The retail or retail business has developed quite rapidly, marked by the increasing number of traditional retail businesses that began to improve themselves into modern retail businesses and the emergence of new modern retail businesses.
With its development, modern retail management requires technological support, especially in the field of information that enables retail businesses to be able to provide products, wealth and fast processing and satisfying customers.
But in its development, modern retail has a faster growth compared to traditional retail. Private label products are one way for retailers to win the competition to win the consumer segment.
Private label is a brand of product that is made and only available for retail sale. One of the advantages of a private brand is to improve the store’s image. Private labels are known as store brands, own brands, retail brands, and wholesale distributor brands themselves.
Private label is a name designed by a wholesaler or retailer and better monitored, not sold by retailers and direct competitor customers. Creating a good perception for consumers is not an easy job.
Retailers must create a perception of a good store image to consumers, so consumers are interested in returning to our store. Image is a shadow or picture that is in someone’s mind that arises because of emotions or reactions to the surrounding environment.
So the store image has a very important role in the development and success of a retail company’s private label. Consumers have the same perception of the quality of private label products as products from national brands.
The main reason consumers buy private label products is price reasons but by increasing the quality of private label products, consumers will still choose private label products compared to national brands.
Private label products are rarely promoted and private label products are positioned as cheaper alternative products compared to national brand products. Most consumers currently have the perception that the quality of national brand and private label products is equally good.
Consumers drop the selection of national brand products to anticipate the satisfaction expected by these consumers.
Based on the description above, products with the private labels are positioned as guaranteed quality, affordable prices, attractive packages and easy to remember names.
Lately, there have been many Private Label Manufacturer various types of products, even though the company has no brand or marketing team to market its products.
Definition and Opportunity Private Label
They are often positioned as alternative products at low cost for certain target markets, although lately, several private label brands have been positioned as “premium” brands to compete with existing “name” brands.
Nowadays in every modern retailer, it is easier to find private label products. The very rapid development of private labels can be seen from the increasing number of types of private label products marketed, ranging from generic products such as sugar and tissue to private labels for shuttlecock, t-shirt, cosmetics, and carbonated drinks.
Some private label products that are easily found today include rice, snacks, creamers, soy sauce, frozen vegetables, diapers (baby & adult), cotton, soap, house cleaning, insect repellent, garbage boxes, bread & cakes, instant noodles, doormats, singlet shirts, pans, jars, electric kettle, jams, drinking water, skincare and much more.
The development of private labels is not independent of the development of the retail business.
Other advantages of having a private label are:
- Competitive price.
This is an attraction for consumers to choose a private label, especially consumers who are not loyal to certain brands.
Encourage loyalty to retailers because they have a specific and unique brand in accordance with the retailer’s name. An identical brand will lead consumers to always remember the retail name. The lower price compared to branded products is possible because of the short distribution channels, low promotional costs (there are practically no promotional costs) and low MOGE costs (marketing, overhead and general expenses).
- Control production.
Private Label Manufacturer work according to the retailer’s direction, offering full control over the ingredients and product quality.
- Products according to market needed and seasonal.
Private label product launches can be tailored to specific events such as Eid and Christmas.
In addition to generic products that are always available at any time, such as Bottled Drinking Water, tissues, skincare, chili, cleaning cotton, etc., there are also products that are made specifically on demand for a certain period of time, for example during Eid and Christmas. At the time of the “seasonal”, there are a lot of circulating dry label private food (snacks) and every retailer is waging a price war to attract more consumers to shop at the retail outlet.
- Retailers have more control over prices.
Thanks to control over the product, retailers can also determine product costs and favorable prices. They might look for third-party suppliers that offer prices accordingly.
- Marketing independence.
For manufacturing companies, private labeling allows them to reduce marketing costs.
- Optimizing production capacity utilization.
Manufacturing companies with lesser-known brands can improve their utilization rates through collaboration with retailers.
- Retail business margins or profits.
Profit margins tend to be greater if compared to ‘branded’ products. Based on Food Marketing Institute research in the US, retailers can get a 35% gross margin from private label products. While the gross margin of ‘branded’ products is only 25.9%. Retailers know exactly what products are fast-moving based on the database they have. So by owning a private label for fast-moving products, the greater the profits directly received by the retailer.
Sustaining the name “retail brand”
Private label will have a specific and unique brand in accordance with the name of the retailer (retail businessman). An identical brand (though not exactly the same).
Will lead consumers to always remember the name of the retail outlet so that it becomes an indirect means of promotion that will sustain the name of the “retail brand”.
The growth of “private label” also has positive implications for Manufacturing Companies, especially those companies that do not have strong brands and have low utilization because there are not many products sold or marketed.
Manufacturing companies that are not affiliated with well-known brands, must have a very high effort to be able to increase sales, which can not be trusted for the long term.
To cover high overhead costs and large initial investments, manufacturing companies will approach retail companies to make 3 PM on “private label” products in accordance with retailer demand.