Private Labels

A common sight in many retail stores in India and abroad is the presence of the retailer’s own brand often sharing shelf space with major national brands. When a retailer decides to sell products or a line of merchandise owned, controlled and sold by the retailer in his stores / chain of stores, he is said to be selling Own label / brand or Private Label merchandise.

The terms ‘own’ brands acknowledge the power of the retailer. Own brands are articulated and developed in a way that they not only fit with the brand promise of the retail store, but if effective, they also give consumer drivers a key point of departure to enhance and celebrate the overall retail brand proposition so as to keep consumers coming back for more.

In this article we look at the concept of the private label, the reasons for their evolution and finally, the process of private label creation.

The concept of the Private Label:

The Private Label Marketing Association defines store brand products as all merchandise sold under a retail store’s private label. That label can be the store’s own name or a name created exclusively by that store. In some cases, a store may belong to a wholesale buying group that owns labels, which are available to the members of the groups. These wholesaler owned labels are referred to as controlled labels.

Thus, a private label can be classified as under:

Store brand:

Which carries the retailer’s name, such as Westside, Food World, Big Bazaar,

An Umbrella Brand:

Where a common brand name is across multiple categories – example Splash (lifestyle), Bare (Pantaloon).

Individual Brands:

Were specific brand names are created for specific market segments and/or categories.

While store brands offer a choice to the end consumer, for the retailer, they are a tool for increasing business and winning customer loyalty. Retailers have realized that while consumers can buy a national brand anywhere; they can only buy their store brand at their store.

A private label is more than a product with the name of the retailer / store — it needs to be seen by the need consumer as a different product. There must be clear perception that it is produced by this store. Private labels or store brands exist in a wide variety of industries, from apparel to food to health and beauty aids.

The need for a private label:

Across the globe, as retailers become more sophisticated and competitive the role of private labels in the stores changes from that of a price fighter to being a value added marketing differentiator. This is indicated by the fact that the volume of private label merchandise has been on the rise in all retail sectors over the past decade. Private label brands are starting to diversity their offering beyond the expected enabling them to compete more effectively in existing product categories and foray into new and different product categories that have traditionally been dominated by national brand players.

The changing consumer tastes and the need to fill a gap in the product offering are the key reasons for retailers to opt for offering a private label. This gap may be due to the non-availability of a particular product / category. The retailer may also seek to create a competitive advantage in his domain by aiming to offer a product that is unique and thus, also build in on customer loyalty. Offering a product or arrange within a product, which gives the customer newer reasons to visit the store every month or week, is something that every retailer would aspire for. Private labels also allow the retailer to build a brand which is associated with the store and therefore with an experience.

The most significant advantage that a private label allows a retailer is that of earning a level of margin which may be higher than what is offered on other brands that he chooses to retail. A private label basically involves the retailer doing the designing, merchandising sourcing and distribution. Thus, his costs are under his control and spread across a limited range of activities. Promotion are mainly done in store and thus, his cost of goods sold is much lower compared to that of national brand.

Finally, the retailer may also vary the offerings of the private label across geographical boundaries on the basis of the variation in consumer preferences or to seek a competitive advantage in a new geographical region.