Is More Private Label At JCP The Right Move?

Implications: Many retailers over the years have gone down the path of increasing their private label penetration to the point where their business suffers at the top line, and eventually the bottom line. JCP is heavily penetrated with private brands now, and with the disappointng launch of American Living, pushing more private label may cross the line.

Analysis: Most large scale retailers have the abilty to incorporate a certain percentage of private label into their mix. The question is how much is too much. Unfortunately that answer is different for every retailer. A 15% penetration might be fine for one retailer, while 25% is comfortable for another. The one common denominator remains the fact that there is a point where too much private label becomes a negative to the consumer and ultimately the retailer. In these economic times, private label fills a need for lower price points for the consumer and higher margins for the retailer. However, the retailer who has established a certain level of quality is in a better position to pull it off. The Kirkland line at Costco is well known for its quality with its members. Introducing a new label, especially in juniors, is a treacherous undertaking. The assortment needs to be right on and current, as newness is king in this environment. The chance of that happening at JCP is remote based on how far out they will have to work, coupled with their lack of expertise in the Junior area. Certainly they have done a fantastic job with their signature Arizona line. Their denim continually shows up in consumer research as a national brand. But the question remains, how many different brands can a retailer support at one time? Pushing more private brands into the young men's and junior assortments seems to be a very risky move.