Private brands are an important marketing tool and profit center for many retailers. In this lesson, you'll learn about private brands, some related concepts, and be provided some examples.
What Is a Private Brand?
A private brand is a product that is exclusively manufactured for a retailer. The retailer will market the product under its own brand name. Prices for private brands are usually set cheaper than competing name brands. Consumers often think that private brands are of lower quality, but that perception is changing.
Common examples of private brands include:
- Grocery products - canned food, frozen food, rice, cereal, sodas, etc.
- Generic medicine and health products - pain relievers, cough syrup, bandages, etc.
- Textiles - towels, washcloths, bed sheets, etc.
- Household supplies - cleaning products, kitchen utensils, dishes, etc.
Why Develop Private Brands?
Private brands provide retailers some good benefits. These include:
- Control: A retailer will have a much greater degree of control over quality and marketing of private products because it develops them.
- Profit margin: Private product brands tend to have a higher profit margin compared to name brands.
- Image: Retailers can create a unique image for their retail establishment with their private brands.
- Customer loyalty: It's possible to improve customer loyalty because of the exclusivity of private brands. If retailers can get consumers hooked on their private brand, then they must go to that store to get it because it is the only place it's available.
Successful Private Brands
According to some experts, there are three main factors that will determine the success of a private product:
- Right product: The best products for private brands are those products that can be manufactured quickly while maintaining good quality control so there is a constant source of quality inventory. Examples of products amenable to private labels are your typical grocery staples such as canned foods, frozen foods, and breads.
- Competitive pricing: Retailers need to price their products to be competitive with name brands to induce their customers to purchase their brand over name brands. Their profit margin should be better with private brands, so they have room to aggressively price their products.
- Strong marketing: Retailers need to champion their brand and aggressively market it. If they're not proud of it, they shouldn't be selling it because a private brand is associated only with them.
Let's review. A private brand is a consumer product that is developed exclusively for a specific retailer for sale in its store. Common examples of private brands include store brand groceries, textiles, and medical products. Private brands can provide retailers distinct advantages, including better profit margins, more control, and customer loyalty. Successful private brands require selecting the right products, competitive pricing, and strong marketing.