Private label brands are products generally instigated by retailers or distributors who wish to sell their own branded products. This is in lieu of and in addition to those sourced from other vendors. Private label brands are products specifically developed and sold by the company.
Private label branding has many important advantages as a business plan. A private label or a home brand is an exclusive product made or purchased for sale through a particular channel. A national brand is a prominent or established product. Retailers generally sell a mix of private label goods and national brands to benefit from each segment.
Typically, private label brands may provide significantly higher profit margins than national brand products. Private label gives you a competitive advantage of exclusivity. One of the greatest characteristics of private labels is that you intrinsically have an exclusive right to sell the products. If the brand is marketed well, you create demand for it. Hence you benefit as you customers’ only source. This may contribute to the opportunity and ability to command premium prices. This enables you attracting more customers who may buy add-on products thus increasing the average cheque. It is one way to separate yourself from competitor.
In turn, it may provide customer loyalty provided the goods stand up it test. It helps building a loyal customer base is key to the long-term business success. The high-quality brands that may have limited exposure to a large customer base help you gain loyalty from core customers. Your customers may feel attached to the brand. Customers may like the feeling that they are among the select few who own it.
Private label also creates a position of increased wholesale income. Either in addition to exclusivity or as an alternate you may operate as a wholesaler of your brands and offer limited access to other retailers who may consider paying premium price for the right to carry the brand. In addition to generating more income, it spreads the exposure of the brand even further. Relationship with a high-volume reseller may lead to more customers.
As Warren Buffet states ‘it takes 20 years to build a reputation and 5 minutes to ruin it’. It takes a lot of time and energy to create a brand that echo with consumers. The reputation that you may have worked so hard to create may be damaged beyond repair.
Creating a private label is not right for every company, despite there are more private labels in the market than ever before. Every business at any given point must decide what name they want their products or service to own. The affirmation of more sales and success is often enticing, however jumping too quickly can cause margins to shrink.
It is critical to work out whether you sell private labelling or selling branded products. It is imperative to understand the benefits and cons of each model.
There are many upsides of building an enterprise that sells products from other brands or established brands. Selling products that are already branded, provides benefits of instant recognition. Therefore, a customer looking at your offers are more likely to do business with you because they can choose a brand that is prominent compared to unfamiliar brands.
Every time you plan to expand your product line, you may have an easier run when using branded products. It is generally much easier and less costly to introduce new products if you already have a loyal brand following.