Most consumers are aware that there are products generally manufactured by one company but labeled with another company’s brand, aka private labeling. Not only is this beneficial to the manufacturer who profits from the sale of its product but also creates a stream of revenue from the reseller. Meanwhile, the store who is rebranding it as their own realizes an opportunity to offer additional products in their line-up.
It is likely that most of us have purchased private label products at some point. From ketchup to shirts to medications to tires and more, stores are becoming very sophisticated in how they market these products while shoppers are more savvy and realize that they can get the same or similar product for less. Where once these products were deemed to be of lower quality, consumers now realize the advantages.
If your business has considered offering private labeled merchandise, we have some pros and cons for you to consider.
A few advantages of private-labeling include:
Build Your Brand – purchasing products from an original manufacturer offers you cost savings while providing you with the option to create your own store labels. With private labeling you can add your own logo and manage the messaging on the label.
Increase Margins – Since you’re bypassing the brand name for a private label, you’ll see some real savings. Retailers pay a premium for a branded product but with private labeled products, the cost of the product is less thereby providing an increase in ROI.
Build Loyalty & Beat The Competition – If you private label, that same product will likely cost less at your store than at a competitors location who sells the “name brand”. In order to meet your prices, competitors may have to put a branded product on sale in order to compete.
In addition, as your customers come to realize the quality of your products at better prices, you’re likely to see more repeat business.
Now that we’ve looked at the advantages, we want to review some of the potential downsides to private labeling.
Choosing a bad product resulting in slow turnover of inventory – If you order a line of private-label products before analyzing customer needs, you could make a bad purchase and then have a hard time selling the inventory. With private-label goods you won’t be able to return products so you might have to drastically reduce prices in order to move the product.
Minimum Orders – Most manufacturers require a minimum quantity for each order. In some cases, this might be higher than you really need. Try working with the supplier to create a custom order that meets their minimum and maximizes your inventory.
Customer Perception – We mentioned this earlier. Some consumers will consider these items to be of lesser quality. It’s wise to completely understand your market and the likes and preferences of your customers to ensure you buy products that have the best likelihood of selling. Then create a private label that matches the quality of the product and is comparable to the branded version.
Private-labeling merchandise can be a great benefit as long as you consider the risks and rewards. If you decide this is the right choice for your business, one of the next steps in how to incorporate private labeling into your plans. This is where Griffin Rutgers can help! Our team works with businesses to understand your operation, identify the best printing solution and then assist you with implementation.
We have experience with printing and coding on many substrates and have configured product labeling solutions for hundreds of products of every size and shape imaginable. When you’re ready to take the next step, call us for a consultation.