Advantages of Private Label

(1)       Edge over the competition : The current competitive environment is such that the major brands are driven by the availability mantra, which makes sure that their products are available across all kinds of retail formats and retail outlets. The product mix carried by different retailers is more or less similar. In such an environment, private label products are available only with the retailer. They also provide the retailer with an opportunity to present a unique offering to a customer.

            (2)     The Supplier Angle : Introduction of an own brand of products helps the retailer to have means with which he can compete head on with the manufacturer’s product. An established private label brand provides the retailers a platform to negotiate with the suppliers and thus the retailer is apparently self-sufficient in a certain category.

(3)     The Customer Advantage : Private label brands are also a strategic tool to attract and retain customers Since private label products are available only in the retailer stores, it draws customer back and builds customer loyalty. American retailers have extensively used private label brands to differentiate their in-store product mix, as well as the catalogue offering. The contribution of a private label in catalogues has changed from 30% to over 70% for apparel and home retailers over the last two decades, the prime reason being to attract the customer through a differentiated product offering. Once the customer is hooked to the private label brand, he will certainly come back to the store.

(4)     High Profit Margin : Private label provides accruing higher gross margins. Increasing the sales volume and decreasing purchasing costs and enhance the margins. Retailers can increase the sales volume of private label products by positioning a private label as one which provides a higher perceived value. The costs can be contained by the limited promotional and advertising spends vis-a-vis the manufacturer brands. These benefits can then be partially passed on the consumer, thus balancing the perceived value equation of the private label brand.

(5)     The Marketing Mindset : The first and foremost requirement is a new mindset of the retailer. Besides, trading and selling, he has also to be a marketer. The retailer needs to identify customer niches and select categories, which are conductive to private label brands. He then needs to develop not just a product, but also a brand.

(6)     Threshold Volumes : The retailer needs to cross the “minimum order” hurdles to cover the fixed costs of a private label launch. This can be achieved only when the retailer has the infrastructure in terms of presence and can achieve the identified volumes. Though not entirely impossible for a retailer with a single outlet, it is difficult to launch a private label when the volumes are limited.

(7)     Consumer in the key : The management of a private label requires a customer-centric approach to the whole process from product development to sales. Only a complete insight into the current customers profile their need gaps, should drive the retailer in developing the private label.