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.
