The Inside Track on Private Labels


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Private labels have been around for centuries (e.g. A&P in the US with its Eight O’Clock Breakfast Coffee, Marks & Spencer in the UK with its St. Michael brand, etc.), and have been exploding since the 1970s. In the US, private labels have outperformed manufactured brands in all but one of the last 15 years. In this report, you will learn what they are, how they have developed and why they are critically important to retail today.

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The Inside Track on Private Labels

  1. 1. in t f The Inside Track on Private Labels Sertus LLC. © 2011
  2. 2. Jay Peirce The Inside Track on Private Labels(305) 215-3414 March 2011jay@sertusllc.comWhat is a Private LabelSimply put, private label is the practice whereby and more and more retailers are jumping into theretailers sell products in their stores under their own private label arena with the hope of boosting grossbranded label in order to increase profitability and margins. Yet there are a number of challenges thatenhance customer loyalty. many retailers have not had to confront and that must be well managed if they are to be successful.A Brief History Building Brand LoyaltyPrivate labels have been around for centuries (e.g. A&Pin the US with its Eight O’Clock Breakfast Coffee, Time is a limiting resource. We never have enough ofMarks & Spencer in the UK with its St. Michael brand, it, and the consumer experience is increasinglyetc.), yet they have historically maintained a very small becoming one that is highly time sensitive. Therefore,share of the overall market. In the twentieth century, consumers are even more reliant on brands to help themmanufacturers dominated their retail customers. make the purchasing decision quickly. Brands mustConsumers purchased manufacturer-endorsed brands communicate if they are to be effective and retailersthat symbolized trust, quality, aspiration, affluence, and must build their brands over time so it becomes highlylifestyle. However, in the 1970s, as the industry recognizable and synonymous with quality, value andexperienced a consolidation and mom-and-pop trend-right fashion. Many retailers have tried buyingchannels gave way to global players, the balance of their private labels from large manufacturers that arepower began to shift in favor of retail over brand selling competing national brands and the experience ismanufacturers. In the US, private labels have not always a positive one because the priority for mostoutperformed manufactured brands in all but one of the manufacturers is to support and build their brandlast 15 years. They represent over 20% of sales at the equity, which can be at odds with the goals andlargest retailers in the world and the growth rate is objectives of the private label. Therefore, it is criticalexpected to continue over the next decade in the range that retailers select independent, professional specialistsof 50% (which is what it approached during the decade that have experience in managing private labelended 2010). As a result of the success of private label programs in the products sought.around the world, global private label sales nowapproach USD1 trillion. The Importance of AssortmentsWhy Private Label is Increasing % While the private label wave is pushing retail toFloor Space increase floor space dedicated to their own store brands, it is still important to offer the consumer relevantA majority of the growth seen in private label has been choices. Striking the right balance of private label anddue to retail’s incentive to promote its own store manufactured brands is of paramount importance and isbrands. Even when there are exclusivity agreements in part of any good merchandise planning process. Theplace with manufacturers, any efforts to promote private label products selected must compliment andmanufacturer brands in its stores creates a free rider not compete with the branded products in theirproblem – manufacturers may be tempted, because of assortments in order to offer a comprehensive andthe retailer’s success in creating a following, to end relevant selection for the consumer.exclusivity and offer the product elsewhere. Bycontrast, if the retailer is able to create a following in itsprivate label, consumers must return to its stores to Ask an Expertpurchase it. In addition, retailers have figured out thatproducts designed and/or sourced by their own teams For retailers that do not have the in-house expertise forhave higher profit margins than do manufactured developing and rolling out a private label, the firstbrands. The potential profitability is highly appealing decision is to find the right company that can help.
  3. 3. Jay Peirce The Inside Track on Private Labels(305) 215-3414 March 2011jay@sertusllc.comRetailers must consider the complexities ofdevelopment and need to coordinate the planning,positioning, selection, sourcing, and quality controlprocesses required to launch an effective private labelprogram. Building brand loyalty is not an easy venture.It requires a consistent offer of quality, trend-rightproducts at competitive prices and the assortments mustbe relevant and correctly positioned to compliment thenational brands. Sertus has helped numerous clientsfrom large retailers like Walmart to wholesaledistributors in many countries launch and manageprofitable private labels. We can also help you achievegreater profitability, shorten cycle times, and strengthencustomer allegiance.For more information, please or visit