Private label market core solutions 2013

Retail Private Label
State of the Market, 2013
Core Solutions Ltd.
July, 2013

1. What is Private Label……………….…..…3
2. Why Private Label…………….……..….….4
3. Private Label Trends.….….………….....10
4. Private Label Sourcing ………..…...…..13
5. Private Label Collaboration…….…...…18
6. Private Label Strategies.……..………...20
7. How can Core Solutions help……...….25
TABLE OF CONTENTS:

Private label brands - also known as store brands, home
brands, own label, own brands and retailer brands – are
products made by a contract manufacturer and typically
sold under a brand name of a retailer.
The current economic climate has put pressure on
consumers to seek better value and in turn on retailers
to provide quality, on-trend products at low prices. This
has presented an opportunity for retailers to expand
their private label programs, to offer greater variety,
quality and value.
CHAPTER 1:
What is private label?
// Page 3 Retail Private Label – State of the Market, 2013

Private label products offer significant benefits for the
consumer as well as for retailers and their suppliers. These
range from cost savings, margin improvements, greater
product variety and shorter lead times for on-trend products.
CHAPTER 2:
Why private label?

44.7% of
retailers
identified
differentiation
as the most
important role
of their store
brand program.
What makes private label
an attractive proposition?
 Offers control over the
product: image, pricing,
production, distribution
 Builds own brand loyalty
and differentiation
 Customers indicate a
preference for certain
private label products
 Private label is much more
profitable
 It allows retailers to
undercut brands by around
20%
 Consumers get to save
around 30% of their usual
shopping costs
 Eliminates the need for an
agent or middleman
Source: Private Label Store Brands
Research, 2013
// Page 5
Retailers rely on private label for
differentiation
Retail Private Label – State of the Market, 2013

Private label is an attractive proposition for retailers on many
levels. Aside from greater profits, it helps differentiate their
products and respond faster to consumer trends.
// Page 6
Private label drivers
What’s
Driving
Private
Label?
Price
Advantage
over
branded
products Differentiate
from branded
products
Opportunity
for higher
profits
Developing
Brand loyalty
Consumer
savings of 30%
Faster time
to market
Ability to
respond
faster to
trends
Greater
control over
the product

A recent British consumer research study found that consumers
believe that private label products are the same as national brands
but in different packaging. Consumers believe that advertising
costs are the only differentiator.
Shoppers now believe
they can actually get
their preferred brands
for a cheaper price
because it is presented
in a supermarket style
branded packaging.”
// Page 7
What do consumers think?
Source: Emmar Herbert, Canadean
Research, March 2013

Private label is increasingly popular with consumers, who are
attracted primarily by the value:
 When consumers buy private label, they save around
30% of the cost of their products
 U.S. consumers saved approximately $32 billion in 2012
by choosing private label.
 Most consumers feel the quality of private label products
is almost as good as branded merchandise.
// Page 8
Why consumers like private label?
26% of shoppers think
they will buy a larger
amount of a supermarket’s
private label product in the
coming year.”
Source: PLMA, Research 2013

Consumers say that there are a few important factors which
will influence their decision to buy private label products in the
year ahead:
// Page 9
What makes consumers buy more
private label?
57%
• Will buy more if satisfied with the
private brand
49%
• Will buy more if the private label
quality is good
46%
• Will buy more private label based
on special offers
43%
• Will buy more based on greater
private label variety
Source: PLMA, Research 2013

Private label still has much room for growth
especially in North America where it is under-
penetrated, also in developing market. Retailers
are focused on delivering more localized private
label offerings as well as extending their range of
products beyond basics into premium and luxury
goods, both food and non-food. Private label
products are no longer just a low cost option,
they offer a distinctive mix of variety and value.
CHAPTER 3:
Private label trends

Private label growth continues strongly in Europe, where in
some countries it accounts for the majority of all products
sold. Penetration in North America still lags Europe, but is
growing. In developing economies such as China and Brazil,
private label only represents a small margin of total products.
// Page 11
53
51
45 44
42 41
36
29
25
19 18 17 16
13
10
7 6
3
0
10
20
30
40
50
60
Global penetration of private Label
Source: Nielsen, PLMA, IRI
Private Label Share of Total Retail Sales by Country (2013)

Retailers in the U.S. continue to expand their private label
product offerings to boost margins. Of the top 30, 62% saw
an increase in the percentage of private label product sold.
// Page 12
Top 30 U.S. Private Label Retailers
Source: Retail Systems Research, PLByer, October 2012
U.S. Retail Private Label Sales (US $ millions)
Company Name 2011 Rank 2011 % PL Sales 2011 $ PL Sales
Wal-Mart 1 18.0% $31,385
Kroger 2 27.0% $24,401
Costco 3 24.0% $11,244
Safeway 4 25.0% $10,158
Loblaw 5 27.0% $8,360
Trader Joe’s 6 85.0% $7,650
Aldi 7 95.0% $6,935
Target 8 20.0% $6,025
Supervalu 9 20.8% $6,000
Publix 10 21.0% $5,663
WMT-Sam’s Club 11 18.0% $5,326
Walgreens 12 20.0% $5,096
Delhaize 13 26.0% $5,000
Sobey’s 14 27.0% $4,387
Ahold 15 17% $4,143
CVS 16 18.0% $3,401
H.E. Butt 17 16.7% $3,000
Giant Eagle 18 30% $2,790
Metro 19 21% $2,419
Dollar General 20 22% $2,383
Meijer 21 25% $2,356
Hy-Vee 22 28% $2,044
A&P 23 20% $1,688
Winn Dixie 24 23% $1,583
Wegman’s 25 25% $1,550
Rite-Aid 26 18.3% $1,525
Whole Foods 27 11% $1,112
Shoppers Drug Mart 28 20% $1,092
Wakefern 29 31.6% $1,010
Family Dollar 30 17% $959

Private label sourcing is going through a
shift in the face of emerging retail
trends, more competition and increasing
costs. Facing these pressures, private
label has evolved from a low cost
alternative, into the role of product
differentiator, offering greater quality and
value.
As such, more sophisticated sourcing
expertise is required to select the right
sourcing markets and handle more
complex requirements. Retailers also
need to work closely with their suppliers
to collaborate on ways to offset the
increase in wage rates and volatility in
currency rates and commodity prices.
CHAPTER 4:
Private Label Sourcing

With the growth of mobile, online commerce and the
omnichannel market, global retail is going through a period of
massive change. This is forcing retailers to leverage their
private label supply chains to drive differentiation, grow market
share and increase margins. This is not easy with commodity
cost fluctuations and wages increase. Consequently retailers are
looking at how to optimize their private label sourcing.
Sourcing can help open up
new supply markets, serve
international retail markets
with varying tastes and
manage raw material cost
volatility.”
// Page 14
Sourcing can enable the
development of more
sophisticated and unique
private label offerings to
combat online competition.”
Source: Private Label Sourcing: Strategies to
differentiate and defend, Deloitte: July, 2013
Sourcing: A private label supply
chain lever

Retailers in categories
including apparel, general
merchandise and hard
goods are facing a lot of
pressure from volatile cost
structures in their supply
chain. Top pressures
include variability in
commodity costs and
wages.
Along with transportation
these costs comprise 80-
84% of landed cost.
// Page 15
4.8
4.8
4.9
4.9
4.9
4.9
5.0
5.0
5.0
5.2
5.2
5.3
4.4 4.6 4.8 5.0 5.2 5.4
Supply disruptions
International product
customization
Need to customize product
specs for multichannel market
Consumer sustainability
demands
Transfer pricing policy changes
Regional tax policy variability
Availability of production
facilities
Supply chain integrity and
transparency
Fee trade policy changes
Rising production labor wages
Fuel price volatility
Raw material cost volatility
Top market pressures on private
label sourcing
differentiate and defend, Deloitte: July, 2013
Top pressures on private label sourcing

According to Deloitte, raw materials, production wages and
transportation costs make up 80-84% of landed cost paid. This
means that retailers must source more strategically. This climate
provides an advantage for private label producers who can
leverage a more streamlined supply chain to reduce costs.
// Page 16
Private label sourcing trends
Product sourcing cost structures
(% of landed duty paid)
Source: Deloitte, July 2013

Retailers are currently actively responding to private label
cost pressures across their value chain and their sourcing
footprint. They are also increasingly looking at more
strategic response such as diversifying their sourcing
countries, re-shoring to domestic vendors and consolidating
existing vendors.
// Page 17
Strategic responses to private label
sourcing trends
differentiate and defend, July, 2013
35
33
28
27
25
23
22
22
21
21
20
20
19
17
43
38
51
58
63
69
49
59
70
64
71
66
56
65
Diversify country source ofsupply footprint
Re-shore production todomestic vendors
Consolidate the number of vendors
Align metrics and systems to fostersupply…
Implement vendor performance…
Enhance ethical sourcing capabilities
Negotiate raw material sourcingon behalf…
Disintermediate supply chainmanagement…
Engage in advancedplanning/scheduling
Guarantee volumes or…
Enhance quality assurance programs
Engage in innovation/product design/R&D…
Collaborate with buying houses/supply…
Provide logistics support to vendors
Strategic responses to private label sourcing pressures
= Do not use
strategy, but plan to
= Currently use this
response

Suppliers who focus on branded products need to
manage the different requirements of multiple retailers.
They likely have different lead times, minimum order
quantities, delivery cut-off times and packaging
requirements. This makes it difficult for suppliers to
optimize their operations.
Life is more simple for private label suppliers. They
usually have exclusive relationships with retailers and are
better able to serve their need. Collaboration is easier
which allows for reduced costs, increased efficiency and
better decision making.
CHAPTER 5:
Private Label Collaboration

Why private label enables
improved collaboration?
 Alignment of orders is simple
due to greater visibility
 Improved forecasting, order
and replenishment
 Optimized production
schedules, batch sizes and
lower inventory
 Greater visibility into
demand,
 Open-costing is easier to
enable
As retailer cost pressures intensify, collaboration with
suppliers will play an increasingly greater role.
Retailers will look to suppliers for greater input on
design and require open costing. Suppliers will expect
more visibility into planning and forecasting. Both
sides will expect to support each other to mitigate
currency and commodity cost fluctuations and ensure
quality and compliance. At the same time, retailers will
look consolidate their supplier base.
// Page 19
Private label enabled
supplier collaboration
typically results in a
2% reduction in end-
to-end supply chain
costs.
Private label collaborative benefits

To ensure the ongoing successful of their private label
programs, retailers need to focus on new strategies,
processes and tools. Successful players are developing
unique products for individual markets, at they same time
leverage their commodity buying and sourcing scale across
markets. They are also consolidate suppliers and extended
the scope of tools such as product lifecycle management
(PLM) which help optimize their supply chain.
CHAPTER 6:
Private label strategies

Retailers are shifting toward creating more unique products
for individual markets. They will also increasingly leverage
common components and raw materials across these
markets. Other strategic changes to improve their private
label product development include consolidating suppliers
and in some cases looking for suppliers closer to home.
Ongoing retail private label
process improvement
// Page 21
Retailer plans for product development process
improvements over the next five years
Source: Accenture, 2011
82%
64%
45%
36%
36%
Unique products developed for
individual retail markets
Common products developed for
multiple retail markets or regions
Common suppliers leverage across
multiple retail markets
Common components leverage
across multiple retail markets
Common raw materials leveraged
across multiple markets

Retailers recognize the need to leverage more advanced
tools to enhance their private label programs. Many still
rely on desktop tools such as spreadsheets and other
manual processes which limit the ability to scale and
improve efficiency. Most retailers expect to adopt more
advance tools in the next five years.
Tools to enhance private label
capabilities
// Page 22
Percentage of retailers who plan to use specified
tools to support their private label programs
Source: Accenture, 2011
83%
75%
75%
75%
67%
67%
Product Lifecycle Management (PLM)
tools
Sourcing applications
Import management tools
Collaboration tools
Product costing tools
PO and SKU visibility tools

PLM enables retailers to manage complex
processes involved in product development
 Line Planning – PLM helps manage various product
options, developed internally or externally, employing
tools such as critical path management, to ensure on-
time delivery
 Specification Development – PLM helps to manage the
entire product specification for a range of product
types
 Supplier Management – PLM manages supplier
information ranging from profiles, audits,
performance, capabilities and compliance related
information
 Sourcing and Costing – Retailers can issues RFQ’s
through a PLM system, compare quotes and calculate
landed costs
 Product Commitment – The PLM system centrally
manages all information in the commitment process
and can effectively track work-in-progress (WIP)
// Page 23
PLM systems support private
label product development

What makes a private label program successful? The
following are three key attributes of a successful private label
program:
 Visibility – a single version of the truth
 Intelligence – ability to aggregate data for decision
making
 Collaboration – communication on a high level, with
central archiving of information and social-media like
capabilities
// Page 24
Three elements for a successful
private label program

Core solutions provides systems and processes which
help retailers and brands scale and optimize their direct
sourcing and private label programs. Core’s CBX
extended supply chain management platform automates
manual processes and builds visibility and collaboration
across the retailer’s supply chain.
CHAPTER 7:
How can Core Solutions help?

We helps retailers
drive speed, agility,
efficiency and profit
in bringing private
label and branded
merchandise to
market on-time and
on-trend.
// Page 26
Plan
Develop
Source
OrderMake
Deliver
Pay
CBX
Extended Supply Chain
Management
CBX enables Retailers, Brands, and Manufacturers to
streamline their end-to-end product development, global
sourcing and supply chain processes, from concept
through to production and delivery.
CORE’s clients include large multi-national, multi-brand
retailers, including: Safeway, LiDL, ICA, Redcats, Migros,
Dairy Farm, Home Retail Group and Wesfarmers.
A platform to efficiently
manage private label sourcing

This leading retailer increased their direct sourcing from
approximately $250 mln in 2009, to a projected $1.2 bln for
2013. This represents on ongoing shift from branded to private
label product, which are expected to comprise over 60% of the
retailer’s product offering in the next few years.
CBX helped us to scale
our direct sourcing
without a corresponding.
increase in headcount
and costs.”
// Page 27
Case Study: $5 billion retailer
0
200
400
600
800
1,000
1,200
1,400
FY09 FY10 FY11 FY12 (Forecast) FY13 (Forecast)
USD$Millions

If you’re interested in learning how to
grow your private label and direct
sourcing with minimal additional cost or
resources, request a consultation or
demo of Core Solution’s CBX platform.
Fine-tune your retail
private label program
www.coresolutions.com info@coresolutions.com
Americas: 1.908.898.1880 Europe: 44.20.8133.0328 Asia: 852.2378.6300

Private label market core solutions 2013

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (12)

More from CBX Software

More from CBX Software (9)

Recently uploaded

Recently uploaded (20)

Private label market core solutions 2013