The Advantages of Private Label Branding for Your Business

by Startacus Admin

Private label products are becoming an increasingly popular solution for brands looking to expand their ranges in place of items carrying national brands, the famous brands you’ve probably seen advertised everywhere from TV to coupon mailers. This is because they mitigate a lot of the issues typically involved with manufacturing and allow these brands to offer high quality products with less overheads. In 2018, private label brand sales grew at twice the rate of name brands.

Let’s look at the five main benefits of private label branding for your business.

You Can Win Discount Shoppers

Private label brands are, on average, a third cheaper than national brands. This makes them attractive to consumers looking for a deal. However, they are no longer seen as second-class alternatives, because consumers recognize that private label products deliver quality comparable to national brands. You’ll attract customers who want to spend less on those specific products, and they’ll probably buy other items when in your store as well. In short, they come for the affordable private label products and probably throw a few other things in the cart as well.

You Improve Your Own Brand

Good private label brands create profit for retailers, since they can put their logos and taglines on the products. As a private label seller, you can personalize your products to suit your particular customer base, and you can offer top of the line features that national brands don’t necessarily have, while cutting back in other areas that don’t matter to your customer base. A classic example of this is affordable organic meals with more sophisticated packaging than name brands offered by a number of grocery store chains. To customers, this is an ideal combination of low cost and high quality that brings them back to your store again and again.

Private label branding with desirable products allows your business to stand out from competing retailers. You’ll essentially be offering something different (and potentially better) than stores that only offer a mix of the same name brand products. Note that people may come to try out the private brand and end up also buying a name brand from your store. Good private label products can enhance customer loyalty, since they usually aren’t widely available, and they can only get it from you.

You Have Control

Private labeling gives retailers control over factors they cannot control when buying from name brands. When you have private label products made, you can control factors like the price, the packaging design, the product size, as well as the production and distribution process. Equally, you can make quick changes to all of the factors to keep up with customer expectations, whether it is offering smaller lots or creating organic versions of the product. This is incredibly important in the food industry, since there is fierce competition for market share.

Another variation of this is control over where your private label products are placed. You can use horizontal shelf displays or end cap displays to make the private label products stand out from national labels in addition to selecting packaging that has the same effect. Alternatively, you can have unusual and luxury items not available elsewhere, giving people a reason to shop at your store.

It Can Be Profitable

Private label brands are brands developed and then sold by the company that creates them. You don’t have to pay a portion of the sales to the supplier or name brand, because it is yours. This is why private label brands have, in general, higher profit margins than name brands or “resale” products. Private labels often allow businesses to secure a decent profit margin in product lines that otherwise have razor thin margins.

Companies like AmegA Sciences are providing private label products such as water conditioners, agrochemicals, specialty fertilizers, turf colorants, wetting agents and spray pattern indicators. In a niche that historically lacks innovation, this is a forward-thinking private label company who strive to help their customers improve their bottom line which is what you should be looking for in a private label supplier. Whether you choose to sell the same chemical compounds as the name brands at a lower cost while carrying your brand’s color scheme, or to create a niche product in this area that will delight your customers, going with private label branding gives you that option. And both business cases typically let you do so with higher profit margins than seeking expensive name brand products to stock your shelves with.

It Can Become a Whole New Business Model for You

We’ve addressed the benefits of using private label branding to create an exclusive product that attracts and retains customers. However, private label branding can open up new avenues of income for your business. If your brand is popular enough or fills a niche that few others do, you could end up selling your private brand to other retailers who will pay you for the right to carry it. This has several benefits: One is that you’re profiting from a product you don’t have to sell yourself. Another benefit is that your products sitting on other retailers’ shelves improve the exposure of your brand.

Private brand products are proliferating because they are so beneficial for the companies that develop and sell them. This is true regardless of the type of product being sold under the private label. The exponentially expanding ecommerce space has become a contender for markets typically dominated by brick and mortar stores, and it’s a little-known fact to web consumers that ecommerce is largely dominated by private label products. Our final word regarding private labeling is that many retailers default to Chinese and Asian manufacturers to find the cheapest deals on their private label product supply, but this isn’t always the best practice. Western manufacturers may charge more for their products, but they also generally offer better distribution and design, printing and labeling channels which often result in the higher costs of the creation being recouped. Local manufacturers should have a better turnaround time which can help you get to market quicker or stay stocked during Q4 which is a common issue for retailers. 

Subscribe to our newsletter

If you would like to receive our startup themed newsletter, full of the latest startup opportunities, events, news, stories, tips and advice, then sign up here.

• #brand
• #branding
• #retail
• #manufacturing
• #name brands

Published on: 29th October 2018