Private Label is a very interesting topic nowadays. For years private label has been considered as gold by retailers as it was achieving several goals at the same time:
- · Differentiation with competition by having non comparable products
- · Improving price image, by lowering the prices per unit of standard products
- · Generating higher margins for most of them.
But the conjuncture has changed. Today, retailers in France are fighting in a mature market that is struggling to find growth. There has been two consequences:
- · Cutting prices to keep a competitive advantage.
- · Raising the number of promotions to generate more traffic in stores and get market shares.
Both of them have hurt private labels:
- · The investment in lowering price has been taken on the development of private labels for different reasons including more negotiation leverage with international suppliers but also to compensate some of the lost margins.
- · Prices of international brands are for a longer and longer period of the year at the same price of private label…
But what is the future of private label? I stille believe private label is a great strategic tools. And you can actually see that some of the best performing brands in retailing are still betting on private labels. As said Anders Dahlvig in its book, Ikea has thriven on developing their own products, which allowed them to work on added value better than competition. Anders Dahlvig exposes the fact: when every retailers distribute the same products, there are no other choices but to compete on prices by lowering them to leverage sales.
Now private label must be taken as a strategic tool to achieve its goal, not to be a cheaper me-too.