. Naturally, having a private label for one's product would mean investing a lot of money so the retailer must be sure that it has the capital needed for such a venture. Secondly, most people still view private label products as something synonymous to lower quality products so this is another issue that the retailer must try to combat as they launch their new line.
For producers and suppliers, the advantages of producing private label products for a retail company is less visible but still present, nonetheless, For one, they get rid of most of the entry barriers of producer usually faces as they try entering a market because they're supplying directly to the retailer itself. Secondly, for cash-strapped suppliers, manufacturing private label products will let them enter the bigger and higher end markets. The downside of all these of course is when a product does not perform as expected. Low profit could then affect the relationship between the supplier and retailer.
For the consumer, the advantages and disadvantages are almost equal. Most private label products are cheaper than branded products. This would translate to lower expenses for consumers, something that not everyone would doubt welcome. However, if the quality of the products is sub-standard, as some private label products are, maybe you are not getting the best of the deal as you have originally thought.
At the end, everything comes down to quality. Since price-wise, private label products have the upper hand, the only ace branded products have in their sleeves would be a more superior quality. However, if a reliable retailing company backs a private label product, the quality is usually equal to those that are branded. All one has to do is to CHOOSE WISELY.