The document discusses retail brand alternatives that include national brands, licensed brands, and private label brands. National brands are designed and marketed by vendors to multiple retailers. Licensed brands involve licensing images or designs to other parties. Private label brands are developed exclusively by retailers. The document analyzes factors for retailers to consider such as building customer loyalty and flexibility when deciding between national and private brands.

1. Retail Brand Alternatives
Dr. Parveen Nagpal

2. Retail Brand Alternatives
• Merchandise management process identifies the process that buyers
go through to determine what and how much merchandise to buy.
• After creating an assortment plan for the category, forecasting sales,
and developing a plan outlining the flow of merchandise (how much
merchandise needs to be ordered and when it needs to be delivered),
the next step in the merchandise management process is to acquire
the merchandise.
• The process for acquiring merchandise differs for well-known national
brands and private-label brands that are available exclusively from the
retailer.
• Thus, the first strategic decision that needs to be made is to determine
the type of brands to buy for the category.

3. Retail Brand Alternatives
• When buying merchandise, buyers meet with vendors at wholesale
markets or in their offices and negotiate many issues such as prices,
delivery dates, payment terms, and financial support for advertising
and markdowns.
• The buying process for private-label merchandise is often more
complex.
• Some retailers have their own design and sourcing departments that
work with buyers to specify the merchandise designs and then
negotiate with manufacturers to produce the merchandise.
• Although buyers meet and negotiate with national-brand vendors and
private-label manufacturers each season concerning new merchandise,
there is a trend toward developing long-term strategic relationships
with key suppliers.

4. Retail Brand Alternatives
1. National Brands (also known as Manufacturer’s Brands)
• Products designed, produced, and marketed by a vendor and sold to
many different retailers.
• The vendor is responsible for developing the merchandise, producing it
with consistent quality, and undertaking a marketing program to
establish an appealing brand image.
• In some cases, vendors use an umbrella or family brand associated
with their company and a sub-brand associated with the product, such
as Kellogg’s (family brand), Frosted Flakes (sub-brand).
• In other cases, vendors use individual brand names for different
product categories and do not associate the brands with their
companies. For example, most consumers probably don’t know that
Procter & Gamble makes Pringles potato chips.

5. Retail Brand Alternatives
• Some retailers organize their buying activities around national-brand
vendors that cut across merchandise categories.
• For instance, buyers in department stores may be responsible for all
cosmetic brands offered by L’oreal rather than for a product category
such as skin care or eye makeup.
• Managing merchandise by vendor, rather than by category, gives
retailers more clout when dealing with vendors.
• However there may be some inefficiencies associated with managing
merchandise at the brand or vendor level rather than the category
level.

6. Retail Brand Alternatives
2. Licensed Brands
• Licensing is an arrangement whereby the owner(licensor) of a particular
image or design sells the right to use the image or design to another party.
• The licensee may be
A retailer who contracts with a manufacturer to produce the licensed
product
A third party who contracts to have the merchandise produced and then
sells it to the retailer – E.g. jackets manufactured by Company A with
Company B’s label on them.

7. Retail Brand Alternatives
• Character Licensing: cartoon/movie/fictional characters E.g. Disney, Barbie
• Corporate Licensing: brand names and trademarks of corporations E.g. IBM,
Coca-Cola
• Designer name licensing: used by designers.
• Celebrity name licensing: celebrities license their names to various products
E.g. Shahrukh Khan, Sachin Tendulkar

8. Retail Brand Alternatives
3. Private-Label Brands (also called store brands, house brands, or
own brands)
• Products developed by retailers.
• Most of the time, retailers develop the design and specifications for
their private-label products and then contract with manufacturers to
produce those products.
• Sometimes, national-brand vendors work with a retailer to develop a
special version of its standard merchandise offering to be sold
exclusively by the retailer. In such cases, the national-brand vendor or
manufacturer is responsible for the design and specification as well as
the production of the merchandise.

9. Retail Brand Alternatives
• In recent years, as the size of retail firms has increased, more retailers
have the scale economies to develop private-label merchandise and
use this merchandise to establish a distinctive identity.
• Buyers at these retailers look for holes in their assortment—individual
SKUs or whole categories that they believe their suppliers are not
fulfilling or that they believe they can make and market better.
• In addition, manufacturers and national-brand suppliers are more
willing to accommodate the needs of retailers and develop exclusive
private labels for them.

10. Categories of Private Brands
1. Premium Private-Label Brands
• These brands offer the consumer a private label that is comparable to a
manufacturer’s brand quality, sometimes with modest price savings.
• Some private labels compete for price and some compete on quality.
• Example, Kellogg has two scoops of raisins in its cereal, but President’s
Choice cereal has four and is cheaper. The Decadent chocolate-chip
cookie under the President’s Choice label has 39 percent chocolate
chips by weight, compared with 19 percent in Chips Ahoy. In addition,
it uses real butter instead of hydrogenated coconut oil and quality
chocolate instead of artificial chips. The resulting product is Canada’s
market leader in chocolate-chip cookies.

11. Categories of Private Brands
2. Copycat Brands
• Copycat brands imitate the manufacturer’s brand in appearance and
packaging, generally are perceived as lower-quality, and are offered at
lower prices.
• These brands abound in drugstores and grocery stores.
• Many retailers monitor the introduction of new national brands and
then modify them to meet the needs of their target customers.

12. Categories of Private Brands
3. Exclusive Brands
• An exclusive brand is a brand that is developed by a national-brand
vendor, often in conjunction with a retailer, and is sold exclusively by
the retailer.
• The simplest form of an exclusive brand occurs when a national-brand
manufacturer assigns different model numbers and has different
exterior features for the same basic product sold by different retailers
but it is still marketed under the manufacturer’s brand.

13. Categories of Private Brands
4. Generic Brands
• These brands target a price-sensitive segment by offering a no-frills
product at a discount price.
• Such products are used typically for commodities like milk or eggs in
grocery stores
• However, the sales of generics have been declining. These products are
labeled with the name of the commodity and thus actually have no
brand name distinguishing them.

14. National Brands or Private Brands?
• Buying from vendors of national brands can help retailers build their
image and traffic flow and reduce their selling/promotional expenses.
• Many customers have developed loyalty to specific national brands.
They patronize retailers selling the national-brand merchandise and ask
for it by name. This loyalty toward the brand develops because
customers know what to expect from the products, like them, and trust
them.
• If a retailer does not offer the national brands, customers might decide
to patronize a retailer that does.
• National-brand vendors devote considerable resources to creating
images of their brands that build customer loyalty. As a result, retailers
need to spend relatively less money selling and promoting national
brands.

15. National Brands or Private Brands?
• Because vendors of national brands assume the expenses of designing,
manufacturing, distributing, and promoting the brand, retailers realize
a lower gross margin percentage for them compared with the
percentages for their private label brands.
• Also, because national brands are sold by other retailers, competition
can be intense.
• Customers compare prices for these brands across stores, which means
retailers often have to offer significant discounts on some national
brands to attract customers to their stores, further reducing their gross
margins.
• Large retailers, however, can push some of the financial risk of buying
the merchandise back onto the national-brand vendor.

16. National Brands or Private Brands?
• Stocking national brands can increase or decrease store loyalty.
• If the national brand is available through a limited number of retail
outlets, customers loyal to the brand will also become loyal to the
limited number of stores selling the brand.
• If, however, manufacturer brands are readily available from many
retailers in a market, store loyalty may decrease because the retailer
can’t differentiate itself from its competition.
• Another problem with manufacturer’s brands is that they can limit a
retailer’s flexibility.
• Vendors of strong brands like Jockey, can dictate how their products
are displayed, advertised, and priced.

17. National Brands or Private Brands?
• Exclusive models and brands make it difficult for consumers to
compare prices for virtually the same item sold by different retailers.
• Since the retailers are less likely to compete on price when selling
exclusive brands, their margin percentage for the products is higher,
and they are motivated to devote more resources toward selling the
exclusive brands than they would for similar national brands.
• The exclusivity of strong private labels boosts store loyalty.
• Well-known and highly desirable private labels and exclusive brands
can enhance the retailer’s image and draw customers to the store.

18. Advantages of Private Brands
• Third party manufacturers proceed work, based on the direction
provided by the retailers. This allows them to have complete control.
The retailer can choose the right kind of design and packaging for the
product.
• Since retailers have complete control over the product, they can
determine the cost and the right profitable price for the product.
• If there is a demand for a new product in the market, private label
brands can immediately commence production or adapt themselves to
rising market demands for new features.
• Private labels can enhance customer loyalty of the store.

19. Drawbacks of Private Brands
• Retailers make significant investments to design merchandise, manage
global manufacturers, create customer awareness, and develop a
favorable image for their private-label and exclusive brands.
• “Minimum orders” is one of the basic requirements to produce
customized products. Most of the times, this minimum order is a large
quantity.
• If the private-label or exclusive merchandise does not sell, retailers may
not be able to negotiate to either return the merchandise or receive
compensation from the manufacturer.
• Sometimes retailers may make a wrong choice of products by ordering
private label line of products before even knowing whether their
customers will like it or not.

20. References
1. Michael Levy & Barton A Weitz, “Retailing Management”, 8th Edition, Tata
Mc Graw Hill.
2. Swapna Pradhan, “Retailing Management – Text and Cases”, 5th Edition,
Tata Mc Graw Hill.
3. Nagpal, Sharma “Retail Management”, TYBMS, Sheth Publishers