Why Retailers Need Their Own Private Labels – The Studio (2024)

FAQs

Why Retailers Need Their Own Private Labels – The Studio? ›

With a private label, you not only have more control over your branding – you also have more control over supply chains. Owned brands give retailers the opportunity to either bring design, sourcing, manufacturing, and distribution in-house, or at least have the final say on who fulfills those roles.

Retailers often use private-labeling to offer exclusive items, expand their catalogs, and undercut competitor pricing. Private-label products can be similar to items that already exist on store shelves, but the exact manufacturing formula of the product must be original.

Why do retailers sell private label products in the first place? Retailers have three primary incentives to create and sell their own consumer packaged goods: Higher profit margins (no middleman) Greater promotional and inventory control over the product (since they own it)

Private label products are also a good deal for retailers. They don't have to split sales with name brands. And they can give house brands the best shelf real estate, because they own the shelf.

Retailers producing their own brand have complete control over design, quality, materials used, and how much to produce. Retailers can set their own prices for their own brand, a distinct advantage when attempting to remain competitive, especially when consumers are particularly cost-conscious.

Private labelling allows you to brand a product that will resonate directly with your target market based on your own research and experience. It is a great way to separate yourself from your competitors.

Private label products are those that a retailer gets produced by a third party but sells under its own brand name. The retailer controls everything about the product or products, including the product's specs and how it's packaged.

Consumer cost savings.

Additionally, private label products are often made by the same manufacturers and with similar ingredients as national brands. And since they're subject to the same quality standards, consumers enjoy high-quality products at lower costs.

“This trend is driven by consumers, particularly those with children, as well as millennial and Gen X households without children, who are strategically employing a variety of methods to stretch their dollars amid high inflation.” Retailers have been rushing to cash in on the growing private-label interest.

Collectively, private labels in the United States command higher unit shares than the strongest national brand in 77 of 250 supermarket product categories. And they are collectively second or third in 100 of those categories.

What is a private label branding strategy? ›

Private label branding is a practice retailers use to have their brand name appear on products a contractor or third-party manufacturer makes. The private label aspect means that even though one company manufactured the product, another company can use its brand name on the label.

The most obvious and commonly cited benefit of purchasing private label is price, but it seems shoppers also believe these products are better. Fifty-one percent of those who plan to buy more store-brand groceries said they would do so because of taste and 47% said because of quality.

Benefits of a robust private-label program

Expanding profit margins. In addition to higher margins for “like-item SKUs,” leaders in private-label products are now creating and offering premium products and services that elevate the category and enjoy premium margins. Increasing growth (volume and sales).

A retailer would have two clear motivations to develop PPLs: (a) PPLs help a retailer differentiate from other retailers who sell identical NBs and commoditized EPLs, and (b) they offer higher margins and, hence, higher profits. Indeed, PPLs are usually priced very closely to NBs.

But low prices aren't the only reason why consumers are increasingly opting for Private Label options. It's largely due to the fact that retailers offering high quality own brand products have helped to minimize the amount of choices consumers have to make during their path to purchase.

Private labels build customer loyalty, enhancing your store's brand and image. The average consumer wants high-quality products at affordable prices. Many consumers are aware of major retailers' brand names.