Consumer’s conception and store consolidation create extensive opportunity for private label.

- In the past, private label products across all categories were perceived to be of inferior quality to the branded analogue merchandise. With the improvement in quality, innovation, marketing and the advantageous pricing the shopper now views private label the equal and in some cases superior to the national brands.

- The consolidation in the grocery chains, department store and drug store sectors coupled with the shear size of the Wal-Marts, Targets, etc. have created an inherent environment for the creation and expansion of high quality private label offerings. The domestic market is rife with opportunity with the recent rash of mergers in the fore mentioned sectors. If you look at the private label initiatives of Tesco, Carrefour and other international retailers you will find a significantly higher penetration of private label than the domestic retailers.

- The consumer in all sectors has become aware of the advantages and disadvantages of private label merchandise. As an example the consumer in a drug store will now buy the private label aspirin over the branded. The customer who is loyal to Charmin toilet tissue will most likely not buy the private label alternative.

- An example of a consumer preferring the private label brand is exemplified by the Craftsman label at Sears. Given the choice of a Stanley branded hammer and a Craftsman hammer the consumer has proven time and again that they prefer the latter.

- With the merger of Macy’s and Federated department stores you are already seeing a stronger focus put on their proprietary labels inclusive of ^{Alfani, Tasso Elba, I.N.C., Clubroom, CharterClub and Material London. .} The penetration of their private label was 12% in 2003, about 15% currently, with a target of 20% over the next 3 years. The increase in private label is also very prominent at J.C. Penny. They have introduced 2 new private label initiatives, a.n.a. for women and Solitude for men aiming at the 25-50 year old demographic. Kohl’s, Target and others are following the same dynamic. These brands are being marketed to have the same cachet as the national brands including Ralph Lauren, Liz Claiborne and the like.

^- Grocery Stores and Drug stores have evolved from the plain label of say “Peanut Butter” as their private label ^{to a new} “Harvest Grove” Peanut butter. They have created a new brand not a generic substitute. Drug stores are starting to introduce brands also. The drug stores are introducing broad lines of skin, soap, facial and other items under one brand name akin to Tesco’s “ Free From” proprietary brand to compete with The Body Shop and others.

- The office product sector is now offering private label alternatives in all their categories. Office Depot and Staples are chalk full of their own paper, pens, shredders, and calculators and so on. Almost all sectors you can think of are either researching the introduction of a private label initiative or in the implementation process. As an example Haverty’s furniture has converted the majority of their product to private label. This strategy has allowed them to get ahead of their competition in pricing and margin.

- Private label has the potential to represent over 40% of the market as the consumer becomes more familiar with the quality and advantageous price points. The retailer is anxious to have their private label gain traction as their margins can improve significantly and the private label brands will create points of differentiation that has become so important. Retailers envision the consumer coming to their store to buy their high margin, exclusive Tasso Elba collection as opposed to the lower margin ubiquitous Polo.