5 Reasons Why You Should Be Selling Private Label Products

Private label is how you make money in retail
— Ruslan Kogan, Founder & CEO of Kogan.com

From 2011 to 2016 Nielsen polling found that people who perceive private label quality to be just as good as brand quality increased from 33% to 60% over the five year period. At this rate of growth before 2025 the line between private label and recognised brands will be completely erased. The Private Label Lab has been designing, manufacturing and distributing private label products for years and we reckon we know a thing or two about how it's done. Here are five reasons why Private Label is the future.

Positives of Selling Private Label

private label beverage


Putting private label products out into the market will provide significant insights into what brands your customers value and those they don't care about. Pushing a private label product into the market against an established brands can be a hard war of attrition but also sometimes pleasantly surprising. The world isn't as tied down to brand names as one would think. Using private label can open up a treasure chest of possibilities when positioned and introduced properly. We have experienced some extremely successful waterfall introductions for products against some of the most recognised brands in food and beverage. Begin able to design a premium brand quickly and getting it to market before the trend flies away can mean the world. 

Gauging the reaction of the consumer when providing private label products will be an indication of brand loyalty to that type of product. Many will find that products that were perceived to be high in brand loyalty are not as safe from the reach of private label as everyone thinks. If it were true and everyone was 100% brand loyal we'd all still be driving the 2017 version of the Ford Model T.

2. Control your brand

Private label brands

Creating a private label product will provide unprecedented control over your brand, check out this article about the rise of private label in Australian retailers here if you don't believe me. With private label you can choose everything from the ingredients, label design, form factor and a hundred more details. The power of your brand will fully be in your hand. Control is key to creating a trusted and strong brand that coordinates its message to the consumer on several fronts. Imagine if Apple began sticking its logo on computers made by Asus or Lenovo, it just wouldn't happen! Every part of the product and its perception in the market should, and can, be under your control. Choose your market position, decide if your product is going to be premium or economy and what sort of pricing and margins you are aiming for. Further to this end decide what segment of the market you are going for, choose your private label demographic. Out of 1000 shoppers it was found that 54% were purchasing private label goods at medium to high levels. 

Source: Lightspeed GMI/Mintel

Source: Lightspeed GMI/Mintel

3. Better Margins

Profit! If you control the product you also get to control the price point and its positioning within the market. In a 2015 report Mintel found that 45% of shoppers will avoid retailers with poor quality own-label products. We at the private label lab pride ourselves on delivering premium products that maintain healthy margins. Spending a bit extra on marketing for a private label product will go a long way for increasing brand awareness and selling more product. We all know that people correlate a high price to quality so why not seize that opportunity with your unique private label product. Price skimming is an attractive possibility for private label - maximise margins early on with your brand and then gradually lower the price to harness as much profit as possible for that product cycle. 

Alternatively you can compete at a far lower price than your competition while still maintaining a heathy margin. If your competition has to worry about paying several middle men for each product sold they can only go so low with their pricing. Aim for market share and beat out the competition with cheap pricing to saturate the market.

4. People Want a Quality Deal

People will understand where the best deal lies for them. Quality is the best indication of brand health be it a private label or an established player. Private label has the unique position of being able to enter into a market as premium or economy due it natural flexibility. You won't have to worry about working around 100 years of entrenched brand image, just look at the Dollar Shave Club vs Gillette. Private label vs entrenched player, Dollar Shave Club was bought for US$1 Billion by Unilever mid 2016. As mentioned previously pricing is important to find the appropriate market position for your brand. Dollar Shave club maintained the quality of razor and then further capitalised on a new delivery model to add extra value while slashing overheads. Premium is possible! If you're product is top of the line and your a bit innovative you can turn an industry upside down, Dollar Shave Club being the gold standard example.  

There can be instances of short term resistance to newer brands in the market but overtime the better choice will win. They may buy with brands that they trust in the short term but overall they will eventually come to see the cost savings in buying the private brand. Creating a brand does not occur overnight it will take time to create the perception that more established players hold. Selling private label products is a marathon not a sprint.

5. Testing YOur market

There certainly are market niches that currently are more susceptible to private label than others. Doing your due diligence will always save quite a few headaches when launching. Strategise your entry to create the best possible outcome for your product. Not all product launches are as smooth as they should be, research and preparation are the best solutions here. For example  Millennials are 18% more likely to be high purchasers of store brand products than non-millenals. Now what kind of products can you launch to leverage this? 

Before I mentioned using the waterfall approach to launching products. Geographically this can be extremely effective in ironing out the finer details of your product and packaging before going mainstream. Locate niches that are of high value and plan an entry plan accordingly. It is commonplace for many international retailers to test a product in one market, receive validation and then initiate the international launch later on. Here at the Private Label Lab our clients have had tremendous success with this approach and it could save you millions.

Bringing It All Together

You have the opportunity to source your own private label products providing you greater control over delivery and deployment. The overall operation of sourcing private label will provide your business with more control, healthier margins, and greater market share. These factors together create unprecedented opportunity for your products to flourish in their respective markets. If you would like to discuss more on the topic of private label products shoot me an email, sam@privatelabellab.com.au