Rocktomic Labs Shares a Beginner’s Guide to Private Brands for Retailers
Private brands have attained a 19.3 percent market share in the United States. This retail sector is growing steadily, with more retailers deciding that putting their efforts into creating a private label is worthwhile from a financial perspective.
Atlanta, Georgia-based Rocktomic Labs shares a beginner’s guide to private brands, naming their advantages. The company also offers tips on how to position a private brand against any major brands that a retailer may be selling.
The Rise of Private Brands
Many companies in the United States and abroad have adopted private-label brands over the past few decades. In Switzerland, the share of private-label brands is as high as 45 percent. Several U.S. retailers have adopted the European model, like Aldi and Trader Joe’s. These stores sell primarily their own private-label brands, which have independent reputations for quality.
According to the Daymon Private Brand Intelligence Report from 2020, 9 out of 10 consumers put equivalent trust in store brands as in brand-name products. This statistic shows that there is great potential in the private-brand race.
Advantages of Private-Label Brands
The primary advantage of private-label brands from a retailer’s perspective is that they cost so much less to produce than brand-name products. Retailers can then receive higher profit margins from the products.
For consumers, the relatively low price point is the largest draw, but today, private-label brands are offering equivalent and sometimes superior quality when compared to major brands. Many retailers, like Target and the grocery chain Hannaford, offer premium private-label brands that are positioned as higher-quality than the brand-name alternative.
In some cases, these products are even priced slightly higher than the brand-name versions, but the perceived reputation for quality drives customers to buy the products regardless of the higher price.
Marketing is another huge advantage of the private-label product. It costs far less to market a private-label version of a product. Focus is placed on the retail location itself, rather than on promoting individual products. Once a customer is in the store, they can see the private-label products placed alongside their brand-name competitors and decide for themselves whether they would like to try them.
There are also advantages in shipping, storage, and manufacturing. Private-label products can be produced anywhere around the world. Some countries have even more advanced manufacturing capabilities than the United States. Even so, many consumers highly prefer products that are made, tested, and sold in the United States and this can be used as a selling point.
How to Price a Private-Label Product
Private-label products can be priced competitively since the cost of making and marketing them is so much lower than the cost of doing so with a major label. Since costs are lower, the profit margin of private-label products tends to be somewhat higher. Companies have more leeway when it comes to pricing these products since the profit margin is higher.
Determining a Competitive Position
Retailers must decide how to index their prices against competitors’ offerings. If a product compares to a high-end major brand item, the price will be different than when it compares to another store’s private-label item. Stores need to set their prices based on the complete landscape of private-label and major brand prices in their area. These prices can be constantly shifting, so investing in analysis software can be a good idea.
Using AI to Set Prices
Artificial intelligence or AI programs can help retail companies decide how to set their prices. AI can sift through reams of data on customer behavior and product pricing and come up with figures that support a company’s profit margins while keeping the products highly competitive in the marketplace.
Ensuring Quality
When retailers contract with a private-label manufacturer, they have more control over the process than they would have if they simply bought a major label brand at wholesale. They can control the ingredients, packaging, and pricing of the product. They can easily inspect the plant to make sure that their high quality standards are being upheld.
Promoting Private-Label Brands to the Consumer
Many retailers may wonder how they should promote private-label brands to the consumer. Grocery stores are having good luck promoting their private-label products in conjunction with their customer loyalty cards. These retailers offer a generous percentage back to the consumer when they buy the store’s private-label items. This entices more people to try private-label products and see that they are as good as the major brands. This builds shopping habits and causes the private-label brands to become more profitable.
Private-Label Brands Work for Retailers
Rocktomic Labs encourages all retailers to look into the advantages of selling private-label brands. From a profit standpoint as well as a quality standpoint, private labels can boost sales and drive consumer loyalty. Many private-label brands have even taken a market position that they have higher quality standards than competing major brands.
This beginner’s guide to private-label brands is only a jumping-off point for the study of this marketing technique. Retailers are encouraged to learn more about private-label brands and to incorporate them into their sales strategies.
