Private labels are continually expanding into new and varied groups. Their increase follows some general trends. In supermarkets, for example, private labels have developed well past the traditional basics for example milk and canned peas to incorporate health and beauty aids, paper products such as diapers, and soft drinks. Private label sales have also grown in classes like clothes and beer. With that growth comes increased acceptance by consumers. The more quality private label goods available on the market, the more readily will consumers pick a private label over a higher-priced name brand. Gone are the days when there clearly was a stigma attached to buying private labels.
The Brand Strength
Taken collectively, these trends may seem daunting to manufacturers of brand name products. But they tell only half the story. The increased strength of private labels does not mean that we have to write an obituary for national brands. Truly, the brand is alive and reasonably healthy. It requires just committed direction to thrive. Consider the following points.
The purchase process favors brand-name products.
Brand names exist because consumers still need an guarantee of quality when they would not have time, chance, or ability to scrutinize alternatives in the purpose of sale. Brand names simplify the selection process in cluttered product classes; in the time-forced double income households of the 1990s, brands are needed more than ever before. In fact, a 1994 DDB Needham survey suggests that 60% of consumers however concur that they prefer the comfort, protection, and worth of a national brand over a private label. Although this percentage is lower compared to the 75% figure common in the 1970s, it’s stayed fairly constant during the past ten years.
Brand name goods possess a sound foundation where to develop current edge.
The most powerful national brands have built their consumer equities over decades of advertisements and through delivery of consistent quality. From year to year, there’s little change in consumers’ ranks of the most powerful national brands. By comparison, retailer brand names aren’t visible. On the 1995 Equitrend list of the top 100 brands in the United States (based on evaluations of 2,000 brands), just 5 store brands appear, the maximum of which is Walmart at number 52, down from 34 in 1994.
Brand strength parallels the potency of the market.
Revenue of superior-quality, premium-priced brands are increasing. A 1993 Roper Starch Worldwide survey found that 48% of packaged goods buyers understood what brands they wanted before entering the store, up from 44% in 1991.
National brands have value for retailers.
Retailers cannot afford to cast off national brands that consumers expect to find widely distributed; when a shop doesn’t carry a favorite brand, consumers are put off and may change stores. Retailers must not only stock but also promote, frequently at a loss, those popular national brands—such as Miracle Whip, Heinz ketchup and Campbell’s soup—that consumers use to estimate complete shop prices. Even if, in theory, retailers can earn more profit per unit on private-label products, those products (with rare exceptions such as President’s Choice chocolate-chip cookies) only do not have the traffic-building power of brand-name goods.
Excessive emphasis on private labels dilutes their strength.
What could be more suitable, some retailers assert, than to have consumers recall just one store name? The problem is the fact that stretching a store name—only like a producer name—over too many product classes muddies the image. Many consumers rightly don’t believe a shop can provide the identical excellent quality for products across the board. Even Sears, Roebuck & Company, the highest private-label retailer in the United States, found it needed to invest in category-specific subbrands such as Craftsman and Kenmore—which, subsequently, happen to be outgunned by more centered manufacturer brands for example Black & Decker and Sony. In 1990, the business launched the Sears Brand Central store within a store concept and committed itself to stocking a full variety of national brands alongside its private labels in electronics and appliances.
In case You Don’t, Don’t Begin
Faced with the pros and cons of private-label production, what should national-brand manufacturers do? Our recommendation to firms that do not yet make products for the private label market is straightforward: Don’t start.
For makers seeking only to use extra capacity, private label creation can eventually turn into a narcotic.
Some brand-name manufacturers make private label goods and then use occasional surplus production capacity. In those circumstances, private label generation might seem tempting. But beware. Though the system may function nicely for a business to get a period, private label creation can develop into a narcotic. A manufacturing company that starts making private label merchandises to take up excessive capacity may soon find itself taking orders for private-label goods in classes where the market share of its own brand is weak.