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Private labeling products for retailers

Because millennials are more cost-conscious than brand loyal, retailers are investing in private labels


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There are a lot of sellers who are new to the physical product industry that only have their sights set on Amazon. If you've never thought about life beyond an online marketplace, like Amazon or Ebay, you should. It's time to start dreaming about the bigger picture for your business. Private labeling for retail stores can open up doors for your company that you never dreamed possible. This is especially true when you do things right.

Private labeling for retail is different than private labeling for online marketplaces because instead of creating your own brand and label, you'll manufacture the product and either put your label on it or use the retailer's label. Many retailers will then sell these private label products under their store brand. Those that are well-known include Safeway Select items, 365 Everyday Value products at Whole Foods and all Kirkland goods at Costco.

In the last 10 years, there has been a big increase in the number of retailers interested in developing private label brands. That is largely attributed to the influx of millennials into the consumer market. Millennials are more cost-conscious than brand loyal, so retailers across the continent are investing more of their time and marketing dollars in their private label brands. This is good news for private labelers across the board, whether you're using your own label in stores or helping retailers create a private label brand.

Our family has been private labeling for retailers for more than 60 years, so if you're considering a fresh start for your private label business in the retail world, here are a few things to keep in mind:

PACKAGING + LABELING

The packaging and design of a product are always important, especially when your private-label agreement is with a retailer. You may find it prudent to offer a display of what your product can do for retailers. If you have a consumer product, take time to package your product so it sells itself. You could also provide a diagram of what complementary products yours should be displayed next to on shelves.

CONTRACT MANUFACTURING

You'll be responsible for providing the product in a private label agreement either by making the product yourself or by contracting a manufacturer to make it. Unless you're already manufacturing products, we recommend starting by contracting a manufacturer to ensure the agreement with the retailer gets off to a good start. 

You can switch to your own manufacturing operation once sales are secure and your margins are lower.

UNDERSTAND THE COMPETITION

Retailers typically develop private label products for competitive reasons. To sell the concept effectively, you should know your target retailer’s competitors and how your product will increase their competitive edge. When you approach a company with a private label proposal, show them how and why their target customers need (and will ultimately love) your product. Try using surveys or interviews with potential customers to help reinforce your point.

KEEP QUALITY HIGH

30 years ago there was a distinct gap quality between private label and national brand products. By national brand we mean those incredibly well-known name-brands you see throughout stores like Heinz Ketchup, Q-Tip cotton swabs, Kleenex tissues, Campbell’s soup, or Huggies Diapers. Today, that quality gap has narrowed to the point that private label products now have a consistently high quality across product categories, making them serious competitors for national brands.

This is good news for private labelers because the more high-quality private label products are on the shelves, the more readily consumers will choose those products over the higher-priced name brands. All that being said, make sure you invest in product improvements for the items you’re private labeling for retailers. This helps enhance your brand’s perceived superiority, provides the basis for informative and provocative advertising, increases the brand’s sustainable price premium over the competition, and raises the costs to private label imitators who are constantly forced to play catch-up.

CONSIDER DEVELOPING A PREMIUM LINE

 Several innovative retailers in North America have shown the rest of the private label world how to develop a private label line that delivers quality superior to that of national brands, and you can learn a lot from the example they’ve set.

Let’s look at President’s Choice as an example. Parent company Loblaw (which has thousands of grocery stores across the country) has developed this premium private label brand of 1,500 items, which includes the leading chocolate-chip cookie sold in Canada. As a result of careful, worldwide procurement, Loblaw has squeezed Canada’s national brands between its top-of-the-line President’s Choice label and their regular Loblaw private label line. And President’s Choice has even expanded beyond Loblaws’ store boundaries — fifteen grocery chains in the States now sell President’s Choice products as a premium private label line.

Private labeling for retail stores across the country may seem like a giant leap from where you’re at now, but what if, in a few months or years you hit a ceiling with Amazon and start dreaming about life beyond an online marketplace?

This allows you to create a business that can not only survives, but thrives beyond an Amazon listing. There’s no doubt that private label brands are in the midst of a major retail transformation, which is creating incredible opportunities for private label businesses.

In other words, Amazon is simply a stepping stone to a bigger reality for your business.  And remember you can always get expert advice on what works from those that do this on a regular basis.  


Karen and Neil Gwartzman, the creators of the Private Label University®, have over 35 years of experience private labeling products and have sold millions of dollars of products in retail and in online sites such as Amazon. They have recently been featured in Small Business Exchange and CEO Blog Nation and have been training entrepreneurs around the world on the secret formula to private labeling.  Additionally, they have been guiding countless chain stores and entrepreneurs with sourcing, importing and private labeling products, specializing in helping entrepreneurs build private label businesses on Amazon. To learn more visit www.privatelabeluniversity.com.

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