Retail Brand Alternatives, National Brands, Manufacturer’s Brands, Licensed Brands, Private-Label Brands, store brands, house brands, own brands, Premium Private-Label Brands, Copycat Brands, Exclusive Brands, Generic Brands, National Brands or Private Brands?, Advantages of Private Labels, Drawbacks of Private Labels

1. Dr. Parveen Kaur Nagpal
Retail Brand Alternatives

2. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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. Dr. Parveen Kaur Nagpal
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

21. Dr. Parveen Kaur Nagpal
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