Differentiation is the Key to Building Private Brands.

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Not long ago I received an email from Clear Seas Research asking me to do an online survey about Private Label, as I was only marginally aware of Clear Seas I took a moment to check them out. According to their website Clear Seas is a full service research firm owned by BNP Media. BNP Media is the publisher of Private Label Buyer as well as a long list of other industry and trade magazines and websites.

So I took a few minutes and completed the research questions, the results were released this past week. Interesting, customer loyalty and differentiation were key factors for having a strong private label program. If retailers truly believe this, they must not only grow private labels but also build great Brands. Brands that innovate, brands that differentiate and brands that customers can’t live without. This will require a radical shift of both thinking and resources. Who is up to the challenge?

Their website reports the following results:
Clear Seas Chart
One-third of retailers report current private label penetration levels of 10% or less; half (53%) report penetration rates of 11%-25%. Regardless of current levels, nearly all (91%) have plans to expand private label offerings, with a large share (42%) indicating growth goals of 5+ points over the next five years.

Retailers report building customer loyalty as the #1 reason for having a strong private label program.

Differentiation(from competitors) and higher margins are also key components driving current practices and targeted growth initiatives. To accomplish short-term growth goals retailers expect to focus efforts on center store items. Natural/organic foods and beverages and refrigerated/frozen meal solutions are also viewed as presenting large short-term growth opportunities. Sustainability (i.e. greener packaging, local sourcing, etc.) is also viewed as a vital element. With regard to long-term potential, retailers believe that a value-tier-focused + national-brand-equivalent + upscale program (that offers something different from national brands) presents the greatest opportunity for continued growth, post-recession.

The biggest challenge faced in the retailer-supplier relationship centers on pricing. Additionally, retailers are divided on who should bear financial responsibility for private label product/packaging innovation; about half (45%) report a willingness to split costs with suppliers, while the other half (48%) believe suppliers should be solely responsible for such innovations.

Most retailers go-it-alone in terms of the planning, procurement and/or promotion of private label products (not using and not planning to use an outside broker for such purposes). Additionally, most retailers use fewer than 10 manufacturers to supply their current private label program while one-third (34%) report manufacturing some/all of their own private label products.

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Christopher Durham
Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.