Private label has its place amongst value propositions

Private label products have continued to drive change across various market sectors and should be considered "here to stay." The evolution of private label, as we all know, is based on retailers forcing increased efficiency into the logistics and value chain thereby demanding that manufacturers and marketers drive further innovation in terms of cost and benefits.

This process has further evolved into creating a whole new perspective in evaluating product and price positioning in the marketplace.  Where retailer and marketer alike sought to bring to the consumer a “good/better/best" assortment, the private label carved out a new lower opening price point we could refer to as “basic.”  For years, across all segments, manufacturers tried to compete against the retailer fighting “good” against “basic.”  Most have finally given up, to a large part driving that high volume piece of their business to be sourced abroad. Problems of unacceptable quality still exist.  It is a barrier to purchase with some consumers that won’t be broken through easily, but as this article expresses, it is now a smaller and smaller percentage of the market.

Once mostly the purview of Wal-Mart and some large grocery chains, the private label “basic” offering has expanded across not only national but regional retailers and driven substantial structural/organizational changes to meet the importance of foreign sourcing. Manufacturers also adjusted to help retailers to source “basic” products and found that allowed more opportunity to gain placement of their higher margin product ranges. Now the issue has matured further, with retailers establishing some private label "brands" at the “good” price levels and licensing brands with strong consumer awareness to reach into “better.” A great example of this is Wal-Mart’s exclusive General Electric program that is more than five years old and crosses many categories of products.

Licensing has been a key marketing trend for brand/category and price positioning expansion in the past and will continue strong in 2007. As you evaluate your investment portfolio of retailers and marketers of consumer products, make sure you pay attention to not just the categories of products and their potential, but the breadth of the company’s offering across the range of price points.  I will continue to watch private label as it chews its way through value & price proposition equations beyond “basic” (which generates foot traffic) to “good” and “better” with more feature rich offerings at a better consumer value.