A store brand product is one with the retailer’s label on a white label product. There is a level of paranoia for manufacturers of brand name products against store brand goods. And this is justified. It is essentially transferring power from manufacturers to retailers, and manufacturers must learn to collaborate with store brands. They are here to stay. In the US store brands sell more units in 77 out of 250 supermarkets. Europe is the current leader in the sale of store brands, with up to $1 out of every $3 spent on store brands products in the consumer packaged goods market. All of the larger stores such are turning making their own private brands. Some of Walmart’s more well-known store brand products include Sam’s Choice, Equate and Great Value. Other massive global retailers taking advantage of private label products include Amazon, Carrefour, Groupe Casino, Sears and Tesco. People have come to terms with store brands and are viewing them as the same quality as national brands.
It is important to be aware that the percentage of store brands sold is usually a reflection of the region and also the market category. Sales of store brand goods are much more frequent in developed countries as opposed to under developed countries.
Reason One – Having a store brand is Cheaper
The most obvious reason to have a store brand is that it is cheaper while delivering a product of similar quality. More and more people are becoming aware that there is often no discernible difference between the most well-known brands and lesser known brands with the rise of store brands. And you can ensure that there is no real difference as you now have more control over the products under your store brand name. In general, store brands are cheaper to make than national brands. Store brand is much cheaper than wholesale selling for a variety of reasons. One reason is that in the wholesale supply chain profit needs to be made at every point before it gets down to the consumer. A wholesale supply chain may have a manufacturer, distributor, regional wholesaler and store brand seller. It is usually much cheaper to simply go make your own store brand straight away. You can cut out the distributor and the regional wholesaler. There are exceptions but generally speaking having store brand is cheaper.
A proprietary product can cost up to $10,000 to start from scratch. But with store brand it can be done for a few hundred dollars. However, make sure you have a product that is as good or nearly as good for a cheaper price. Many store brand are products that are cheaper for a reason, in the sense that you get what you pay for. Also bear in mind not to discount too much. If your price is half that of a competing national label, then customers will think it must be because of a decrease in quality. 70% -80% is much more reasonable and will result in a bigger profit margin at the end of the day.
Reason Two – Build your own brand
Store brand offers a unique way to build your own image. You now have a retail outlet with your name and accompanying products with your name. It is a form of advertising for your business. You will then have a stronger market identity with repeat customers and a more loyal base. You can include what you want on your products, including logo, design, contact details, standards and more. Over time people will come to trust your brand, and this will provide opportunities for you to grow your business with more of your own product line. The sky is the limit with this approach, as you build your own line and have complete control. It is important to keep the name of the item and its purpose dominant as opposed to your brand and logo. The reason customers buy products is to fulfill a need or desire. People look for this need/desire and then associate it with a logo/brand name, not the other way around. Prominent but not dominant is a good rule of thumb.
Perhaps the best part of having your store brand is that there is no race to the bottom, where sellers of the same brand keep on lowering the price in order to get a bigger cut of sales. This is good for consumers but not good for retail outlets. You are the one and only seller of your product. If someone else takes your store brand you can take legal recourse. Studies have proven that customer loyalty has significant impact on the profitability levels of large supermarket outlets.
Reason Three – More Control over Store Brand
Making your store brand gives you more control over the price, sales, marketing and distribution of your products. You are dealing directly with the sources and are not as tied down. This is because if you were to order from a well-known brand they might have certain criteria or terms for businesses. Some have certain limitations on how to receive inventory, or may only produce a limited quantity of products for a season. You have more choice and wiggle room with store brand vs national brands. Retailers can make swift adjustments to meet the preferences of their consumers. You can lower or raise the price of products as you see fit.
Another huge disadvantage to selling wholesale products is that you do not have control over the price. This can be very frustrating. Many wholesale suppliers have a minimum supplied price which has to be adhered to. This can be especially disheartening when you are tied in with a wholesaler who is just trying to get rid of stock. When you go make your store brand, you can just promote a sale on your products to generate awareness. You have more control, and may even wish to sell your products to break even instead of being tied into a minimum price.
Going down the route of store brand can often mean fewer products to manage instead of getting different brands from different sources. Fewer products reduces administration, tracking and management. You are centralizing your product line, making it more efficient and easier to manage. Your efforts are more focused towards promoting your product line instead of simply selling as many products are possible.
Reason Four – Agility
Another important consideration is that store brand is quicker than national brands. This means that the larger brands can be out maneuvered in many instances in line with customer demand. You can respond to changing trends much faster than national counterparts who have larger orders and bigger deals. They are simply not as mobile, which is always a disadvantage. If you are to wholesale other brands, you do not have this type of agility, and rigid contractual arrangements and other limitations may preclude you from adapting. An example of this is that a store brand seller could simply look at reviews online or through surveys and change the product accordingly. Larger brands have to go through much more hoops to respond to feedback, and can really only do so when it is convenient or in instances of overwhelming negative feedback.
Reason Five – Why Not?
Owning a retail outlet, you have access to all the data. You know what is selling and what is not. You can quickly adapt to get a private brand. Put your store brand name on the items that are selling well. There is no reason not to have your own private product next to a national brand. This way the customers can still get their national brand if they really want, and you will still make a profit. So, you can promote and advertise your personal brand over the national brand. You are not tied to any particular brand or industry, only the ones that happen to be selling. And you always have a fallback of national brands. It’s what is known as a win-win.
Another advantage is that you can wholesale your products under your store brand name to other sellers. While this may seem counterintuitive in the sense that it is more logical to simply sell it yourself, there is one solid reason to do so. Cash flow, which can be tight for store brand sellers at times.
That said, in the vast majority of cases it is still better to sell your store brands online or offline instead of selling to other wholesalers. Customer loyalty is really the whole point of having a store brand and building up a loyal base of followers is really the foundation of a good private label enterprise. And selling to other wholesalers completely undermines this foundation. You also have to build up the branding initially so wholesalers would buy it, which is a lot of work. You are essentially selling the name you worked so hard to build, and it is now all set to becoming yet another national brand.
There are few disadvantages to selling with your store brands once you have the financial capacity to do so. If you get the formula right for one product it can often be reproduced for many others. However, building loyalty for your store brand is harder than you might think, and is not built in a day or even a year. The ultimate risk is that the manufacturer will not honor the contract. Prior to making your store brands, ensure you find yourself a reliable private label manufacturers. If you don’t, it could cripple your business.