What Are Private Labels?
Walmart Private Label Ibuprofen
What Are Private Labels?
Private labels are “white label” or “private brand” consumer products that are uniquely manufactured by one company and sold under a different company’s own brand name. These private labels have custom artwork, logos and marketing.
What is Private Labeling?
Private Chocolate labels
Private labeling allows retailers and stores to sell a product that they do not manufacturer, the production of the product is made at a specific manufacturing company under a special contract, with specific requirements for quality, materials and design. This works for large chain retailers because they do not need to invest capitol to start their own line of consumer and food products.
Private label printing is all about the marketing on the sticker. These marketing tactics and techniques are used to create a positive image of the product label in the consumers eyes, and to help distinguish that label from a competitor’s label.
Private Label Products Have More Profits
In the past, private labels were frowned upon by consumers, today it is the number 1 choice. The main reason is because profits on selling third party food products is around 1% or 2%. The profit margins on selling private label products is around 25% to 30%. So retailers prefer to make more profit selling the private labeled brands.
Younger millennial consumers, who came of age in the 2008 recession, are less dependent on brands and brand loyalty compared to their parents and grandparents.
These new private label products in many cases are premium private labeled products. These private products are now competing with the world’s biggest brands on quality and marketing. To reduce competition from the worlds top established brands, retailers like Publix, Walmart, and Target are adopting smart branding strategies for their private label products that can take advantage of real time feedback from customers buying in real time with their wallets. This growing market for private labeled products indicates that shrinking market for high priced international brands. This creates a opportunity for smaller retailers and brands to join the fight. Everyday consumers are getting more used to these private branded products, which is good for the consumer because this lowers prices for them, saving them money.
Private Label Categories
Lets look at some of the popular private labeled products trending with consumers.
- Frozen Food
- Chilled and fresh food
- Ambient foods (shelf stable food)
- Pet food and care
- Beverages and drinks
- Personal Care
- Confectionary (Candy)
- Cosmetics
Advantages of Private Labeling
But what are the advantages of private labeling?
- More control – retailers and supermarkets nationwide can have more control over the product, quality, ingredients, materials, design, price, and marketing.
- Nimble – With a low entry price tag, retailers can join the industry for minimal cost and still have a custom product made specifically for them without large overhead costs.
- Customer loyalty – By selling a private product, stores can keep their customers coming back for more and more every weekend or every two weeks. This helps the store drive more foot traffic and stay more profitable by selling their own products and not name brand products. This also helps the company boost brand awareness.
- Less Stress – Because another company is manufacturing your product you do not need the time, energy, or resources to produce the product. This creates less stress for you, but this can also be reversed. If the company experiences a manufacturing bottle neck, or equipment breaks, this also affects you.
Disadvantages of Private Labeled Products
The disadvantages are few, but still important and should be mentioned.
- Competing with worldwide brands – Competing with a nationwide brand, or international brand can a difficult thing to accomplish. It is unlikely that your budget can match theirs.
- Limited use – Getting into a large supermarket or chain store can be difficult, so to start your brand might be available only on your website, while the big dogs are in all the major chain stores.
- Manufacturer dependent – Because the manufacturing of your product is the responsibility of a manufacture company, this can create problems for you if they experience trouble. And these problems are out of your hands.