Where private labels can't cross the line

Where Private labels can’t cross the line

Private labels are labels typically products manufactured/sold by the retailers under their name. It’s a strategy for backward integration. The prime reason for using this strategy is to piggy back on the retailers brand equity and power to persuade it’s loyal customers to spend more. A private label is a source of increasing margins while the powerful brands try and squeeze more and more on the retailer’s pie.

Typically, private labels are introduced in the categories where the customers are cost conscious and do not have an emotional connect with the brand. Various categories in apparel retail are hence a very soft target where the already existing brand clutter can very easily accommodate a private label. Even in grocery, a retailer’s image plays a very important role in deciding what categories to enter. A logical progression from apparel to food products was a smooth transition.

All the talk about retailer power counts a naught, when it comes to categories like skincare, baby-care which are still out of the reach of retailers. A value consumer/cost conscious consumer would buy non-branded flour, even cereals but would not agree on buying private label baby soap.