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Private Label Products: Trend For The Best?
Lately, private label products
have made a tremendous impact on the U.S. market, affecting
almost everyone, from producers to retailers to consumers.
Private label products are products whose name or brand
solely belongs to a specific retailer (e.g. Wal-Mart
and Marks & Spencer). Let us say that you are in
a grocery store. At first, you see all those gourmet
sandwiches with brands that have long been familiar
to you. Then you go to Marks & Spencer and lo and
behold, now they are selling the same type of sandwiches
too!
Private label products have grown significantly
in Europe, especially in the Western half, and now it
is making its mark in the United States. Private labels
can be divided into sub groups: store brands are products
where the retailer's name is a strong factor in its
packaging and marketing aspects; store sub-brands are
products whose connection to the retailer is minimal;
umbrella branding is a strategy where a retailer uses
only one private label for different product categories
and finally there are individual brands in which one
private label is accorded to one product type.
The advantages are of course numerous,
to all key persons involved. For the retailer, one of
the most obvious pros would be the increase in sales.
In addition, since it is his or her own private label,
the retailer then has the freedom to create its own
marketing strategy, have more control over its stock
inventory and possibly use it to gain a more positive
image to the public. And with a positive image, this
would of course lead to stronger customer loyalty. Naturally,
having a private label for one's product would mean
investing a lot of money so the retailer must be sure
that it has the capital needed for such a venture. Secondly,
most people still view private label products as something
synonymous to lower quality products so this is another
issue that the retailer must try to combat as they launch
their new line.
For producers and suppliers, the advantages
of producing private label products for a retail company
is less visible but still present, nonetheless, For
one, they get rid of most of the entry barriers of producer
usually faces as they try entering a market because
they're supplying directly to the retailer itself. Secondly,
for cash-strapped suppliers, manufacturing private label
products will let them enter the bigger and higher end
markets. The downside of all these of course is when
a product does not perform as expected. Low profit could
then affect the relationship between the supplier and
retailer.
For the consumer, the advantages and
disadvantages are almost equal. Most private label products
are cheaper than branded products. This would translate
to lower expenses for consumers, something that not
everyone would doubt welcome. However, if the quality
of the products is sub-standard, as some private label
products are, maybe you are not getting the best of
the deal as you have originally thought.
At the end, everything comes down to
quality. Since price-wise, private label products have
the upper hand, the only ace branded products have in
their sleeves would be a more superior quality. However,
if a reliable retailing company backs a private label
product, the quality is usually equal to those that
are branded. All one has to do is to CHOOSE WISELY.
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