What are the advantages of Private Label Branding?

The definition of private label branding has evolved significantly over time. Some would argue the term “private label” is a misnomer of great proportions. There is no question that the words “private label” acknowledges the birth, history and existence of generic and store brands. Yet, the term does not adequately capture the extent to which private label has progressed. Today’s retail marketers are managing their proprietary brands with the same combination of care and innovation as manufacturers of national brands. In recent years, retailers have been liberating themselves from the traditional definition of private label marketing as being the poor relative of national brand consumer goods, and, in doing so, opening up huge opportunities for private label branding. These opportunities require the adoption of a different set of marketing and branding practices to support and propel the retailer’s business and marketing ideals for its private label brands.

The key to successful marketing management for today’s retailers is to understand the contribution and role of their proprietary or “own” brands in the long-term business strategy and marketing mix of the retail store and consider both the supply side and the demand side of the equation. Effective category management can enable retailers to solidify and optimize supply-chain relationships. Strategic brand management goes hand in hand with these endeavors to establish sustainable points of difference in each aisle and segment within the store. It also spurs decisions about how to appropriately define the retailer’s “own” brand portfolio in order to galvanize consumers to connect and reconnect with its franchise in a compelling manner.

Advantages of Private Label Branding

According to a 2008 report by the global business advisory firm AlixPartners, from 1997 to 2005, the sales of private label brands grew at twice the rate of national brands. Private label products are on average about 30 percent lower in price than national brands, according to Packaging Digest. Store label merchandise, however, is slowly moving away from being considered solely as a cost savings to consumers over national brands. Once viewed as second-class alternatives, they are now bridging this gap by delivering quality comparable with national brands.

1. Control

Private labels offer retailers control over product factors such as pricing, size, package design, production and distribution. Retailers can build up and implement innovative ideas to gain market share over national brands. This includes the ability to make nippy adjustments to products based on customer’s changing preferences. “The food industry is seeing a heated battle for market share,” says David Garfield, Managing Director and head of AlixPartners’ Consumer Product Practice. According to an AlixPartners 2011 report, this battle will continue as consumers choose value over brand loyalty.

2. Branding

Successful private label brands will be able to create better sales opportunities for retailers. The customisation of store brand labels, such as to logos and tag lines, can personalize a customer’s shopping experience that can lead to higher customer loyalty.

Example: Supervalu’s Wild Harvest organic food line offers its customers healthy food options at low prices with sophisticated package design that rivals that of more exclusive national brands.

3. Structural

Unlike national brand labels, retailers with store labels can mould the shopper’s in-store experience. This might translate into marketing advantages gained from in-store placement of private label products and signage.

Example: Retailers can use horizontal shelf displays techniques, such as brand blocking, and end-cap display fixtures to make private labels stand out from national labels.

4. Value

While value is not the only reason consumers consider when choosing private label brands, it still remains an important one. “The need for affordable packaged goods solutions is high, and private label products are going a long way toward answering that need,” Thom Blischok, Consulting and Innovation president at Information Resources Inc., told Packaging Digest. The most significant advantage of store brand labels during economic downturns is that price gains importance as consumers increasingly turn to money-saving strategies like increasing private label brands to manage budgets.

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