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Each week we share learnings and insights from experts in the consumer product and retail space. This guest editorial comes to us from Kim Greenfeld. Kim has over 20 years of product development and private label expertise, honing her craft in companies such as Trader Joe’s and Whole Foods. As the Coordinator of Buying at Trader Joe’s, she opened Trader Joe’s East resourcing all perishable items from local East Coast Vendors. During her nearly 17-year tenure at Trader Joe’s, Kim was responsible for the product development and launch of over 5000 private label SKUs under the Trader Joe’s label.
You own a brand and that brand means everything to your burgeoning business. Without your brand, you have no direction: no sales, no inventory, no production, no income, no nothin’!
Enter private label. Traditional retailers love brands. Brands fuel their business, with vendor dollars paying for promotions, end caps, demos, free fills, BOGO’s, coupons—you name it. Yet these same retailers certainly understand the power of the brand, so they maximize their ability to squeeze vendor dollars from the veritable turnip to promote the brand, and, at the same time, look to launch their own brand, the private label.
This private label will sit on shelf right next to your brand with many of the same attributes. It will be as good as, if not better than, your brand, and will be less expensive for the customer because it won’t have all of the promotional mumbo-jumbo dollars rolled up in it. It will be a dead net, or close to dead net, program, unlike the brand, and yet will present a better value proposition to the customer. This is the power of private label.
The Misconceptions of Private Labeling
Why do most brands have a total misconception of the power of private labeling? Suppose a retailer has made the choice to introduce a similar private label offering as your brand and approaches you to sell them this product under their brand. You have two choices:
- Do whatever is possible to protect your brand; as in, hell no, we won’t consider the private label possibility that someone would not buy our brand and go for the store brand’s label.
- Or, the second choice, which, frankly, also protects your brand, is the option of “owning” both slots on shelf: your brand’s slot and the private label slot.
For you, the vendor, private label is a win-win proposition. You know your costs, you know exactly where your costs-savings come into play—and you can pull out all of the marketing fees associated with your brand and offer a dead net, or close facsimile thereof, deal to the retailer.
This cements your position on shelf in not one, but two, ways. If the private label is discontinued, you still have your brand on shelf; if your brand is dropped, you still have the private label. I can cite hundreds of examples, but then I’d have to go into hiding since the vendors and the retailers would come after me with pitchforks since private label is just that—private.
Let’s say that you are a “new” brand just in its infancy stage…
What are the disadvantages of private labeling? Well, if you have a product or product line that is unique or requires specific manufacturing equipment, then perhaps it is to your advantage to not private label or at the very least to put off private label as long as possible. However, the risk is always that the retailer will find someone else to produce this product and you will be left with only your brand; or, even worse, the retailer will have a bee in its bonnet that you refused to private label and will drop your brand from its shelves.
Bear in mind that when a retailer approaches you to private label, it means that they WILL have your product, or its clone, on shelf whether you are involved in its production or not. Translation: you might as well have the best of both worlds and submit to the private label whims of the retailer. Otherwise you run the risk of losing to another vendor on both the private label side and brand side. The more savvy brand marketing managers understand this dilemma and many have opted to have their brand co-exist on shelf right next to the private label which they also produce.
Without giving away the farm, personal care, housewares, and household cleaning items are terrific examples of this phenomenon. They own the technology, the shelf space at retail, and are thrilled at the prospect of “easy” money by producing the identical private label product. Next time you are attending an industry show or event, start asking manufactures about this, and I think you’ll be pleasantly surprised at how open most are to pushing both their brand and the private label to retailers.
Even if your product is co-manufactured, private label is a possibility. Some retailers do not ask the question if you are “primary” or not; they simply assume that you produce your own products. Let them assume and quote them a price that will benefit your bottom line. Private label requires less work and maintenance in the long run than your brand. You don’t have to worry about marketing or even sales. You wait for the purchase orders, produce the orders, ship the orders, and reap the rewards.
Am I biased about private label? Yes, absolutely. It is what will keep customers coming back to the retailer as a destination shop, not simply because they need or want to go through the painful exercise of grocery shopping. It is also something that keeps retailers on the cutting edge of innovation. It used to be the quirkiest of retailers who pushed hard for private label, but now even the most staid retailer offers a private label or in-house brand. The future of private label is already here. Jump on board and enjoy the ride.
Have questions about private-labeling? Join the discussion in the comments below.
ABOUT THE AUTHOR:
Kim has over 20 years of product development and private label expertise, honing her craft in companies such as Trader Joe’s and Whole Foods. As the Coordinator of Buying at Trader Joe’s, she opened Trader Joe’s East resourcing all perishable items from local East Coast Vendors. She re-sourced over 1000 Perishable SKUs for the East Coast expansion within one year. During her nearly 17-year tenure at Trader Joe’s, Kim was responsible for the product development and launch of over 5000 private label SKUs under the Trader Joe’s label.