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A Complete Guide to Private Label Brands

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Private label brands are products manufactured mostly by a third party and packaged for sale under a brand name, which is owned by the retailer. No doubt these brands get some preferential treatment from retailers from ranging, self-position, and retailer advertising. You might ask why retailers make private-label brands. The simple reason is profitability. With normal supplier own brands, grocery retailers typically make about 25% gross margin. With their brands of private label brands, this margin can be close to 50% or more, which helps to improve their overall profitability. These days private label brands are enjoying a moment due to several reasons; like low pricing, improved quality, and innovation. During the Covid crisis, many national brands disappeared from the store’s shelves due to high prices and pantry loading. Due to a lack of availability, people started buying private-label products. High availability and low pricing attracted buyers to shift their trend towards private label brands during the pandemic.

A consumer survey shows that nearly 40% of US consumers have tried new brands due to the Covid outbreak. Private-label brands are one of the top beneficiaries of this changing trend. Almost 20% of consumers are buying more private label products due to their massive availability. Previously, consumers considered private label brandslow-pricedd but not of high quality. altogether, private labels in the United States have a higher share than the powerful national brand in 77 of 250 supermarket product categories. And they come second or third in 100 of those categories. Private labelling was once considered a cheap alternative to well-known national brands, but due to inflation, this pandemic has helped usher in a new era of private labels, posing a formidable threat to national brands.  In this article, we will through light on the private label brands.

What are private label brands?

A private label product is a product that the seller has manufactured by a third party but sold under its brand. The seller checks all about the product or products. This includes the product specifications, packing methods, and everything else. The private-label products are then delivered to the retailer for the purpose of sale. So far as consumers are concerned, it is the company’s “own brand” products. For example, a collaboration software vendor might run a line of private-label conference calling hardware. These products would be made by another company. However, they would be sold under the original company’s trading name.

History of private label brands

Now let’s look at the brief history of private label brands. Before the upsurge of online marketplaces, retailers traditionally stocked their shelves by making deals with manufacturing giants like Procter and Gamble or Nestle. Those large consumer-goods amalgamation pushed out smaller brands, demanded high-class shelf space, and business for other benefits as part of their deals with big retailers like Walmart. Later on, Walmart took the opportunity to use the data it collected in its stores to make its private-label brands.

Private label brands on a way to win customer loyalty

Although retailers have introduced private label products over the years, only a few have thought about the role of private labels. Some private label brands came into existence because the retailer wanted to introduce something that was of low price as compared to national brands. On the other hand, some retailers launch the product deliberately to satisfy their customers at a low price for gaining loyalty. 

Retailers who seize this moment to reconsider their private label brand strategies to gain the loyalty of customers gain long-term benefits. Retailers should conduct a detailed diagnosis and gap assessment for their private label brands. Customer impression of private labels is influenced greatly by what they see on the shelves of the store. Setting and regularly enforcing price-gap measures is very important for private label brands. Now leading retailers are developing the brand language on the packaging of products, that not only draws the attention of shoppers but also conveys the functional benefit of the brand.

Thus, to make the long story short, the rise in private-label products is good news for both consumers and retailers. Retailers can influence the sale of private label brands by following the right measures. By doing this, private labels can become powerhouse brands.

Zuella Montemayor did her degree in psychology at the University of Toronto. She is interested in mental health, wellness, and lifestyle. 

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