Private labeling occurs in many different industries, from cosmetics and household cleaners to foods. As a product manufacturer, private labeling could be an excellent opportunity for increased profits, decreased competition, and many other advantages.
Commonly referred to as “generic”, they are anything but: private labels compete with brand-name products and are typically sold at lower prices. Private labeling is a common form of merchandising that can generate positive returns on investment for store owners and manufacturers.
What Are Private Labels?
Private labels—or store labels—are exclusive labels that a particular store owns. They are the packaging and brand names specific to a particular store. Examples include Walmart’s “Great Value” Costco’s “Kirkland” brand, and “Private Selection”, available from Kroger.
Manufacturers of goods can sell their items for private labeling in addition to creating their own brands. Kraft, for example, manufactures its products for sale under the Planters Peanuts brand name as well as under private label names. This carries the benefit of marketing a product to larger retailers to sell the product in the retailer’s brand packaging, expanding reach and sales potential.
By selling to private labels, a manufacturer can eliminate the cumbersome branding process that requires creation, testing, implementation, and distribution. When you have a business to run, these actions can be time consuming and costly. Selling to a private label can bypass much of the branding process to save time and money. For companies that choose to produce their products under both their own brand and that of a private label, Century Label can handle the packaging needs for both.
Higher Profit Margins
Brand personality is incredibly important for building a customer base, creating product designs, and establishing marketing campaigns. If you run a business, however, you know how expensive and time-consuming branding can be. Private label products use the retailer’s private label brand. It is up to the end retailer to design the manufacturing, packaging, and marketing – not up to you as the creator of the good, eliminating added costs. You only pay the product cost without a premium for brand name or expensive marketing campaigns.
Lower Operating Costs
Private label products have to sell themselves; they are typically items that do not necessarily need advertising campaigns to fly off the shelves. Products chosen should regularly sell at five or six times the manufacturing price. This will leave the manufacturer room to provide the price discounts required of private-label goods. Therefore, most items chosen are cheaper to manufacture and produce in high volume. Since most private label products end up receiving large orders from major retailers, manufacturers yield the benefit of creating and shipping all products to a single customer. Both factors result in reduced operating costs.
Better Brand Loyalty
In the past, consumers largely saw brand-name goods as superior to private labels. Today, however, store brand or private label goods have made a name for themselves in the world of high-quality goods. Private label products have attained higher quality levels and consistency, thanks to better product innovations and improved manufacturing processes. They have transformed into “premium” private label goods. A better reputation surrounding private label products has led to better brand loyalty, with consumers staying loyal to one store because they know that is the only place they can find the private label item.
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Greater Market Stability
Today’s consumers choose private label products for quality, consistency, and affordability. Even in economic downturns, private label goods enjoy steady sales thanks to lower price points. The overall stability and inelasticity of the market can benefit manufacturers, as there is less of a chance of retailers freezing their orders during tough times. In fact, most retailers will increase their order quantities during economic downfalls because private label goods become more popular when times are tough.
If you would like to enjoy the myriad benefits of private labeling at your manufacturing company, contact Century Label to receive a free quote. We can provide high-quality labels and packaging for a manufacturer’s own brand as well as private labels.