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Definition Of Private Brand

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Private Brand

Have you visited a store and noticed products branded with the store's name? The chances are that you must have bought a private label product sometime in your life. It could be a simple branded bottle of ketchup or medication from the nearest pharmacy. Private brands or private labelled products produced by these brands exist primarily as they tend to be much more affordable than their counterparts.

Selling products of private labels is one of the most profitable ecommerce business models. Having a look around will help you to figure out that the top ecommerce brands are not dropping their generic junk.

Then what are they doing? They are using private label products as the cornerstone of a brand marketing machine.

Let's discuss in detail the intricacies of private brands.

Private Brand: Definition And Examples

On the basis of a survey, about 85% of people often type in the Google search bar “What is a private label brand?”

A private brand or private label brand defines a good that is manufactured and sold under the name of a retailer. It competes with brand-name products. Private brands manufacture products that are controlled and marketed by retailers.  The retailer puts his name on it before selling the final product.

 To have a lucid idea of the concept, have a look at the private brand examples given below:

  • Great Value
  • Publix
  • Costco
  • Target
  • Neiman Marcus

Why Is It Essential For Retailers To Develop Private Brands?

Private label or retailer brands are nothing new to the retail industry.  According to Daymon’s recent Private Brand Intelligence Report, about 61% of consumers are purchasing more private-label brands now than they were purchasing about two years ago.

 Let's look at the reasons why retailers are committing themselves to private brands in recent times:

  • Improved quality:

A retailer can have complete control over the development, sourcing, merchandising, warehousing and marketing of its products. Store brands are not only positioned as value brands in modern times but also as brands equivalent in quality to those of national brands at lower prices.

  • Driving loyalty:

The more unique a retailer's private brand lineup is, the more significant is the loyalty of the shoppers. 53% of consumers shop at a store attracted by the name of a private brand. Hence, many retailers are in favour of developing a private brand, as once they accomplish attracting a specific number of customers, they can expect them to purchase their products continuously.

Now that you know about the reasons that can lead a retailer to develop his brand let us learn about the benefits of a private brand.

What Are The Benefits Of Private Brands?

According to a 2008 report by AlixPartners, a global advisory firm, "The sales of private label brands grew at double the rate of national brands from 1997 to 2005."

Private label brands offer numerous remarkable advantages for the retailer. Here are some of the advantages:

  1. Private label products are manufactured for the wholesaler exclusively. It does not need to compete with reputed brands.
  2. Private label branding incorporates direct involvement with suppliers and sources. It proves to be a boon to business logistics and the day-to-day operations of a brand.
  3. Store brand sales are more profitable than national brand sales as the products are more affordable.
  4. Private branding is more cost effective. Private label products are more affordable than their national brand competition.

These are some of the unique benefits of private branding. It represents some of the best reasons for small business owners to go for private-label branding.

Categories Of Private Labels

Private labelling occurs when a retailer purchases distinct products from various manufacturers. Then the retailer markets those products under his brand. Setting the right private label brand strategy for retail brands is one of the critical steps in the private brand journey.

Let’s Have A Look At The Categories Of The Private Label Brands:

  • Generic private labels:

A generic brand is a consumer product that lacks a widely recognised name or logo as it is typically not advertised. Generic brands are less costly than brand name products because of their lack of promotion that can inflate the cost of a service or good. The main strategy of generic private labels is to provide the customer with a low priced option.

  • Copycat brands:

A copycat brand is a brand that copies, mimics or is made deliberately similar to an established brand in a marketplace. These copycat brands are also known as ‘parasitic brands’. Copycat brands are almost similar to leading brands. However, they are relatively cheaper.

  • Premium Store brands:

A premium brand is one that holds a high position in the market, based upon the confidence and faith of the customers. Premium store brands are unique and act as a source of differentiation on the shelves.

  • Value Innovators:

Value innovator products provide the customer with the best value and build customer loyalty. These offer packaging that is unique but cost-effective.

Private Label: Advantages and Disadvantages

The difference between a private label and a national brand lies in the fact that a national brand is an established or prominent product, whereas a private label or store brand is an exclusive product that is acquired for sale through a retailer.

Here are the key points to consider while evaluating the pros and cons of private label brands:

ADVANTAGES:

  • Private label brands are cheaper than other branded products

This is due to the fact that customers do not have to pay for mass marketing campaigns and other costs that national brand items might face. Local products acquired from local producers typically have cheaper transportation costs. This does not essentially mean that every private label band is cheaper, but most of them are.

  • Numerous private label brands operate together to establish a product mix.

In modern days, customers require multiple choices. This means they require generic products that depend solely on the cost, and they require premium products that compete on quality. Some days customers can afford premium items, while other days, generic products may be a stretch. Hence, by working together, these brands can make their way onto the store shelves to satisfy the customer with the variety they want.

DISADVANTAGES

  • Retailers do not have control over a private label brand

This makes it difficult for the retailer. If a market trend changes and the brand is too slow to adapt to that change, then the retailer loses money. It is also because the customer goes to that brand which fulfils the needs.

  • Private labels do not have the same head start

Strong national brands have spent more than decades establishing their customer loyalty base. People have used these brands through generations. Hence, national brands do not have to make an effort repeatedly after a product. Unlike national brands, private labels have to start from scratch. If they fail to meet the promise made by a product, then the customer goes back to the national brand.

In the end, examining the advantages and disadvantages of a private label brand demonstrates that the consumer always wins. Retailers also have a great opportunity if only they can manage their risks smartly.

Wrapping It Up,

Private label brands have a prosperous future. Selling private label products have become one of the most profitable ecommerce business models. Comprehend the basics, use your thoughts and resources to develop and sell your own brand.

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