Private Label Encroaching the share from Bigger manufacturer's brands

_____________Private label_________

Private label products or services are typically those manufactured or provided by one company for offer under another company's brand. Private label goods and services are available in a wide range of industries from food to cosmetics to web hosting. They are often positioned as lower cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands.

Types of private labels:

§  Store brands - The retailer's name is very evident on the packaging.

§  Store sub-brands - Products where the retailer's name is low-key on the packaging.

§  Umbrella branding - A generic brand, independent from the name of the retailer.

§  Individual brands - A name used in one category, this is only used to promote a "real" discount product line.

§  Exclusive brands - Again a name used in one category, but to promote "added value" products within the category

§  Distributor brands - Large wholesale grocers and foodservice purveyors often have private labels, for example the Parade brand of Federated Foodservice and the wide array of private brands of the large food service supplier Sysco. These brands are typically seen in non-chain independent restaurants and stores that cannot afford their own private labeling.

§  Copycat private labels - brands owned by a retailer which use similar trade dress, i.e. packaging as a leading national brand.

 

Private label strategies which are being followed by various promoters of private labels fall in one of the following category:

v  Generic –very promotional, very low margin, Conway, Walgreen

v  Fast Value Fashion – knock-off brands, Zara and H &M 

v  Premium Store Brands – Retailer’s own brand offers same or better quality at better price.  The most profitable strategy in private label.

  

Retailers believe private brands are their strategy:

v  To differentiate

v  To gain and maintain consumer loyalty

v  To achieve higher gross margin

v  To compete with national brands

v  Change mind set and realize that Private Labels are competing brands

v   Innovate and stay as market leaders to beat PL

v   Stay focused on target audience

v   Increase and market brand imagery to gain and maintain customer loyalty

v   Partner with retailers to produce exclusive brands, SKUS, one-time offers or lines

v   Price competitively and streamline expenses

 

PRIVATE LABEL PROS & CONS:

PROS

v  Exclusivity & differentiation

v  Bring customer loyalty

v  Better margin

v  Better control in deliveries

v  Brand equity

v  Freedom in pricing strategy

v  Increase bargaining power with both national brands and PL factories

CONS

v  Inventory risk

v  Higher R&D expense

v  Higher marketing expense

v  No markdown or return allowance from branded suppliers

v  If product fails, will create negative image

v  Quality control, complex production & import issues

 

Overview of private label industry

v  Worldwide Private Label retail sales have passed US$1 trillion

v  2006 US apparel & shoes retail sales:  $358.6 Billion

v  2006:  45% apparel sales were private label

v  2005:  39% apparel sales were private label

v  2002:  35% apparel sales were private label 

v  By 2010, private label merchandise expects to increase by 22% to 55% of total apparel sales

Why the growth?

v  Consolidation of retailers

v  Brands sell to same retailers and become a commodity

v  Retailers need differentiation and better margin

v  Declining retail prices (women’s apparel prices dropped 2.4% 2007 vs. ‘06)

v  Globalization of Production

 

How do retailers achieve low PL prices?

v  Imitate designer brands to reduce R&D costs

v   Source direct with factories to eliminate middlemen cost

v   Buy in larger volume to receive lower cost

v   Source from low cost, duty and/or quota free countries:  China, India, Bangladesh, Vietnam, Pakistan, South & Central America, Africa

PRIVATE LABEL TRENDS:

v  Combined effort, a win-win strategy: American Living, Simply Vera, Isaac Mizrahi

v  One time exclusive deal – H & M, Target

v  Blending in with Premium brands - INC, Arizona

v  Marriage with a celebrity name – Sarah Jessica Parker, Hilary Duff

 

NATIONAL BRAND COUNTER STRATEGIES:

v  Develop unique products and stay ahead as a trend leader

v  Create own stores

v  Develop a compelling marketing strategy

v  Increase brand loyalty

v  Combine effort by offering exclusive lines. I.e, Simply Vera, American Living,

Liz & Co

v  Create one shot exclusive deliveries and SKUS

v  Evaluate sourcing strategy and production cost

v  Maintain net price (minimal promotions & discounts)

v  Improve forecasting and turnaround time

 

Future of private labels:

v  Private brands will continue to play an important part of the assortment to their growth strategy

v  Becoming national premium lifestyle brands: INC, Alfani, Arizona

v  Branching out to create specialty chain business: George apparel stores, Wal-Mart, UK

v  Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc)

v  Cannibalize weaker PL brands

v  Deploy a multi-layer strategy in brand, price and quality

Some premium private label brands

v  JC Penney’s – a.n.a., Arizona, Ambrielle

v  Macy’s - INC, Alfani, Style & Co

v  Wal-Mart - Faded Glory, George

v  Target - Mossimo, Circo

v  Kohl’s - Urban Pipeline, Sonoma, Apt 9

v  Zara- Garments brand (Based on copycat strategy)

v  Tesco- Multiple grocery store

v  7-Eleven - convenience

v  Walgreens- Drug-store

v  Home Depot

v  Decathalon – A sports brand

Some Indian PL at Ahmedabad

• v  Jade Blue                            
  
• v  Mochi Ka Juta
  
• v  Food Bazaar
  
• v  Pantaloon
  
• v   Westside
  
• v  Naturals
  
• v  Star foods
  
• v  Reliance fresh
  
• v  Patidar
  
• v  Shree ji
  
• v  Induben Khakhrawala