Summary
Market shares of Private Label have been changing.
Why has it been principally at Opening Price Points?
Why it may creep into higher price positionings?
Analysis
Having worked with several companies that have assisted retailers in private label products, the evolution has been interesting.
Born of inefficiencies in manufacturers' supply chain cost structures, private label products have not only driven jobs, products and services abroad, they have kept inflation low and taught global branded goods companies some hard lessons. For the most part, these items have remained entrenched at the opening price points. In the early days of private label electronics and electrics, retailers who imported these products directly learned valuable life lessons, suffering the ire of the Consumer Products Safety Commission and consumers with safety and quality recalls. For a period of time they ran back to branded goods makers for cover. However, as they recognized how to attack quality standards, the private label business in the last 3-5 years has regained some momentum.
The next phase for retailers has been attempting to find a way to merchandise private label at "better" or "value added" price points. This has been problematic from two perspectives, finding the right feature packages and branding. Very few Asian suppliers have the ability to address innovation, so retailers come back to branded goods suppliers for their product development investment contribution. On the other hand, some retailers have found refuge in licensing brands to add perceived value and price.. The best example of this was WalMart's deal to license the General Electric brand across multiple electrics categories several years ago. While this strategy has been less apparent in electronics, it is certainly an option. As second and third tier brands begin to lose shelf space, they may turn to retailer exclusive deals to save some measure of asset value. These deals become more attractive as some retailers establish global storefront locations.
Another opportunity will be stretching existing brands in the market place across more categories through licensing deals. Black and Decker and Sunbeam have provided their shareholders with excellent returns on these parts of their portfolios trading paper agreements for cash. It’s almost better than selling water. Finding brands which are tangential or not in the electronics sector today, that could crossover in the minds of consumers will be the best value solution for today's retailer.
