Private label products are typically those manufactured or provided by one company for offer under another company's brand. Private label goods are available in a wide range of industries from food to car care. They are often positioned as lower cost alternatives to regional, national or international brands, although recently private label brands have been positioned as "premium" brands to compete with existing “A-brands”.
Products sold as private label
Major supermarkets, hypermarkets, drug stores and discounters today offer almost any product under the retailer's brand. Private label covers full lines of food, health and beauty, cosmetics, household and laundry, DIY, lawn and garden, paints, hardware and auto care products. The same tendency is seen in a business-to-business environment for a rapidly increasing number of products.
Why will private label grow fast?
Private labels offer huge incentives to private label owners pushing them towards private labels.
For the end-user private label represents the opportunity to purchase quality products at savings compared to manufacturer brands.
The trend to consolidation, scaling up and store expansion by companies and retailers over the past decade has given suppliers and shoppers more access to private label opportunities.
E-commerce has given brands another way to reach the consumer and the wider choice that the digital economy offers to consumers and the globalization of shopping trends is driving private label growth.
Private-label brands are now being seen as equivalent to multinational premium brands or - at the other end of the spectrum – offer a comparable quality to local brands at a better price.
Smaller, niche and private-label brands often lead innovation and are quick to incorporate this in their portfolio pushing private label sales.
To save cost, consumers increase private-label purchases when the economy is struggling. When an economy recovers, however, changed shopper behaviour often remains, as private label products have been accepted as proven (lower cost) alternatives.
Private label is a new opportunity in developing countries and fast growing economies providing a way to differentiate and at the same time increase profitability and flexibility.
Perceptions about private label are becoming more favorable (see graph below)
Millennial consumers are much less brand-fickle than their brand-loyal predecessors. As the purchasing power of this group continues to increase, so will private label.
Advantages of private label
Considerably higher profit margins compared to A-brands
Increased freedom in pricing strategy
Full control over the brand and its positioning
High flexibility and shorter time-to-market for innovative products
Reduced producer domination in the marketplace
Increased client dependence & customer loyalty
Reduced supplier dependence
Increased sales possibilities
Opportunity to differentiate and provide variety
Positive image building
Marketing efforts are to one’s own benefit only, not to that of competitors.
Should you require any further information, please contact us.
Technical Lubricants International B.V. (TecLub) is a leading ISO 9001:2015 certified private label producer of lubricating oils, greases, brake fluids, coolants, fuel, radiator and motor oil additives and a full range of automotive specialty products.