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Unit 13: Private Label Brands

3. The third key driver for the enlargement of private label is the historical perspective of Notes
key retailers that a strong “house brand” that consumers could only purchase at their store
would drive loyalty (i.e., the aforementioned Sears and Tesco). Ultimately, any retailer
wants to maximize customer loyalty (share of retail visits) and revenue (share of wallet).
Brands that can be purchased exclusively at their stores can accomplish both those
objectives, many times in tandem with improved profitability.
Retailers develop and market their “own” brands or “private label” as the ultimate guarantee of
obtaining customer loyalty in an extremely competitive market, resulting in more trips and an
increased share of wallet.

That being said, private label brands are in the middle of a major retail transformation for which
the ultimate end-game has not yet been determined. Leading retailers of nearly all but the
smallest sizes are investing more of their time and marketing dollars in the development of
“private label” brands. The goal of this increased spotlight is both a growth (loyalty building)
and survival tactic (owning an equity or line of products that differentiates them from larger
competitors). Most retailers are either in the process of refining their “own brand” strategies or
focusing on positioning their lines to maximize loyalty, competitive differentiation and share
of wallet.
The most that can be said with belief is that the retail and brand landscape, particularly with the
exponential growth and purchase influence of the Internet, will continue to be extremely fluid
and dynamic and will drive winners and losers. Those without an evidently articulated
strategy – supported by the appropriate levels of investment and organizational support – will
suffer greatly.

What to Do About It?

1. Eliminate the use of the term “private label”: It is a frequently irrelevant term increasingly
not used or applied by consumers. In place of stating that “Kirkland” is Costco’s private
label brand, consumers are more likely to state that “Kirkland” is exceptionally good
brand that one can only seem to find at Costco.
2. No more doing it on the cheap: If consumers recognize little or no difference between
national and “exclusive” brands, they will hold your retail organization to the same
standard as for national brands. This means that in nearly all cases there is no more “doing
it on the cheap.” A brand recall, inconsistent quality, lack of follow-on product support,
poor brand positioning, bloated lines with distracting SKUs have an increasing collision
on the image of and loyalty to your chain, not just for your “private label.” The two are
inextricably linked. The result is that you must manage your “own” brands as if they are
truthfully national brands with the same level of expertise and sophistication.
3. Develop holistic brand marketing and merchandising strategy: It is very important to
create a compelling holistic brand strategy that considers current industry trends. Many
national brands sell 25 percent or more of their products to just one or two retailers. Will
all of them survive in their current format? Consider your options. If the retail world is
moving to its own brands, should you believe stronger strategic alliances with national
brands that hold high brand equity but which are under significant retail pressure?

4. Think Internet and distribution: If you have created a brand with well-built individual
equities, it may have a larger profit opportunity outside the walls of your stores. Brands
are sold in more channels, particularly on Internet sites. Walmart.com, Amazon.com,
E-Bay and other internet retailers are the sales agents for more brands than you might
think – and that won’t change. It’s important to comprehend how to take advantage of this
fact instead of being a victim of it.

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