A Private brand product is a cost-efficient consumable than a branded product
A private brand is a new method of doing business where a manufacturer produces a goods under the name of a different seller and sale the product without the brand loyalty. These products are also known as “private label” or “store brand”. Private brand items can be offered to retailers, such as supermarkets, with higher margin than the usual brand-name goods.
The price of private label goods are found lesser than high priced branded products. Sometimes companies purchase good quality products in bulk from a manufacturer, and then sale it under personal brand name using personal marketing/retail network. Private brand products are now being sold in wide varieties of categories like food items to regular grocery items, dairy products, etc.
Manufacturers offer private level production because it is a bulk way to increase their production volume without the responsibility of retailing. Alternatively, buyer of private label can get the readymade products without maintaining the liability of a full-fledged manufacturing/production unit.
Private label stuffs are often considered as a lower cost alternative for established regional, national or international brands, although lately some private brand products have been identified as “premium” brands to contest with prevailing “name” products. Such brands are usually less costly than the established national brands, as the retailer enjoys the privilege to optimize the production to match market and consumer demand. At the same time the hefty advertising costs to a large extent can be lessened in store brand products sale.
Goods traded under a private brand are subject to the similar governing oversight as goods sold under a specific patented brand.
Consumer demand for such private label products might be connected to individual features such as demographics as well as socioeconomic variables.
Research has established that some retailers rely on the proposition that while publicizing by premium national brands increases the chance to pull shoppers to the store, the retailer characteristically enjoys higher profit by selling the customer a store brand.
Recently a study has published a result on store branding and store positioning. It has been observed that grocery chains such as Aldi and Save-A-Lot chiefly sell private brands to indorse general lower prices, paralleled to supermarket chains that trade with a number of brands.
How a Private Brand Works
Now the question is how this private brand products work. Let’s take a closer look.
Private label products are typically manufactured by 3rd party or by a contract manufacturer, mostly on the similar production lines like other brands. They may differ only in labeling or may be completely unique. Private branding is a cost efficient way to manufacture a product without investment into the large manufacturing conveniences, hiring designers, availing employment of quality assurance personnel, or without establishing a specific supply chain.
By using external manufacturing help a retailer may offer a wide range of private brand goods that appeal to both cost-sensitive shoppers as well as premium-product purchasers.
Increasing market shares and ascending variety of private label consumer goods is now a global whiz. However, private label market shares display extensive variety across the global market and in variety of product categories.
Experiential research on private brand products has been of significant interest to both marketing academics and consumer product manufacturers. Substantial work has been done on definite areas of private-label research such as private-label brand policy, market presentation of private-label products, competition with national brands, market configuration, and relayed buyer comportment.
Advantages and Disadvantages of a Private Brand
Private brand goods offer quite a few profits to retailers. This comprises an extended product line, which allows retailers to offer a larger variety of products tempting to cost aware as well as quality conscious consumers. Private label products also allow imposing of control over marketing, letting the retailer to modify a product according to the local needs and tastes.
The key advantages are:
- Private label brand products are typically inexpensive than other branded products
- Many private brand products work together to start a product mix
- Globally private brand is enjoying huge successes parallel to premium private labels
- New channels are opening to surface up
- Each brand marketing effort helps the efforts of other private labels
- Many private labels are beginning to reach national/global brand status
On the snag issues, a retailer may lose huge if it makes a meagre choice about the types of products under private brand. Some branded products can be reverted to a distributor or manufacturer, but many private brand goods cannot be given back and in some cases may create a dead inventory. Also, some manufacturers may need minimum orders, so the loss can be weighty if a private brand item does not create consumer interest.
Also, there are risks related to quality assurance if the outside manufacturer fail to match the desires quality output.
The key disadvantages are:
- Retailers don’t have any control over a private brand commodities
- Retailers will be highly be governed by the manufacturer in terms of the quality as well as in terms of production
- Designing a personal logo and packing can be difficult, risky, and expensive
- Economic conditions often tend to command how these brands interrelate with the market
- Private Labelled products are more like replicas of the branded products which leaves very small room for the unique identity.
- Private brands, also recognized as private label and store brands, are manufactured and sold for a precise retailer and meant to contest with premium brand goods
- Private brand products tend to be low-cost than established brand goods and offer retailers with higher margins.
- Many retailers offer private labels, including supermarkets, which may offer organic-only finest goods or lower-cost general brands.
- Private brands are usually made by third-party or contract manufacturers and can be the same as the branded merchandises, only differing in labeling, or they can be totally different.
There are still many consumers who wish to enjoy the familiarity of branded items, and big brands spend millions of revenue to persuade consumers that their brand is better than any generic or a private label product.
However it is important to care for the quality while selecting a private brand manufacturer. It pays to be cautious and traditionalist when creating your own product line, but the potential really has no limit.
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