Private label (PL) has always been profitable for retailers: Around the world, the retailers’ profit margin of PL is roughly 40%, which is twice as much as the profit they make from other brands. Not surprisingly, so far PL has been treated as a “cash cow.” Money was invested in PL the product, not PL the brand. Well, not anymore. Why do you think more and more retailers treat PL as a strategic asset, adding value to their main brand?
To state the obvious, as long as the PL is beautifully designed, customers will associate positive feelings and thoughts with the retailer’s brand. That means, the brand equity generated by the PL will be transferred to the retailer’s main brand. Also, there are some unique PL’s -actually they are so unique- that they help differentiate the retailer. Those PL’s eventually become store brands.
That said, many retailers battle against strategic PL brand decisions: Should you have one PL brand? Or do you need a range of specialist PL brands? Could you implement a tiered approach? Or are you OK offering only one value proposition? Here are the 5 most-frequent questions I get from my clients. Let’s try to simplify your brand architecture considerations…
1) I don’t have a PL. Do I need one?
Let’s face it: Creating and maintaining a brand is a resource-consuming process. You need money, time and effort. If you don’t have a PL, then ask yourself why you want to create one. Be honest. Do you want to make quick bucks? Or do you want to achieve long-term growth? PL offers great margin but keep in mind that your PL is going to have an impact on how your main brand is perceived. So, if you want to grow, but don’t have the resources to nurture your PL, then you are better off waiting a little more.
2) I already have a PL. Do I need more?
If you are a small retailer, or if you got limited resources, then we would recommend you to limit the number of PLs you have. When dealing with the concept of brand, you should always aim for quality, not quantity. First, try to improve the look and feel of your existing brand. Then, depending on market demands you might consider creating additional ones.
3) How wide should the range of my PL products be?
There are some retailers that sell everything (from batteries to candies) under the same PL brand. Let’s state the obvious: At its very core, a PL brand means better value for money. That said, general branding rules still apply to PL.
How appetizing a Duracell Gummy Bear would be?
Or how long would a Haribo battery last?
There is a natural limit how far a brand can stretch itself. That’s why if:
- You have a wide range of product offerings and if,
- You can afford managing multiple brands, then you should consider creating specialist brands.
For instance, Canadian retailer Loblaws sell nutrition under its President’s Choice PL brand, whereas it markets detergents under PC Green sub brand. It sells clothes under its uber-succesful brand Joe Fresh. If you can afford only one PL, then you are better off identifying the product category with the most opportunity and sticking to it. Rule of thumb? Don’t do anything P&G wouldn’t do.
4) Do I need a premium PL?
If you have achieved sustainable success with your mass-market PL brand, then you might consider launching a premium PL. Many successful retailers follow a tiered PL approach: Good-better-best.
They start with a highly successful PL that offers decent quality and value (the good.) Then, in order to fight against the category-leading brand, they flank with a premium brand (the better.) Finally, for only select categories, the retailer offers a PL with significantly high quality (the best.) Again, Loblaws is a great example: Its flagship is the President’s Choice brand (the good.) But it also has a better quality brand: Organic (the better.) Finally, it offers gourmet products under its Black Label Collection. Tesco has an even wider portfolio: It has Tesco, Tesco Value, Tesco Finest, Tesco Organic, Tesco Light Choices etc… How many brands do you need? The answer depends on how many you can afford.
5) Can I use my retailer’s name for my PL?
When we look at the examples above, we’ll realize that Loblaws created a separate brand, President’s Choice. Tesco on the other hand uses its own name for its PL. Both approaches have their pros and cons.
If you own only one retail channel, then using your own name has clear benefits: Customers are familiar with the name. You don’t need to invest extra money in creating awareness. Also, brand equity is easily transferable between the PL and the retailer brand.
In President’s Choice’s case, Loblaws owns many banners. In addition to Loblaw, there is No Frills, Provigo, Valu-mart and many others. So, if you own multiple banners, then it would be wise to create a stand alone PL brand.
There you have it. Do you have a question regarding PL? Have we missed anything? Fire up your comments. If you like this article, then feel free to share it with your colleagues!
Do you feel like the world is spinning faster these days? Are there too many things happening simultaneously? Is the pace of your life too fast? Are you looking for a way to keep things under control? How can you control people and events around you when deep down you know you can’t even fully control your own life?
Working with a destination is arguably the toughest brand assignment. Experts, such as Simon Anholt think that you cannot “brand” a place in the traditional sense of the word. As someone who got involved in a couple of place branding projects, I tend to agree. Here is why…
Back in the day, life was easier for professional associations: Whether you were a lawyer, or an accountant, or a doctor, you would want to be a member of your professional association. Associations used to be the voice of the profession. They had unquestioned authority. Membership meant prestige. Associations used to connect smart people through their popular networking events. They would train members, helping them to keep up with the latest developments. Not to mention associations were strong social support groups. Unfortunately, those days are gone. The Internet, and eventually the social media drastically changed the playing field. Many associations went into an existential crisis. The ones who wanted to go back to the days of glory decided to rebrand, which they perceived as a cosmetic exercise. Not surprisingly most of their members shrugged, feigning indifference. Here is why…
Another new year, another collection of top trend reports!
What was trending in 2013? Which trends will still be relevant in 2014? And, what emerging trends you should pay attention? We have all the answers!
Enjoy these great reports, share ‘em with your friends and let me know if you have any other good ones.
Happy holidays to all!
Almost all of us buy private label brands (PL). But have you ever wondered why? Low price is a key reason, but does it suffice to explain it all? What goes through our mind when we are buying PL? What happens afterwards? Which archetypal forces are controlling us? Let’s speculate a little…Read the rest of this entry
The World Health Organization defines the meaning of health as “a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity.” If health means more than being just physically well, then how healthy do you think the following three facts can be?
I was interviewed by Samantha J. Manniex, a passionate blogger and a place branding practitioner from the UK. It was a fun and insightful conversation. I am posting three questions and answers about my methodology. If you want to read the full interview, please click here.Read the rest of this entry
This week we interviewed Yeşim Kunter: a world-renowned play expert. Yeşim is best-known as the “woman who makes CEO’s play games.” She understands behavior of people to create new organizational experiences. Before founding her independent consultancy she worked for Hasbro, Lego Group, and Toys R Us in New York. As a futurist at Hasbro she was part of an innovation team dedicated to uncovering disruptive new play experiences for children and adults. Currently Yeşim is an independent consultant for developing PLAY to Innovate Workshops for 500 Fortune Companies, giving speeches on Play at Universities and conferences such as World Innovation Conference at Cannes. Let’s see what Yeşim has to say about the future of organizational development!
Look around you. They are everywhere: The over-worked… The under-appreciated… The under-valued… The lost… The professional zombie… Today’s professionals are not happy at work and I think our thirst for meaning is at the core of the problem.
Follow your bliss and doors will open where you would not have thought there would be doors; and where there wouldn’t be a door for anyone else.